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©ICIS HEREN - New law could topple Italy's green certificates market
2010-07-14
The market to incentivise Italian renewable energy production could crumble immediately if state-run energy management agency GSE stops buying leftover green certificates this month, experts said this week. To the disbelief of many in the renewable energy industry, Italy last week introduced a law that relieves the GSE of its duty to buy up green certificates (CVs) unsold on the market (see EDEM 1 June 2010). While the specifics of the law have yet to be made clear, the language suggests that it could take effect this month and apply to CVs for 2010 and 2011. "There's a risk that we won't see them being absorbed, there's already overproduction," said Francesco Arecco, a Milan-based lawyer specialising in renewable energy law. "If there's a collapse of the market, it will probably happen immediately." Since 2002, the Italian government has set a minimum target for renewable energy production and given companies the option to either generate the clean power or buy CVs on the market. As of 2008, the price for CVs could be calculated by subtracting €180 from the average cost of electricity on the market. Raising targets The minimum level for renewable energy has grown from 2% for 2002 to 3.8% in 2008, and is set to reach 6.05% for 2011 and 7.55% for 2013. But the burden on companies remains relatively low, experts said. As a result, the GSE's burden to buy CVs, and its subsequent effect on energy bills for customers, has been quite high. "It's reasonable that the state shouldn't continue to buy green certificates, because then energy bills just get higher," Arecco said. "The problem is that they haven't given an alternative, and it has come at a moment when there's a lot of uncertainty about other energy incentives." Instead of removing such a large buyer from the market, the government should have increased the pressure on energy producers to generate more renewable power or purchase more CVs, environmental advocates have argued. "The number of CVs available is double the obligations," Edoardo Zanchini, director of energy at the environmental advocacy group Legambiente, said of the target for energy producers. "If the government had raised the objectives, it would have created a way to force companies to produce more renewable energy." In a joint statement against the new law, a group of environmental advocacy organisations argued that the lack of a steady objective that keeps production and investment moving forward will bring "the collapse of the exchange price for the green certificate on the market." Scaring away investment The new law, which is aimed at improving Italy's financial stability and competitiveness, comes at a particularly bad time for the Italian renewable energy industry, experts said. In recent months, the government has circulated various drafts of proposals to slash the feed-in tariff currently available to clean energy generators that feed into an electric grid. The latest draft, which was expected to be approved in May but has been delayed indefinitely, would cut the incentives by 5-20%. "It's an uncertain moment in Italy, so this problem with the green certificates feels even bigger," Arecco said. While the government is right to scale back public funding of renewable energy incentives, its investments should be more strategically pointed towards growth, he argued. With the Conto Energia feed-in tariff, and the green certificates, the government has lured investment in plants that use well-established technologies such as solar and wind energy. But research and development of new technologies receives little financing. "If you continue to drug the market and give incentives to sources that we already know such as photovoltaic energy, you won't develop anything new," Arecco said. "The green incentives have been good for Italy, but the criticism is that by taking it away now you scare the sector." (THE ICIS HEREN REPORTS - EDEM 14.105 / 3 June 2010)

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