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The Italian experience with white certificates Marcella Pavan Head of Energy Efficiency Regulatory Authority for Electricity and Gas (AEEG) - Italy This is not an official document of the Italian Regulatory Authority for Electricity and Gas White Certificates Conference Warsaw - 25 October, 2012
32

The Italian experience with white certificates

Feb 03, 2022

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Page 1: The Italian experience with white certificates

The Italian experience with white certificates

Marcella PavanHead of Energy Efficiency

Regulatory Authority for Electricity and Gas(AEEG) - Italy

This is not an official document of the Italian Regulatory Authority for Electricity and Gas

White Certificates ConferenceWarsaw - 25 October, 2012

Page 2: The Italian experience with white certificates

Energy efficiency obligation (EEO) on electricity and gas DSOs: “concept” introduced in 1999 and 2000 (but no targets yet)

Legislative framework introduced in 2001; two core elements:

EEO + energy efficiency certificates (TEE) tradingRegulatory framework developed throughout 2002-2004 via consultation of all interested parties

Limited revision of the legislative framework in 2004

Fully operational since January 2005 (first regulatory period 2005-2009)

Extended to 2012 and revised in December 2007

Few additional revisions in 2008 (e.g. eligible actors, sectoral and cost recovery coverage)

Further revisions foreseen in 2011 but yet to be defined

Brief history

Page 3: The Italian experience with white certificates

Government: core elements (e.g. targets, obligated and eligible parties, apportionment criteria, eligible measures, trading options, general enforcement and cost-recovery criteria; crediting lifetime)

Regulator (AEEG):technical and economic regulation (e.g. M&V-measurement and verification of energy savings, qualitative requirements; cost-recovery, sanctions, rules concerning certificates and trading) day-to-day administration and enforcement (e.g. project evaluation; energy savings certification; checks and inspections; annual compliance check with the targets) monitoring of results and proposals to the Government in order to enhance its effectiveness via legislative actions (Annual Report; Interim Statistical Reports)

Electricity Market Operator (GME S.p.a.):certificates (TEE) issuing upon AEEG authorisationadministration of TEE Registry and trading platform (spot market)proposals on trading rules to AEEG

Energy Agency (ENEA): supports AEEG in projects evaluation; from mid-2011 also involved in the development of simplified M&V methods, to be approved by Ministry of Economic Development

Governance

Page 4: The Italian experience with white certificates

EEO elements

Targets: primary energy savings (toe); annual and ex-post; first regulatory period 2005-2009, extended till 2012 for the time being; cf. following slideObliged parties: electricity and natural gas DSOs > 50.000 customers as of 31 December of year t-2 (previous threshold: 100.000 customers); individual target proportional to own market share (market served by obliged parties)Scope: all end-use sectors(*); only “hard” measures (e.g. technologychanges(**)); banded obligation in the initial phase (50% of target from electricity and natural gas savings)

Enforcement: financial penalties for non compliance with the target; nounitary penalty defined ex-ante; grace period of one year if compliance at least 60%; otherwise the penalty does not cancel the obligation;Funding: cost-recovery mechanism for obligated parties financed via electricity and natural gas tariffs; €/toe saved, updated annually (maximum level so far 100 €/toe)

(*) Except: PV< 20KW; from mid-2011 reduction in network losses may count towards the target, but no tariff contribution

(**) Only exception: information campaigns coupled with “hard” measures; cf following slides

Page 5: The Italian experience with white certificates

National targets

0

1

2

3

4

5

6

Mto

e/ye

ar Ministerial decrees 2004

after MD 21/12/07

Ministerial decrees 2004 0,2 0,4 0,8 1,5 2,9after MD 21/12/07 0,2 0,4 0,8 2,2 3,2 4,3 5,3 6

2005 2006 2007 2008 2009 2010 2011 2012

Increase in targets Extension of targets1,8 Mtoe for electricity DSOs (=5,1% of distributed volumes) + 1,4 Mtoe for natural gas DSOs (=3,5% of distributed volumes)

Page 6: The Italian experience with white certificates

Eligible parties (other than obliged DSOs): DSOs < threshold, companies controlled by DSOs, energy service providers, big energy users + market intermediaries

Certificates trading:central elementno authorisation needed spot market + OTCfrom 3 to 5 types of certificates bankingelectronic Registry, directly linked with the AEEG information system for administering projects evaluationelectronic trading platform (one session per week)rules and procedures to access, to guarantee security of market deals, etc. full transparency on both volumes and prices (spot market and OTC)

Market component

Page 7: The Italian experience with white certificates

M&V approach – 1main issues

What is “special” about M&V of energy savings?

you have to measure the energy savings via a comparison of the energy consumption before and after the project

in some cases the “before the project” scenario is not known (data, new installations) and you need to make assumptions; or you want to support only technologies more efficient than e.g. mandatory standard or market average (baseline definition)

in other cases the “before the project” scenario is known, but you need to net out the impact on consumption trends of variables other than those on which the energy saving project have an influence

in other cases measuring everything is not cost-effective (e.g. mass-market technologies)

Page 8: The Italian experience with white certificates

2005-2011: ex-post accreditation of energy savings for 5 years (8 years for heating and A/C; 10 years for high efficient CHP). => impact on the relative stringency of targets and incentive structure cf. other national schemes. Reformed in late 2011: lifetime savings accredited over the crediting lifetime (5 years for most measures)

3 types of M&V methods:1) deemed savings (no on-field measurement; pre-defined annual energy

savings/installed unit= toe/year/unit); 2) engineering estimates (partial on-field measurement; pre-defined evaluation algorithm,

with pre-defined values for some parameters)3) complete energy monitoring plans (subject to pre-approval)

Information campaigns eligible only if associated to specific “hard” measures2% “premium” on the amount of certified energy savings

No use of uplifts (except for the above premium)

Only “additional” savings are considered, i.e. over and above spontaneous market trends and/or legislative requirements

periodic updating of deemed saving and engineering formula, to be applied according to a pre-defined schedule (“time-windows”)

M&V approach – 2AEEG approach

Page 9: The Italian experience with white certificates

To encourage third parties submission: guidelines and minimum requirements for deemed savings proposals and engineering methods

To ease the access to the system of measures for which no deemedsavings or engineering method is available: diffusion of best practices and guidelines to develop energy monitoring plans for specific types of projects

M&V approach – 3AEEG approach

Page 10: The Italian experience with white certificates

M&V methodologiescoverage of approved deemed savings and engineering algorithms

Buildings (wall insulation, double glazing, solar power, central heating and cooling) Domestic equipment (white appliances, air conditioners, boilers, heat-pumps, efficient shower-heads, aerated flow breakers, stand-by stop)Industrial equipment (motor drives, variable speed drives, natural gas decompression)Private and public lighting (retrofit or new street luminaries, light flow regulators, LEDs for cemeteries and traffic lights)CHP plants and district heating systems

Further methodologiesenergy efficient laser printers home broadband access gatewaysenergy efficient UPS (Uninterruptible Power Supply) systems

Page 11: The Italian experience with white certificates

M&V methodologiesexamples of measures evaluated via monitoring plans

Restructuring of the process lay-out in order to reduce the final energy need

Replacement of combustion devices for heat production

Replacement of big electric drives

Application of variable speed drives to pumps, compressor, etc.

Application of renewable energy sources for heat production (mainly biomass and vegetal oils)

Retrofit of cooling systems

Waste heat recovery and free cooling systems

Application of CHP to industrial processes.

Page 12: The Italian experience with white certificates

Cost-recovery mechanism for obliged DSOs:financed via electricity and natural gas rates2005-2007: only electricity and natural gas savings; since 2008: all fuels except transport; since 2011: all fuels including transport with deemed savings up to the occurrence of the target€/unit of primary energy saved => flat and technology neutraladjusted annually according to a pre-defined formula

=> increases when energy prices (i.e. the avoided energy cost) fall and viceversa, so as to stabilise the overall incentive to invest in EE

Ct+1 = Ct. (1 – e)

where:Ci is the unitary allowance applied to year i [€/toe]e is the average % increase in the prices of energy for

residential customers (electricity, natural gas and gas oil for heating)

Cost-recoveryAEEG approach

Page 13: The Italian experience with white certificates

Autorità per l’Energia Elettrica e il Gas

RESULTS 2005-2011(*)

(*) Source: Second Statistical Report on the 2011 target eyar of the TEE mechanism, forthcoming (www.autorita.energia.it)

Page 14: The Italian experience with white certificates

Autorità per l’Energia Elettrica e il Gas

Average energy savings rateMonthly TEE emissions rate

0

50.000

100.000

150.000

200.000

250.000

300.000

350.000

400.000

450.000

2005 2006 2007 2008 2009 2010 2011

target year

TEE/

mon

th

Page 15: The Italian experience with white certificates

Autorità per l’Energia Elettrica e il Gas

Sectoral breakdown

The share of energy savings delivered in the industrial sector is constantly increasing. This means that the mechanism is gradually promoting investments in long(er) lifetime saving measures

33%

55% 59% 60% 58%52% 49%

14%

16%

21% 23% 23%

22%21%21%

11%

6% 3% 2%

2%3%

27%

12% 8%5%

3%

3%2%

5% 6% 6% 10% 14%20%

25%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

up to 31/5/06 up to 31/5/07 up to 31/5/08 up to 31/5/09 up to 31/5/10 up to 31/5/11 up to 31/5/12

Indutrial uses

Public Lighting

Residential CHP andDistrict Heating

Thermal uses in theresidential sector

Electricity uses in theresidential sector

Page 16: The Italian experience with white certificates

Effects of different accounting rules - 1

Had Italy measured energy savings with a lifetime approach (cf. UK and France schemes) the breakdown of delivered energy savings would have been very different:

in a static picture: the share of short-term saving measures (e.g. residential lighting) would have been much lower while the share of long(er) lifetime measures (e.g. building envelope, industrial measures), would have been much larger, since all their lifetime savings would have been accounted for in the first accounting year (as opposed to be accounted only for 5 years and ex-post)

in a dynamic picture (i.e. taking into account the impact of such a different accounting method on investors’ incentives and choices): the share of long(er) lifetime measures would have been even largeralso as a result of a greater number/size of those measures beenimplemented

Page 17: The Italian experience with white certificates

Effects of different accounting rules -2

merely comparing the energy savings achieved in the Italian system with those achieved by other systems with different measurement and verification rules is not correct and is strongly misleading

Page 18: The Italian experience with white certificates

From ex-post accreditation of energy savings for the crediting lifetime (5 years for most measures) to accreditation of (discounted) lifetime savings over the crediting lifetime, so as to increase incentives for long-lifetime measures (without increasing the overall tariff burden)

U

T

i

i∑−

=

−=

1

0)1( δ

τDiscount factor

Measure lifetime

Crediting lifetime

τ = Lifetime

energy savings

Currently accredited

energy savings

Recent regulatory measures

Reduction of minimum project size

Simplification of other rules and procedures

Page 19: The Italian experience with white certificates

Autorità per l’Energia Elettrica e il Gas

Who is delivering?

TEE (% share over total)

up to 31/5/06

up to 31/5/07

up to 31/5/08

up to 31/5/09

up to 31/5/10

up to 31/5/11

Obliged electricity DSOs 9,1% 6,1% 11,4% 9,8% 7,8% 7,0% Obliged natural gas DSOs 23,8% 9,4% 10,1% 8,4% 7,7% 6,7% Non obliged DSOs 2,5% 12,2% 1,9% 1,0% 0,4% 0,5% Energy service providers (SSE) 64,6% 72,3% 76,6% 80,8% 83,5% 81,3% Final consumers with an energy manager (SEM) - - - 0,1% 0,6% 4,5%

Total 100% 100% 100% 100% 100% 100%

31 dic 2008 31 dic 2009 31 dic 2010 31 dic 2011 SSE 165 196 270 297 SEM 0 2 9 12

Page 20: The Italian experience with white certificates

Autorità per l’Energia Elettrica e il Gas

The key role of tradingCompliance strategies of obligated DSOs

15%39% 43%

21% 28% 28%

85% 45%

97%

32%47% 44%

57%

30%

15%

11% 9%

37%

0%

20%

40%

60%

80%

100%

120%

140%

160%

180%

2005 2006 2007 2008 2009 2010

%TEE

rispe

tto

all'o

bietti

vo co

mples

sivo

% Emessi vs obiettivo% Bilaterali vs obiettivo% Borsa vs obiettivo

Market liquidity

22% 22% 20%

54% 55%

23%

7% 4%

1%

0%10%20%30%40%50%60%70%80%90%

100%

2008 2009 2010

%TE

E ris

petto

all

'obiet

tivo

com

ples

sivo

% Emessi vs obiettivo% Bilaterali vs obiettivo% Borsa vs obiettivo

per il 2005 per il 2006 per il 2007 per il 2008 per il 2009 per il 2010 Obiettivi assegnati 155.911 311.758 633.382 2.200.003 3.200.000 4.300.000 % incremento obiettivi - 100% 103% 247% 45% 34% TEE scambiati 145.567 472.637 861.674 2.099.842 2.913.390 3.952.973 % incremento volume - 225% 82% 144% 39% 36% % scambi/obiettivo 93% 152% 136% 95% 91% 92%

DSOs with at least 100.000 final customers DSOs with at least 50.000 final customers

Compliance strategies of obligated DSOsPercentage of TEE gained each target year via:• own projects (“% emessi vs obiettivo”)• spot market purchases (“borsa”)• OTC purchases (“bilaterali”)

Page 21: The Italian experience with white certificates

€ 0,00

€ 20,00

€ 40,00

€ 60,00

€ 80,00

€ 100,00

€ 120,00

apr-08

giu-08ago-0

8ott-0

8dic-

08feb-0

9apr-0

9giu

-09ago-09

ott-09

dic-09

feb-10ap

r-10

giu-10

ago-10

ott-10

dic-10

feb-11

apr-11

giu-11ago-1

1ott-1

1dic-

11feb-1

2ap

r-12

giu-12

ago-12

TARIFF CONTRIBUTION SPOT MARKET TRADING

BILATERAL TRADING

Market PricesMarket prices are very important signals for decision-makerson the effectiveness and efficiency of the system as well asimportant reference indexes to set e.g. the tariff contribution, the sanctions of non compliances

Page 22: The Italian experience with white certificates

Market Prices and Legislative changes

30

40

50

60

70

80

90

100

mar-06

mag-06

lug-06

set-0

6no

v-06

gen-0

7mar-

07mag

-07giu

-07ag

o-07

ott-07

dic-07

feb-08

apr-0

8giu

-08ag

o-08

ott-08

dic-08

feb-09

apr-0

9pr

ezzo

(€/T

EE)

tipo Itipo IItipo IIIchiusure d'anno

Proposal to extend the tariffcontribution to other forms of

energy

Extention of the scope for the tariff contribution

From bandedto un-banded

EEO

Page 23: The Italian experience with white certificates

19 44

18 34

22 28

9 201,9

0 10 20 30 40 50

c€/kWh

Feed-in tariff for PV

Feed-in tariffs for other small FER-E plants

Feed-in tariffs for thermodinamic PV

Green Certificates (CV)

White Certificates (TEE)

With reference to the year 2011 white certificates (TEE) have beenfrom 5 to 23 times more cost-effective than other incentive toolsdesigned to achieve similar sustailable development objectives(in previous years the comparison has been even more favourable toTEE).

Cost-effectiveness of TEE versus otherFER-E supporting tools

Page 24: The Italian experience with white certificates

Cost-effectiveness of TEE versus other EE supporting tools

The cost-effectiveness of TEE has been confirmed by the 2010 Energy Efficiency Report by ENEA (National Energy Agency) where it compares the costs or the State of the various policy tools introduced to promote end-use energy efficiency

Page 25: The Italian experience with white certificates

TEE cost for an average-household

Impact of TEE on electricity and natural gas tariffs:maximum impact 6,5 €/anno in 2012

year c€/kWh €/household/year * c€/mc €/household/year **2005 0,00 0,1 0,01 0,22006 0,01 0,2 0,02 0,32007 0,01 0,3 0,05 0,72008 0,04 1,0 0,12 1,62009 0,05 1,4 0,16 2,22010 0,07 1,9 0,21 3,02011 0,09 2,5 0,26 3,72012 0,10 2,6 0,28 3,9

* annual consumption: 2700 kWh** annual consumption: 1400 mcNOTE: data in dark blu are estimates

Page 26: The Italian experience with white certificates

Direct private benefitsThe avoided energy cost has been from 11 e 19 times greaterthan the tariff contribution (that varied from 100 €/toe in 2005-2008 to 86,98 €/toe in 2012).

1035

1195

1341

1545

1663

1078998

953 969

1189

1469

12721273

688 712 688749

820 816902 874

955877

641578599570

747790

865846

857880

400

600

800

1000

1200

1400

1600

1800

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

€/to

e (c

urre

t pric

es)

Gasoline Natural Gas

Electricity

Page 27: The Italian experience with white certificates

Costs/Benefits Ratio

In the overall 2005-2012 period the costs/benefits ratio may begraphically shown by comparing the range of variation of energy prices (the benefits) with the range of variation of costs for different market actors (tariff contribution or average market pricesfor TEE)

0 200 400 600 800 1000 1200 1400 1600 1800

euro/toe

Average TAverage TEE

T

EE market price (OTC) market price (spot mkt)

ariff contribution for TEEElectricity price

Natural gas priceHeating oil price

Page 28: The Italian experience with white certificates

Autorità per l’Energia Elettrica e il Gas

TEE supply versus targets

0

500.000

1.000.000

1.500.000

2.000.000

2.500.000

3.000.000

3.500.000

4.000.000

4.500.000

5.000.000

2005 2006 2007 2008 2009 2010

Annual target (toe)

Issued + banked TEE

Issued TEE

Page 29: The Italian experience with white certificates

Autorità per l’Energia Elettrica e il Gas

Effects of the Regulatory changes introduced in November 2011 (lifetimesavings)

8

10

12

14

16

18

20

22

24

mag-11mag-12

mag-13mag-14

mag-15mag-16

mag-17mag-18

Mili

oni

toe

(cum

ulat

ive

from

1/1

/200

5)

Fabbisogno di TEE per raggiungere gli obiettivi nazionali ad oggi fissati dalla normativaScenario 2 (vecchie LG): TEE che si sarebbero emessi in futuro con le vecchie LG (senza effetto tau)Scenario 1 (vecchie LG): TEE che si sarebbero emessi in futuro con le vecchie LG (senza effetto tau)Scenario 2 (nuove LG): TEE emessi in futuro con nuove LG (con effetto tau)Scenario 1 (nuove LG): TEE emessi in futuro con nuove LG (con effetto tau)TEE effettivamente emessiTEE che sarebbero stati emessi con le vecchie LG

New Regulation enters into force

last compliance check fot the 2012 target (one year grace period)

Page 30: The Italian experience with white certificates

AEEG has urged the Government to:fix future targets, at least up to 2020clarify TEE boundaries relative to other incentive mechanismsrecently introduced (e.g. new support mechanism for high efficient CHP; feed-in tariff for renewable heat and small energy efficiency measures)clarify and rationalise the governance of the mechanismpromote development of technical norms market studies, independent data and statistics to support M&V of energy savings

Meanwhile we are studying:approaches to promote the development of ESCOs, EPC, new business models ways to prevent opportunistic behaviour (e.g. hoarding) without interfering with the marketpossible alternative approaches to fix and update the cost recovery rate

The way forward

Page 31: The Italian experience with white certificates

http://www.autorita.energia.it/it/pubblicazioni_ee.htmAnnual Reports on the White Certificates Mechanism (Sixth Annual Report plus

a Summary of the first five years of implementation to be published also in English)

Interim Statistical Reports on the White Certificates Mechanism (two every year)Papers on the Italian White certificates scheme:

Tradable White Certificates: experiences and perspectives, in Energy Efficiency, 5 (2012)

Tradable Energy Efficiency Certificates: the Italian experience, in Energy Efficiency, Vol. 1, Number 4, November 2008, p. 257-266, Springer Netherlands

Not Just Energy Savings: Emerging Regulatory Challenges from theImplementation of Tradable White Certificates, Proceedings of the 2008 ACEEE Summer Study on Energy Efficiency in Buildings. American Council for an Energy Efficiency Economy, Washington D.C. (August, 2008)

Assessment of White Certificate Schemes and their Integration into the Carbon Markets, with Paolo Bertoldi and Silvia Redessy, in Proceedings of the 2006 ACEEE Summer Study on Energy Efficiency in Buildings. American Council for an Energy Efficiency Economy, Washington D.C. (August, 2006)

A few references

Page 32: The Italian experience with white certificates

Contacts

Marcella PavanHead - Energy Efficiency Autorità per l’energia elettrica e il gas Piazza Cavour 520121 Milan – ITALY

tel: +39 02 65 565 263fax: +39 02 65 565 230e-mail:[email protected]

WEB Site: http://www.autorita.energia.it/ee/index.htm(in Italian)