White certificates in Italy

www.fire-italia.org The White Certificate scheme: the Italian experience and proposals for improvementDario Di Santo, FIRE

ECEEE Summer school 2011

www.fire-italia.org

The Italian Federation for the Rational use of Energy is a no-profit association that promotes energy efficiency, supporting energy manager, ESCos and other companies dealing with energy.

Besides the activities directed to its nearly 500 members, FIRE operates under an implementing agreement with the Ministry of Economic Development to manage the Italian energy manager network since 1992.

In order to promote energy efficiency FIRE cooperates and deals with public authorities, energy technology and service companies, consultants, medium and large consumers, universities and associations to promote best practices and improve the legislation.

FIRE

www.fire-italia.org

EGE certification Energy Management Experts

UNI CEI 11339

www.secem.eu Rivista Gestione Energia

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FIRE activities and projects

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www.hreii.eu www.enforce-een.eu

www.ener-supply.eu

www.soltec-project.eu

www.esd-ca.eu

Among closed projects:- www.e-quem.enea.it - www.eu-greenlight.org- www.enerbuilding.eu- Eurocontract- ST-Esco

Besides to dedicated meetings, FIRE organises the Enermanagement conference, workshops, and training courses. It implements dissemination campaigns, surveys, market analysis and studies. Among the subjects with which FIRE has cooperated there are ENEA, GSE, RSE, large companies, universities, associations, agencies and trade fairs organizers.

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WhC in Italy

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WhC economics

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WhC and 20-20-20 Programme

WhC play an important role within the Italian 2020 target strategy.

Italian 2010 RES Plan target in 2020

Old mandatory target in 2020

2006/32/EC directive EE target in 2016WhC yearly targets

Mto

e

WhC

EE 2007 action plan

Old 20-20-20 target

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WhC economics

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AEEG asks for WhC

Energy savings

End-user

GME

AEEG

WhC obliteration

DSO

Authorises WhC emission

Tranfers WhC

1st step obtaining WhC

2nd step: WhC obliteration

Obliged parties: DSOs with more than 50.000 clients.

DSO

Italian white certificates scheme (obliged parties)WhC flows

cash flows

relations between parties

project implementation agreement

ENEA

WhC project evaluation

Source: FIRE.

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WhC economics

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AEEG asks for WhC

Energy savings

End-user

GME

AEEG

WhC obliteration

Distributor

Authorises WhC emission

Tranfers WhC

1st step obtaining WhC

2nd step: WhC market and obliteration

Voluntary parties: companies connected with obliged DSOs, small distributors, SSE and ESCOs, large consumers with appointed energy manager

Voluntary player

Voluntary company

GME market

WhC trading

Direct contracting (OTC)

Italian white certificates scheme (voluntary parties)WhC flows

cash flows

relations between parties

project implementation agreement

ENEA

WhC project evaluation

Source: FIRE.

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WhC economics

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Cash flow - ESCo scheme

T&D Tariffs End-user

ESCo

Grid savings

220-630 €/toe* saved

300-800 €/toe saved

Tariff reimbursement:92.22 €/toe for 201093.68 €/toe for 2011

DSO 70-100 €/toe additional

* Shared savings EPC hypotesis.

1 toe is equal to: 980 kg of diesel oil

1,300 m3 of natural gas

5,350 kWhe

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T&D Tariffs

End-user with energy manager

Grid savings

DSO70-100 €/toe additional

300-800 €/toe saved

Tariff reimbursement:92.22 €/toe for 201093.68 €/toe for 2011

1 toe is equal to: 980 kg of diesel oil

1,300 m3 of natural gas

5,350 kWhe

Cash flow - end-user scheme

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WhC economics

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WhC for dummies

DSOs with more than 50.000 clientsObliged parties (SO)

DSOs with less than 50.000 clients Companies linked to or controlled from SOEnergy service providers SSECompanies with appointed energy manager

Voluntary parties (SV)

1 WhC (also called TEE) = 1 additional toeWhC energy equivalent

5 years8 years for building envelope related actions10 years for high efficiency cogeneration

Duration of WhC issuing

Depends on the market (95-115 €/toe recently)WhC economic equivalent

Modalità standardizzata - deemed savingsModalità analitica - engineering estimatesModalità a consuntivo - monitoring plans

Saving evaluation

Energy efficiency improvements and savingsAllowed actions

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WhC economics

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Type I - electricity savingsType II - gas savingsType III - other fuels savings (no transport)Type IV - other fuels savings (transport)

Types of certificates

Gas Electricity

Both till 2012, to be extendedDuration and validity of WhC

Source: AEEG. Source: AEEG.

WhC for dummies

53% of the total target is ENEL’s.

Primary energy efficiency improvements Targets

It depends on a standard fuel mix price trend. Till now the range has been: 88.92-100 €/toe.DSO tariff reimbursment

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WhC in Italy

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WhC economics

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Project evaluation method Obliged parties and companies with EM Other voluntary parties

Deemed savings 25 toe25 toe

Engineering estimates 100 toe 50 toe

Monitoring plans 200 toe 100 toe

Minimum thresholds required to present a project

Possibility to join different actions in one project

Number of involved clients Homogenous methodsHomogenous methodsHomogenous methods Non homogenous

methods

Single client Deemed savings

Engineering estimates

Monitoring plans Monitoring plans

Many clients Deemed savings

Engineering estimates

Monitoring plans Not allowed

WhC for dummies

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WhC economics

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Saving evaluation methods

• Deemed savings: the saving is evaluated with respect to the number of installed reference units (e.g. square meter, kW, number of installed units). No measures are required. Only standardized solutions can be included in a deemed saving file.

• Engineering estimates: the saving is evaluated with respect to some measured quantities through a dedicated algorithm defined in the considered file. Required meters are also indicated in the considered file.

• Monitoring plan: the method is similar to the previous one, but the algorithm, the baseline, the additional saving coefficient, and the needed meters should be preliminarily proposed by the applicant and approved from ENEA.

Saving evaluation method

Deemed savings

Engineering estimates

Monitoring plan

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WhC in Italy

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WhC economics

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Deemed savings files

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min max min max max min

1-tris CFLs P <15W lamp 212 4.049 0 5 101.215 5.3062 electric DHW boiler -> gas DHW boiler 1 boiler 14 14 73 73 342 3423 4 stars boiler

heating 1 boiler 11 71 14 92 1.786 272heating and DHW 1 boiler 9 25 40 117 625 214

4 gas DHW boiler -> high efficiency gas DHW boiler 1 boiler 16 16 64 64 391 3915 single glazed windows -> double glazed windows

houses 1 m2 43 500 2 23 12.500 1.087offices 1 m2 56 500 2 18 12.500 1.389

hospitals 1 m2 38 250 4 26 6.250 9626 walls and roof insulation

houses 1 m2 83 3.333 0 12 83.333 2.083offices 1 m2 108 3.333 0 9 83.333 2.688

hospitals 1 m2 79 1.667 1 13 41.667 1.9697 photovoltaic

beta< 70° 1 kWp 3 4 240 346 104 72beta> 70° 1 kWp 4 6 166 241 151 104

8-bis solar thermal collectors for DHWelectric boiler substitution 1 m2 4 10 104 229 240 109gas/oil boiler substitution 1 m2 7 16 61 134 410 187

district heating 1 m2 10 22 45 98 556 2559 VSD electric engines for industrial pumping systems

1 turn industry 1 kW 12 42 24 83 1.042 3012 turns industry 1 kW 6 20 49 166 508 1513 turns industry 1 kW 3 11 95 319 265 78

seasonal industry 1 kW 11 38 27 90 940 27811 high efficiency electric engines

1 turn industry 1 kW 37 294 3 27 7.353 9362 turns industry 1 kW 19 149 7 53 3.731 4693 turns industry 1 kW 10 77 13 102 1.923 245

seasonal industry 1 kW 35 270 4 29 6.757 86813a-bis aerators and low flow shower taps residential sector 1 device 187 187 5 5 4.682 4.68213b-bis low flow shower taps hotels

electric boiler 1 device 60 60 17 17 1.488 1.488gas/oil boilers 1 device 101 101 10 10 2.525 2.525

13c-bis low flow shower taps sport centerselectric boiler 1 device 11 11 89 89 282 282gas/oil boilers 1 device 19 19 53 53 476 476

15 air to air domestic heat pumpsCOP 3,0 apartment 6 59 17 166 1.471 151COP 3,5 apartment 4 48 21 226 1.190 111COP 4,0 apartment 4 40 25 272 1.000 92COP 4,5 apartment 3 36 28 308 893 81

17 public lighting control systems 1 kW 4 14 70 234 357 10718 MV public lighting lamps->HPS lamps 1 lamp 5 31 32 206 779 12119 air conditioners < 12kWf 1 kWf 263 588 2 4 14.706 6.57920 walls and roof insulation for cooling purposes 1 m2 1.250 5.000 0 1 125.000 31.25023 led semaphoric lamps lamp (10 W) 14 40 25 74 998 33924 led lamps for cemeteries lamp (0,5 W) 611 611 2 2 15.263 15.263

25a anti standby anti stand-by device 150 150 7 7 3.741 3.74125b anti standby anti stand-by device 376 376 3 3 9.402 9.40227 DHW electric heat pumps heat pump 9 15 68 111 368 225

File number Technology Unit Unit per toe Saving (10-3

toe/unit/year)Units needed to

reach 25 toe

Deemed savings files

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WhC economics

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Deemed savings and WhC

Deemed savings have been by far the preferred choice. Engineering estimates are paying the effects of an administrative tribunal decision that blocked their use from 2nd semester 2006 to 1st semester 2010 and only in 2011 the actual value will be available.

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WhC in Italy

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WhC economics

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Price trends

Source: FIRE.

In case of excess supply on the market, the price falls. In case of shortage, DSOs can’t accept to have average prices above the tariff reimbursement, so prices remained low. The fact that penalties are not defined (they will be determined by AEEG on a case by case assessment) accentuates the problem. Since DSOs are passive players it is fundamental to facilitate the participation in the scheme of the voluntary parties.

WhC oversupply

WhC shortage

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WhC in Italy

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WhC economics

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Issued certificates VS targets

Source: FIRE.

In the first phase there has been an excess of WhC on the market. Then it came a change that has taken the market on the opposite situation. The main drivers of this change are: CFL and similar files no more available, the completion of their 5 years cycle for some projects, the insufficient growth of monitoring plans. The 2010 results, even if not confirmed yet, is particularly critical.

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WhC in Italy

Results

WhC economics

Comments

Among the answers given by energy managers at a FIRE’s survey about the reasons behind the scarce direct participation in the WhC scheme, the most numerous were:

the lack of interest due to an insufficient economic value;

the complexity of the scheme;

the lack of an adequate knowledge of the WhC scheme;

the size of the actions that was below the scheme threshold;

the lack of an infopoint/call center dedicated to the scheme;

the lack of guidelines for the monitoring plans evaluation and of simplified files;

the lack of interest towards energy efficiency measures from their company.

The first three points are linked together, and witness the fact that WhC is not a strong incentive.

On the other hand its complexity and the “difficulty” of getting information frightens many people more than the scheme deserves.

WhC FIRE’s 2011 survey results

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WhC in Italy

Results

WhC economics

Comments

Is it true that the incentive is not so interesting?

One toe means around 90 € from WhC and an economic saving on bill of 400-600 € for the large industrial users and 700-800 € for the civil ones... but... WhC are only for additional savings and the capital cost varies a lot (“acceptable” average 1,000-2,000 € for industrial users and 3,000-6,000 € for civil users, whereas the WhC contribution is around 400 € – 5% discount rate – on additional toes).

To address more specifically this issue FIRE carried on a study in 2010 within the “Ricerca di Sistema” programme to evaluate the “WhC NPV to capital cost of investment” ratio for deemed savings files.

The results can be summarised in the next two diagrams. The main hypothesis are:

for each technology a range of typical investment cost has been individuated;

the value of 90 Euro/toe has been applied for the years of the incentive (five or eight depending on the solution) and discounted at 5% interest rate;

the incentive/CC ratio has been calculated in typical situations.

Economics of deemed savings

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WhC in Italy

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WhC economics

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Economics of deemed savings

Source: FIRE.

Among the projects that present a WhC NPV to capital cost ratio higher than 10% – apart from the different types of lamps and aerators that can achieve more than 100% – there are only solar thermal collectors replacing electric boilers, VSD engines for industrial pumping systems and stand-by devices.

less than 10%

Aerators, efficient taps and lamps

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WhC in Italy

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WhC economics

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Which are the obliged parties?

Distributors (DSOs):easy to identify, control, and fine;usually not interested in implementing energy efficiency projects among their clients (they are network manager, not energy service companies), sometimes not allowed to (e.g. after the meter rules linked to antitrust regulations);usually can’t transfer costs to their clients (due to caps on earnings or similar rules), so they need a reimbursement or the possibility to rise their transport and distribution tariffs.

Suppliers and traders:can transfer costs to their clients;can be interested in implementing energy efficiency projects among their clients as an additional service;are not always easy to identify, control, and fine.

If the distributors are the obliged players, it is important to set rules to allow them to have an active role and it must be considered the possible effect of the reimbursement on the WhC market prices.

Please notice that a DSO is different from a supplier even if they are in the same corporation.

Important points

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WhC in Italy

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WhC economics

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Is there a robust and clear penalty scheme?

Every obliged player shall know how much is going to pay in case of default and shouldn’t rely on going to court to avoid it or gain time (in Italy the administrative tribunals – TARs – can be requested to intervene on such issues).

The value will represent the upper WhC price threshold, so it must be carefully evaluated.

Is the WhC price interesting for the voluntary parties and, directly or indirectly, for the end-users?

Of course this depends on the different technologies, but the possibility to involve the voluntary parties and the end-users relies on the benefits they can get. Notice that some users can be interested in doing energy efficiency actions, but not in taking part to the WhC scheme.

Important points

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WhC in Italy

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WhC economics

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Is it easy to present a project and to measure energy savings?

Many options exist and it is up to the policy maker or the regulator to decide if it is better to rely mainly on simplified measurement methodologies or on monitoring plans, how to deal with additional savings, and whether to consider the lifespan of energy projects or not.

Just keep in mind that in general the best is an enemy of the good: simple rules are easier to understand, monitor, and correct.

Are there enough human resources dedicated to managing and operating the scheme?

It is important to understand that such a scheme requires both resources for information and training activities and for evaluating the proposals, issuing the certificates, operating the market, monitoring how the scheme works, and changing the target and the rules if needed.

It can be obvious, but still it is better to remind its importance. Please notice that the required people rises together with the targets (i.e. the number of the proposals to be evaluated).

Important points

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WhC in Italy

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WhC economics

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Which are the expected goal of the WhC scheme?to reach the targets;to promote (some) energy efficiency measures;to dramatically boost (some) energy efficiency measures;to promote the energy efficiency market by rising awareness and knowledge;to give a new role to energy utilities;to have an useful method to compute energy efficiency results at the statistical level (e.g. to answer Eurostat requests).

Should we consider the possibility to strengthen the scheme, trying to have at least a 30-50% “WhC NPV/CC” ratio?

The last questions

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If you answered yes than:you think that we need a scheme that really promotes energy efficiency (it could be a question of the right multipliers);

you think that the white certificates is the right tool to do it;

you don’t think that baseline and trade schemes works in practice as they should, so we can sacrifice some theory about cost-effectiveness.

If you answered no than:you think that higher incentives will push the prices of the technologies up and promote speculation;

you are concerned with people who pay the bill;

you don’t want to sacrifice the theory of baseline and trade economics.

Please consider that another possibility is to mix a white certificates scheme with another one (e.g. a feed in tariff, a tax exemption, a capital contribution, etc) in order to stimulate a range of “strategic” technical solutions without sacrificing the baseline and trade theory.

Important points

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WhC economics

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D.Lgs. 3 March 2011 n.28

D.Lgs. 3 March 2011 n. 28 requires a review of the white certificate scheme (WhC), which will be improved and strengthened. It also introduces a new scheme dedicated to small energy efficiency actions. The implementing ministerial decree will set its rules and characteristics.

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WhC economics

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A possible answer: DCO 43/10 proposals

Some interesting proposals from AEEG’s DCO 43/2010:

- minimum savings threshold reduction;Evaluation method toe

Deemed savings 25

Engineering estimates 50

Monitoring plan 100

- introduction of a tau coefficient to take into account the lifespan of the different solutions;

- enhanced attention to communication and information activities, since a complex scheme deserves appropriate resources on this issue.

- bonus for EN 16001 certified companies and UNI CEI 11352 certified ESCos;

Project evaluation method

Obliged parties and companies

with EM

Other voluntary parties

Deemed savings 25 toe25 toe

Engineering estimates

100 toe 50 toe

Monitoring plans 200 toe 100 toe

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WhC economics

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Source: FIRE.A possible answer: DCO 43/10 proposals

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WhC economics

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And now choose your preferred policy maker...

... and make it a sound and effective WhC scheme!!!

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Operative references

www.autorita.energia.it/it/ee/ee_home2.htm1. Recognition SSE e EM

2. RVC and PPPM presentation https://www.autorita.energia.it/raccolte-dati/effenerg-ia

http://www.mercatoelettrico.org/It/Mercati/TEE/RegistroTEE.aspx3. WhC GME’s register

http://www.mercatoelettrico.org/It/Mercati/AccessoTEE.aspx4.a GME’s market

They are carried out within the GME’s register4.b GME’s OTC platform

www.mercatoelettrico.org/It/Esiti/MGP/EsitiMGP.aspx5. Market statistics

www.autorita.energia.it/it/pubblicazioni_ee.htm6. WhC statistical reports

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