Evaluation of Energy Efficiency

policies in Italy

Daniel Giannetti

EPATEE

1st European Peer Learning Workshop, Paris, 3rd October 2017

Agenda

2

Energy Efficiency targets and results in Italy

White certificates operating data

Impacts of white certificates mechanism on economy, environment and energy bill

2020 Energy efficiency Targets

3

Energy Efficiency Target 2020 Energy Efficiency Target 2020

Description Mandatory % % Mtoe Period Measures

Total EE target

Primary energy savings with respect to PRIMES 2007 reference scenario of primary energy consumption.

No -20%

-24 % (with respect to

reference PRIMES 2007)

-15,5 Mtoe/y (saving in 2020 final

consumption) (*)

2011-2020

• White Certificates • Thermal Account • Fiscal deduction • EPBD • EC Standard & Regulation • Other Measures in

Transport

EE obligation schemes target (Art.7 EED)

Final energy savings through energy efficiency obligation schemes

Yes

1,5%/y new savings in 2014-2020 of 1,5 % of the annual energy sales

with some facilitations

(art 7 par. 2 & 3 EED)

Up to 1,5% /y (of Final Consumption excluding transport)

-25,4 Mtoe (2014-2020 FC

cumulated savings, corresponding to

6,75 Mtoe/y in 2020)

2014-2020 • White Certificates (60%) • Thermal Account • Fiscal deduction

Currently the European and National legislation frameworks include two different energy efficiency targets:

(*) 20 Mtoe in terms of Primary energy consumption

Main Energy Efficiency support mechanisms in Italy

4

(*) Until 2017, incentive lifetime is for the most part of interventions 5 years (**) Considering economics of the last obligation year (2016) June 2016 – May 2017 (***) Considering only 65% deduction, because 50% deduction includes also costs not related to energy efficiency interventions (****) The public cost considering only Thermal account incentives paid in 2016

White Certificates Fiscal deduction Thermal Account

Energy savings target obligation Obligation quota Voluntary Voluntary

Remuneration mechanism Saving payment (Saving Certificate with variable market price)

Tax relief (65% of investment for specific EE intervention,

50% for generic building refurbishment)

Capital subsidies (around 50% of investment)

Incentive lifetime 3-10 years (*) 10 years 1-5 years

Sector involved in EE intervention

Utilities

Industry Residential

Services Transport

Residential Services

Residential Services/SME

Public administration

Energy savings monitoring Measured Estimated Estimated

Funding source Gas & Electricity Bill National Budget

(tax income reduction) Gas Bill

Total public cost (2016) 1,4 bn (**) 2,2 bn (***) 0,04 bn (****)

Target savings share 2016 (Art.7 EED)

68% 32% 0%

Policy effectiveness KPI [€/TOE, €/CO2]

191€/TOE (**) 56 €/CO2

1091 €/TOE (***) 448 €/CO2

525 €/TOE (EE) - 191 €/TOE (RES-H) 209€/tCO2 (EE) - 62€/tCO2 (RES-H)

Duration of scheme 2005-.. (2020 last year with defined obligation quota)

1998-.. 2014-… (achievement of cost: 900 M€/y)

Status of national energy efficiency target

5

National EE target per sector

In 2016 Italy reached 41% of the national energy efficiency target expected for 2020: • The energy savings assessed in 2016 (interventions 2011-2016) are concentrated in residential and industrial sectors while services and transport

sectors are still far from the sectorial target • White certificates and Fiscal deductions are the most significant energy efficiency measures in terms of energy saving generated to achieve the

target (*)

National EE target per EE measure

3,1 MTOE 3,7 MTOE

0,2 MTOE

1,2 MTOE 2,0 MTOE

5,1 MTOE

1,2 MTOE

5,5 MTOE

6,4 MTOE

15,5 MTOE

2016 Observed 2020 Target

TransportIndustryServicesResidential

2,6 MTOE

5,5 MTOE 1,6 MTOE

1,4 MTOE

1,5 MTOE

2,2 MTOE

5,2 MTOE

2,0 MTOE

6,4 MTOE

15,5 MTOE

2016 Observed 2020 Target

Mobility investmentEC Std & Reg. (incl. EPBD)Thermal accountFiscal deductionsWhite certificates

Status of national energy efficiency target by measure and sector

6

National EE target per measure National EE target per sector

The national energy savings data (showed in the previous slide) in more details:

2,6 MTOE

5,5 MTOE

1,6 MTOE 1,4 MTOE

0,0 MTOE

1,5 MTOE 2,2 MTOE

5,2 MTOE

0,1 MTOE

2,0 MTOE

6,4 MTOE

15,5 MTOE

2016Observed

2020Target

2016Observed

2020Target

2016Observed

2020Target

2016Observed

2020Target

2016Observed

2020Target

2016Observed

2020Target

White certificates Fiscal deductions Thermal account EC Std & Reg. (incl.EPBD)

Mobilityinvestment

Total EE measures

TransportIndustryServicesResidential

3,1 MTOE 3,7 MTOE

0,2 MTOE

1,2 MTOE 2,0 MTOE

5,1 MTOE

1,2 MTOE

5,5 MTOE

6,4 MTOE

15,5 MTOE

2016Observed

2020Target

2016Observed

2020Target

2016Observed

2020Target

2016Observed

2020Target

2016Observed

2020Target

Residential Services Industry Transport Total sector

Mobility investmentEC Std & Reg. (incl. EPBD)Thermal accountFiscal deductionsWhite certificates

Status of energy efficiency obligation schemes target (Art.7 EED)

7

Art.7 EED national target and result Art.7 EED targets and results per energy efficiency measure

0,9 Mtoe

2,7 Mtoe

5,5 Mtoe

13,5 Mtoe

19,1 Mtoe

25,8 Mtoe

1,2 Mtoe 2,7 Mtoe

4,6 Mtoe

2014 2015 2016 2017 2018 2019 2020

Art.7 EED Energy Saving Target

Art.7 EED Energy Saving observed

83% of 2016 Planned 18% of 2020 Target

68% 0%

32%

White CertificateThermal AccountFiscal Deduction

In 2016 Italy was in line (83%) with the energy saving trend defined in EEAP in order to reach the 2020 energy efficiency obligation scheme target : • White certificates covered more than 60% of the energy savings assessed and is very closed to the planned saving trend • Fiscal deduction provided more energy savings compared to expectations. Fiscal deductions partially compensate the Thermal Account energy

savings gap

1,0

1,9

3,1

0,000 0,001 0,003

0,2 0,7

1,5

0

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

2014 2015 2016 2017 2018 2019 2020

Mtep

White Certificates target EEAP2014

Thermal Account target EEAP2014

Fiscal deduction target EEAP2014

White Certificates observed saving

Thermal Account observed saving

Fiscal deduction observed saving

Agenda

8

Energy Efficiency targets and results in Italy

White certificates operating data

Impacts of white certificates mechanism on economy, environment and energy bill

White Certificates and savings generated

9

Yearly White Certificates emissions and related energy savings Cumulated White Certificates emissions and related energy savings

• In 2016 in Italy have been issued 5,5 M of white certificates related to 2 Mtoe of energy savings interventions, with an increasing rate of 10% compared to 2015 emissions

• The new interventions received 0,7 M of WhC (13%) while the rest are were dedicated to interventions realized in the previous years • The white certificates scheme in 11 years certified 24 Mtoe of primary energy savings

557 757

1.388

2.506

3.246 3.332

5.734

6.118

7.522

5.029

5.518

3.162

2.448 2.695

1.733 1.932

0

1000

2000

3000

4000

5000

6000

7000

8000

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

WhCs nr. [k]

Energy Savings [ktep]

557 1.314 2.702

5.208

8.454

11.786

17.520

23.638

31.160

36.189

41.706

14.947

17.395

20.090 21.823

23.756

-

5.000

10.000

15.000

20.000

25.000

30.000

35.000

40.000

45.000

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

WhCs nr. [k]

Energy Savings [ktep]

White Certificates by assessment method

10

Annual amount of projects, white certificates emissions and related energy savings per EE project assessment method

• The WhCs scheme includes 3 assessing methods to calculate and verify the WhCs amount: • Standardized assessment methods (RVC-S): without metering, considering default values for the energy savings of single installed units and taking into

account corrective factors (e.g. climate zone, working hours, etc.). Method allowed only for some EE interventions (e.g. windows, lighting, etc.) • Reporting assessment method (RVC-C): requires direct measurement before and after intervention, taking into account technological baseline. The project

description and measurement of energy savings proposal could be previously submitted and accepted by GSE (PPPM) • Many of the WhC projects are represented by standard assessment methods while the main part of WhCs and related energy saving is assessed by reporting

assessment methods

2.079

6.155

2.104 2.170 3.124 1.010 1.803 2.646

877

4.034 4.103 2.935

7.604

1.156

518

4.490

1.598

632

6.971

2.435

915

14.751

7.522

2.695

11.762

5.029

1.733

12.524

5.518

1.932

Projects [nr.] WhC nr. [k] Savings [kTOE] Projects [nr.] WhC nr. [k] Savings [kTOE] Projects [nr.] WhCs nr. [k nr] Savings [kTOE]

2014 2015 2016

IP: Infrastructure projectsPPPM: Monitoring planRVC‐S: Standardized assessment methods RVC‐A: Analytical assessment methods RVC‐C: Reporting assessment methods

White Certificates by sector

Annual amount of White certificates emissions and energy savings by sector involved in energy consumption saving

• Most of WhC and energy savings are recognized to energy efficiency interventions in industrial sector (52% of savings in 2016) • The share of savings verified in buildings of residential and service sectors is progressively growing (41% of savings in 2016)

11

1.343

549

1.546

588

2.199

787

5.957

2.010

3.126

996

3.065

1.013

7.522

2.695

5.029

1.733

5.518

1.932

WhCs nr. [k] Saving [kTOE] WhCs nr. [k] Energy savings [kTOE] WhCs nr. [k] Saving [kTOE]

2014 2015 2016

INDUSTRY BUILDING (RESIDENTIAL+SERVICES)

LIGHTING TRANSPORT

ELECTRICITY & GAS GRID INFRASTRUCTURES

White Certificates by intervention type

535

883

313 190

138

129

126 264

946

944

506 540

1.705

2.010

996 1.013

0

500

1.000

1.500

2.000

2.500

3.000

2013 2014 2015 2016

kTOE HEAT PRODUCTION & RECOVERY IN INDUSTRYELECTRIC DEVICES IN INDUSTRYPROCESS OPTIMIZATION & OTHER IN INDUSTRYEFFICIENT ELECTRICITY GENERATION IN INDUSTRY

67 51 60

201 224 256

341

113

203 260

372

435

549 588

787

0

500

1.000

1.500

2013 2014 2015 2016

kTOE BUILDING INSULATIONHEAT PRODUCTION & RECOVERY IN BUILDINGBUILDING AUTOMATIONELECTRICITY GENERATION IN BUILDINGBUILDING ELECTRIC APPLIANCEBUILDING ICT DEVICESBUILDING HOT WATER DEMAND REDUCTION

15 18 22

140

27 12

58

78 78 75

210

127 115 109

0

250

500

2013 2014 2015 2016

kTOE

RETROFIT PUBLIC LIGHTINGRETROFIT PRIVATE LIGHTINGNEW PUBLIC LIGHTINGNEW PRIVATE LIGHTING

Savings by intervention type in industry Savings by intervention type in buildings Savings by intervention type in lighting

• The largest part of energy efficiency interventions realized in industrial sector are related to heat production and recovery (53%) • Heat production interventions and building insulation cover 90% of savings supported by WhCs scheme in the building sector • The main part of lighting interventions is represented by retrofit of public lighting (69%)

12

13

White Certificates by energy saving type

Amount of White certificates and savings by Whc type

• Half of WhC and energy savings are related to energy certificate type 2 representing savings of natural gas because the largest part of energy efficiency interventions supported by WhC involves heat production and recovery mainly from natural gas

7.522

2.695

5.029

1.733

5.518

1.932

WhC nr. [k] Saving [kTOE] WhC nr. [k] Saving [kTOE] WhC nr. [k] Saving [kTOE]

2014 2015 2016

WhC 5: Transport fuel savings

WhC 3: Other commodities savings

WhC 2: Gas savings

WhC 1: Electricity savings

- 60% of white certificate sales are traded on the central market and 40% by bilaterals - White Certificates traded into the central market show prices 20% higher than those of bilaterals, where free sales between branches of the same company occur (ESCO and DSO) - From 2017 the price is stably beyond 200 euro per white certificate, after being in the range 90-110 euro/certificate for over five years - The WhC price growth could be driven by short market caused by more challenging obligation quota and speculative negotiations - Currently it does not exist a cap mechanism for white certificates market price

Main trends of White certificates market

White certificates sales and price trends

14

Central Market Price 2015: 116 €/WhC

Central Market Price 2016: 193 €/WhC

Central Market Price 2017 (preliminary):

290 €/WhC

Bilateral price 2015: 96 €/WhC

Bilateral price 2016:

158 €/WhC

Bilateral price 2017 (preliminary):

207 €/WhC

0

500000

1000000

1500000

2000000

2500000

3000000

3500000

0

50

100

150

200

250

300

350

20

15

-06

20

15

-07

20

15

-08

20

15

-09

20

15

-10

20

15

-11

20

15

-12

20

16

-01

20

16

-02

20

16

-03

20

16

-04

20

16

-05

20

16

-06

20

16

-07

20

16

-08

20

16

-09

20

16

-10

20

16

-11

20

16

-12

20

17

-01

20

17

-02

20

17

-03

20

17

-04

20

17

-05

20

17

-06

20

17

-07

20

17

-08

20

17

-09

20

17

-10

Year of obligation 2015 Year of obligation 2016 Year of obligation 2017

Sales [nr. WhCs] Price [€/WhC]

Central market monthly price [€/WhC]

Central market annual price [€/WhC]

Bilaterals monthly price [€/WhC]

Bilaterals annual price [€/WhC]

Central market monthly sales [nr. WhC]

Bilaterals monthly sales [nr. WhC]

Agenda

15

Energy Efficiency targets and results in Italy

White certificates operating data

Impacts of white certificates mechanism on economy, environment and energy bill

White certificate scheme cost

16

White certificate scheme annual cost evolution

215 M€ 326 M€ 325 M€

481 M€

714 M€ 618 M€

726 M€

1.383 M€

89 €/WhC 92 €/WhC 94 €/WhC 87 €/WhC 110 €/WhC 106 €/WhC 115 €/WhC 191 €/WhC

3.200

4.300

5.300

6.000 5.510

6.750

7.750

9.510

2.332 2.331

3.477 3.736

6.500

5.820 6.325

7.224

2009 2010 2011 2012 2013 2014 2015 2016Obligation year

WhC annual rembursment (k €) WhC compensation price (€/WhC) WhC obligation quota [k WhC]WhC quota fullfilled by DSO [k WhC]

• In recent years, the annual cost of white certificates is growing. It overcame 1 bn/y in 2016. • The white certificates mechanism cost is driven by the increasing of:

• obligation quota to reach the challenging energy efficiency goals • white certificates compensation price recognized to DSO (obliged subjects) that is linked to market price

17

White certificate economic impact on family bill

1 2 1 1 2 6 7 6 6

13

4 6

12 14

15 35

101

153 169 190

170

270

352

375

602

813

8 30

59 101

135

233

328

314 297

453

735

0,1 €

7 € 7 €

15 €

5 € 8 €

18 € 21 €

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Domestic gas annual cost for WhC [€]

Domestic electricity annual cost for WhC [€]

WhC budget in gas bill [Mln €]

WhC budget in electricity bill [Mln €]

White certificates family bill expense

• The total cost of white certificates scheme is covered by the electricity and gas bills (UC7 and RE) • The annual fee that a typical Italian household (2700 kWh, 1400 m3) pays for the white certificate scheme amounts to 20€ per year

18

White certificate environmental impacts: Energy & GHG savings

2,7

1,7 1,9

9,5

5,5

6,6

2014 2015 2016

Energy Saving [MTOE/y]

Emission saving [MtCO2/y]

106 115

191

30 36

56

2014 2015 2016

TOE cost [€/TOE]

CO2 cost [€/tCO2]

Energy & GHG savings related to WhCs Cost evolution of energy & GHG savings

• The energy efficiency interventions supported by White certificates enable the yearly reduction of around 2MTOE and 7 MtCO2 • Primary energy and GHG saved represents the lowest cost/saving ratio among the energy efficiency scheme currently active in Italy, although in

recent years it is increasing

19

White Certificates investment and occupation

Direct occupation

Indirect occupation

Added Value

FTE/M€ FTE/M€ M€/M€

6,2 5,6 0,67

Energy efficiency added value & jobs KPI adopted for the estimation

Volume estimated for investments, added value and jobs related to interventions supported by WhCs

• The amount of annual investments related to the new energy efficiency interventions supported by white certificates is estimated to be around 1 bn/y with more than 10.000 (FTE) of related direct and indirect green jobs

989 664

6.130

11.666

Investiments (M€) Added Value (M€) Direct Jobs (FTE) Direct&Indirect Jobs(FTE)

contacts

Thank you for your attention

d an ie l . g ian nett i@gse . i t stud i@g s e . i t