White certificates in industry

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The paper presented at ECEEE industrial summer study 2012 illustrates the basics of the Italian white certificates scheme and its capability to promote energy efficiency in the cement industry

Transcript of White certificates in industry

  • 1. 6-058-12 Dario Di Santo White Certificates for the industrial sectorDario Di SantoFIRE Italian Federation for the Rational Use of EnergyVia Anguillarese 30100123 Roma ITEmail: [email protected] ForniFIRE Italian Federation for the Rational Use of EnergyVia Anguillarese 30100123 Roma ITEmail: [email protected] BieleFIRE Italian Federation for the Rational Use of EnergyVia Anguillarese 30100123 Roma ITEmail: [email protected] Italian white certificates (WhC) scheme is one of the most complete examples of a baseline and trade incentivescheme, created with the aim of promoting energy efficiency (EE) measures on final energy uses. The mechanismobliges energy network distributors (electricity and natural gas) to reach yearly energy saving targets certified by thepresentation of a corresponding number of WhC (each equal to 1 toe). The distributors can reach their targets eitherby acting directly on their final consumers or by buying WhC from ESCOs or companies that have an appointedenergy manager, as provided by law 10/1991.After almost seven years and major problems in complying with the 2010 targets for lack of certificates on themarket, the Italian electricity and gas authority (AEEG) changed the rules for presenting projects and introduced aset of multiplying coefficients to take into account the technical lifetime of EE measures. This change will have aparticularly pronounced effect on the industrial sector, both because of the enhanced value of the incentive (oftenthree times higher than before) and the progressive recognition of the energy monitoring plans method for savingevaluation.The paper will present the new rules, focusing on their economic effect, and some examples of how EE measures inthe industrial sector can be promoted through the scheme. In particular, the method for evaluating the energysavings will be described, in order to explain both the flexibility of the monitoring plan approach and its drawbacks.The effects on ESCO development will also be discussed. The Italian experience has additional significanceinasmuch as WhC schemes have a central role in the new EE directive proposal.The paper is based on the activities concerning WhC carried on by the authors, such as research and studies,surveys, cooperation with policy makers, implementation of standard evaluation files for different measures,information and dissemination, and support to energy manager and ESCOs.ContentsThis paper begins by explaining how the Italian White Certificate scheme works, its basis and market dynamics,with emphasis on the recent important modifications introduced by AEEG. It then focuses on the potential to applymonitoring plans to the cement industry, to show that the WhC system could perform well in the industrial sector,notwithstanding the modest results achieved by monitoring plans, to date, internationally.Recently, monitoring plans in industry are even becoming the principal mechanism to obtain WhC in Italy,particularly in the industrial sector. This is building capacity in the consultant companies that usually present WhCproposals, some of which are becoming ESCOs and making an enhanced contribution to EE promotion in industry. 1 of 14
  • 2. Even if many issues remains in the Italian WhC scheme, it has achieved a certain maturity and if well managed, themechanism could become more effective and interesting after the planned regulatory changes the Ministry ofEconomic Development is due to introduce in 2012.The analysis of the Italian WhC is principally based on three surveys recently implemented by FIRE1 among energymanagers and ESCOs [1][2][3][20], on studies realized by FIRE in recent years [e.g. 4], and on information, views,experiences, and issues communicated by policy makers, institutional officials, FIREs members, and energymanagers at FIREs workshops, conferences, and training courses [e.g. 5].The Italian White Certificate SchemeIntroductionEnergy efficiency is recognized as a priority for its energy, environmental, and economic benefits. It is also wellknown 1 that many EE measures are characterized by positive NPV, high IRR and short PBT2, which means thatthe capital cost of investment is recovered in a suitable amount of time and that, in many cases, an EE investmenthas a higher financial return than many bonds or other investments. Figure 1. McKinsey GHG3 abatement cost curveNevertheless, EE potential is not deployed as desired or, in policy terms, as required by the European 2020 targets.Many reasons could be found to justify the poor performance at European level described by the CommissionsEnergy efficiency action plan 2011, and many studies have been written on the topic in the recent years. The mainbarriers are not economic, but cultural (see for example [25]). They include knowledge of EE opportunities,qualification of EE operators, behaviours and attitudes of building occupants and workers, and complexity of EEsolutions. The complexity depends on the wide variety of EE solutions with respect to size, involved sector,position in the learning curve, etc. and on the connection between the performance and the use of buildings andindustrial processes, location, and local climate. This creates an intrinsic difficulty in defining appropriate incentiveschemes and in financing EE investments.1 FIRE, the Italian Federation for the Rational Use of Energy, is a no-profit association established in 1987 that manages theItalian energy manager network on behalf of the Ministry for the Economic Development and promotes energy efficiency2 NPV (Net Present Value), IRR (Internal Rate of Return), and PBT (Pay Back Time) are well known economic indicators toevaluate investments.3 GHG, Green House Gas 2 of 14
  • 3. Among the support schemes for EE, WhC is one of the most discussed. It has already been implemented in manyEuropean countries. Some focused on particular sectors/actions, whereas others, like Italy and France, kept thescheme open to most EE solutions and sectors. Figure 2 summarizes the differences. One question we may ask iswhether WhC can be considered an effective tool for promoting EE measures in the industrial sector. According tothe European Commission, Directorate General Joint Research Centre, the dominant sector in the five countriesindicated in Figure 2 has been the buildings, primarily residential. It seems that WhC does not effectively supportEE in industry in any of the countries, with the UK opting explicitly for a focus on the residential sector. UK (CERT and CESP) Italy France Denmark Flanders region (Belgium) 2002-2005 (EEC-1) 2005-2008 (EEC-2) 2006-2009 (first period) 2006-2009 (first period)Obligation period 2005-2012 2003 2008-2012 (CERT) 2011-2013 (second period) 2010-2012 (second period) 2009-2012 (CESP) 2.95 PJ annual (first year Approx. 580 GWh (2009 target) 293 MtCO2 lifetime savings in savings) until 2009 3.5% of the amount of electricity 345 TWh lifetime discounted 2012 (CERT) Cumulative savings of at least As of 2010: 6.1 PJ/y (first year supplied the year before toTarget size (ongoing phase) (over the period January 2011- 19.25 MtCO2 lifetime savings 22.4 Mtoe in 2012 savings weighted with household and non-residential Dec. 2013) in 2012 (CESP) prioritisation factors reflecting clients (2.5% in case of less than action lifespan) 2,500 clients). Residential and non energyEnergy end-use sectors covered Residential All All excl. ETS All except transport intensive industry and service 40% priority group and 15% super priority group. 25% ins