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Wind energyin Italy:recenttrendsMatteo Giannì, Luca BenedettiGSE Studies and System Monitoring DirectionIEA WIND TASK 11 TOPICAL Expert Meeting 96WIND PLANT DECOMMISSIONING,REPOWERING, RECYCLINGROMENOVEMBER 14-15, 2019

Index Targets and current trends Production Investment and O&M cost Competitiveness Expiry of incentives2 Wind energy in Italy: recent trends

2030 RES targets in NECP - electricity RES energy is expected to grow up to about 187 TWh, starting from 115 TWh in 2018: the higher contributions are expectedfrom PV and wind: PV energy should triple ( 50 TWh); Wind energy should double ( 23 TWh)PV capacity should increase to 50 GW ( 30 GW starting from actual 20 GW). In the past 4 years about 400 MW/year installed;the rate should raise up to 3 GW/year; Wind capacity should increase up to 19 GW, 9 GW with respect to actual 10 GWElectricity trajectories towards 2030 targets8070Solar60TWh5040302010-3 Wind energy in Italy: recent trendsHydro*Wind*Bioenergies*normalized (dotted line), actual production (continuous line)Geothermal

Wind energy in Italy: main statistics In 2018, installed wind capacity reached 10,3 GW, related to more than 5.600 plants, which produced 17,7 TWh Remarkable growth in 2006 – 2012, about 1 GW/year; capacity trend slow down after 2013 but significantincrease of small wind plantsWind capacity share in 2018Distribution by region The largest part of wind capacity is located in the South of Italy (97%).Evolution of wind plants (cumulated number and capacity)8.1198.561 8.7039.162 9.4109.76610.2656.9365.8145.579 5.6424.8981.1311.639 1.9081201482.7141693.538203 242 2944878071.054 1.3861.8472.7343.5982004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018Gross capacity (MW)4 Wind energy in Italy: recent trendsN of plants

Supported wind energy At the end of 2018, most wind capacity ( 85%) is still supported by GSE under various incentive schemes, withan annual expenditure around 1,3 bn The Green Certificates/FIP scheme still plays the major role in terms of supported capacity, energy and cost,while more recent schemes are supporting more plantsNumberCapacity [MW]1.2892.283 4.8316.895Energy[TWh]418 8.624222,711,90,8Indicative cost [ mln]15815,31.117381.31850,01.655518375Green FITDMDM Totalc./FIP 2008 2012 20165 Wind energy in Italy: recent trendsDMDM TotalGreen FITc./FIP 2008 2012 2016Green FITDMDM Totalc./FIP 2008 2012 2016Green FITDMDM Totalc./FIP 2008 2012 2016

Recent trends of supported wind plants An explosive number of small size (especially below 60 kW) installations were deployed in the past years, mainly in 2017, whendirect access to incentives closed TraiettorieCapacity trend is almost driven by large plants, with rate of 300 – 500 MW per yearInstallation trend (n/year)7057871.828Capacity trend (MW/year)55394 MW14289 MW357 MW1.656 20 kW20 kW C 60 kW60 kW C 200 kW200 kW C 1.000 kWC 1.000 kW472535 MW412 -2017201820196 Wind energy in Italy: recent trends273422--20152016201720182* partial-2019 * partial

Index Targets and current trends Production Investment and O&M cost Competitiveness Expiry of incentives7 Wind energy in Italy: recent trends

Production of supported wind plants The production of a large amount of plants accessing incentives from 2013 was analyzed (over 3.900 plants and 1,8 GW).Plants with at least one full year of production between 2014 and 2018 were considered TraiettorieMini-wind plants ( 200 kW) show moderate production (although increasing over time), with high variability Large plants have higher performances, almost stable over timeEvolution of full load hours for different plant sizeDB consistency 20 kWNumber73.02617716631200 kW C 1.000 kW8574C 1.000 kW721.5133.9021.80160 kW C 200 kWTotal20 kW C 60 kW200 kW C 1.000 kWC 1.000 kW60 kW C 200 kW(MW)55320 kW C 60 kW2.500Capacity2.000Full load hourssize 20 kW1.5001.00050020148 Wind energy in Italy: recent trends2015201620172018

The high performance of large wind plants: case 1 MW Homogeneous average production, stably over 2.000 full load hoursPretty narrow distributionEvolution of production by year of installationDistribution of production in 20183.000NumberCapacity (MW)Averagedev. std.50025%in operation in 201320%in operation in 201415%in operation in 2015in operation in 201610%in operation in 20175%all0%-2014201520169 Wind energy in Italy: recent 001.000f load hours 2018 - allf load hours 2018 - in operation in 201730%2.0001.5002018 inst. 201772202.208825frequency (%)Full load hours2.5002018441.0432.116319full load hours

The variability of mini wind production: case 20-60 kW Moderate average production, yet increasing for more recent plants. In 2018 full load hours range from around 1.000 h of olderplants to about 1.550 of plants installed in 2017 TraiettorieHighly variable distribution, with many plants with very low (or zero) production, but also over-performing plants, mainlyrelated to turbines with generous rotor diameter with respect to nominal powerEvolution of production by year of installationDistribution of production in 20181.800NumberCapacity (MW)Averagedev. std.1.600600400200in operation in 2013in operation in 2014in operation in 2015in operation in 2016in operation in 2017all-2014201510 Wind energy in Italy: recent 03.800800f load hours 2018 - allf load hours 2018 - in operation in 201710%9%8%7%6%5%4%3%2%1%0%1.2001.0002018 inst. 20171.454861.5441.013frequency (%)Full load hours1.40020182.7911631.474912full load hours

Index Targets and current trends Production Investment and O&M cost Competitiveness Expiry of incentives11 Wind energy in Italy: recent trends

Investment and O&M costs GSE collects costa data of plants accessing incentives through web portalCost data of wind plants realized in 2017-2018TraiettorieSizeNumber Capacity (MW) 20 kW20 kW C 60 kW60 kW C 200 kW200 kW C 1.000 kWC 1.000 city (kW)145919083219.861Investment cost( mln/MW)4,843,812,602,071,37O&M cost( /MW)67.67873.86745.73135.37327.534EquityDebt (%)(%)79%60%63%51%34%21%40%37%49%66% Investment costs decrease withincreasing plant size, varying from about1,4 mln/MW to 4,8 mln/MW O&M costs almost decrease with size,showing with more variabilityInvestment cost ( mln/MW)O&M cost ( /MW)4,843,81Investment cost ( mln/MW)2,60 20 kWO&M cost ( /MW)20 kW C 60 kW2,0773.86745.7311,3760 kW C 200 kW C C 1.000 kW200 kW1.000 kW12 Wind energy in Italy: recent trends67.678 20 kW20 kW C 60 kW35.37327.53460 kW C 200 kW C C 1.000 kW200 kW1.000 kW

Investment costs breakdown1-20 kW20-60 kW7% 11%4%8%70%67%200-1.000 kW9%7% 14%3%9%16%5%% Civil works% Transport% Development7%14%3%9%% Wind turbines67%% Electrical works60-200 kW15%5%8%54% 1.000 kW8%13 Wind energy in Italy: recent trends Wind turbine is the highest costitem, ranging between 50%-70% Civil works is the second cost item16%3%11%13%57%18%62%

Index Targets and current trends Production Investment and O&M cost Competitiveness Expiry of incentives14 Wind energy in Italy: recent trends

Competitiveness in past auctionsOffers range and granted capacity in sessions124Admitted: /MWh 442 MWAdmitted :400 MWNot admitted : 582 MW115 /MWhAdmitted :356 MWNot admitted : 867 MWAdmitted:800 MWNot admitted: 1.144 MW93 /MWh66 ession20142014Bandosession20162016 Initial time needed for operators to get accustomed to the scheme (2012 session not completely assigned) Increase in percentage reductions offered over the four bidding sessions (40% in 2016 session) Promotion of competitiveness and reduction of system costIncentive defined by 2016 sessionI Tb – Pz 66 – (54) 12 /MWh201715 Wind energy in Italy: recent trends

The new M.D. “RES1” July 4 2019The M.D. 4/7/2019 aims at supporting, in 7 sessions in the period 2019-2021, energy from new, refurbished and upgraded plants from“mature” RES: PV, onshore wind, hydro and sewage gas for a total capacity of about 8 GW (of which 7,4 GW new). New elements: Technological neutrality for groups (i.e. FV and wind) in auctions and registries Plant owners offer a % reduction of the base tariff: between 2% and 70% for auctions, and up to 30% for registries (also other criteria) The support is mainly a Sliding FiP (“two-ways”: owner pays GSE back in case Pelectricity Incentive tariff) and a FiT ( 100kW); premiumfor PV plants removing asbestos in addition to the incentiveAuctions (plants 1 MW)AGroup(Wind, PV)Capacity(MW)5.600BRegistries: plants 1 MW (PV 20kW)CA-2BC(hydro,sewage gas)(refurbished wind,hydro,sewage gas)(Wind, PV)(PVreplacement ofasbesto)(hydro,sewage gas)(refurbishedwind,hydro,sewage gas)1105007708008080Specific financial requirements: capitalization as proof of financial and economic stability surety bond deposit (5% temporary, 10% definitive)16 Wind energy in Italy: recent trendsAMain priority criteria: group A: plants installed on exhausted landfills or other specific areas; group A-2: plants on schools, hospitals, public buildings etc; combined with recharge columns for e-mobility offered reduction of the base tariff (max 30%)

Key elements for future plants: auctions or PPA? Until 2016 resulting tariffs werehigher than electricity priceThe tariff resulting from 2016 auctionis comparable with current and futureelectricity priceUncertainty for the next auctions: thebase tariffs established in the latestDecree is comparable with electricityprice and can be lower than theforward energy price. PPA can be avaluable option?Possible range12489 /MWh Onshore wind auctions base tariffs and offers range12712496Base tariff124Min admitted reduction127124108103110938989756663Electricity price12711589Max admitted reduction526669705543212012 session17 Wind energy in Italy: recent trends2013 session2014 session2016 session?2019 session

Wind energy market price.403020100Thermal201118 Wind energy in Italy: recent trendsLarge HydroHydro 74,2Trend in energy sales prices by source57,27071,1Average market price [ /MWh]8075,19074,7 Considering the progressive incentives reduction, the value of wind energy on the electricity market is crucial todetermine the profitability of wind investments in market parity The "average sales prices" of wind energy was estimated matching hourly wind production by market zone (sourceTerna) with hourly and zonal price of the Day-Ahead Market (source GME) In 2018, the average price of wind energy was equal to 57,5 /MWh, almost 4 /MWh less than the PUN. Two mainreasons: half wind production is in the SOUTH market zone, characterized by minimum zonal price; higher windgeneration occurred in winter season and during afternoon, not matching with high electricity wholesale price

Index Targets and current trends Production Investment and O&M cost Competitiveness Expiry of incentives19 Wind energy in Italy: recent trends

Expiry of incentivesIn order not to lose the related energy production, revamping and repowering should be promoted, as also stressed by NECP2017201858201942020103 plants 1,4 GW 2,2 TWh20 Wind energy in Italy: recent trends12021120226320235920242025802026912027447 plants 6,1 GW 11,0 TWh493 MW942 GWh1.143 MW2.157 GWh1.268 MW2.284 GWh1.043 MW1.818 GWh1.172 MW2.080 GWh74Capacity (MW)0,173882802028-202911 MW0 GWh27Number18211Energy (GWh)2 MW3 GWh356 MW563 GWh327 MW491 GWh18Capacity(MW)697 MW1.188 GWhNumber2015-2019RepoweringComplete revampingRenovationTotal952 MW1.706 GWhIn the past years just few renovations took place44 MW87 GWh Part of the plants supported with Green Certificates/FIP are approaching the end of incentive period. In 2017-2019 about 100plants (1,4 GW) are expiring and in 2023-2028 about 500 plants (6,1 GW) will expire96 MW143 GWh 2030

THANK YOUMATTEO.GIANNI@GSE.IT

Wind energy in Italy: main statistics . Wind energy in Italy: recent trends In 2018, installed wind capacity reached 10,3 GW, related to more than 5.600 plants, which produced 17,7 TWh Remarkable growth in 2006 - 2012, about 1 GW/year; capacity trend slow down after 2013 but significant increase of small wind plants The largest part of wind capacity is located in the South of Italy (97%).