PPA and Italy. Is the time finally ripe?
By Francesco CALABRETTA – Country Manager Italy
With the Integrated National Plan for Energy and Climate – more simply PNIEC – Italy has established the lines of intervention that it will adopt, over the next 10 years, in terms of ever-increasing decarbonisation and the use of renewable energy sources.
Beyond individual judgments on the effectiveness or otherwise of the actions envisaged to counteract the climate change – adequate for some, insufficient for others – it is interesting to note that PPAs or Power Purchase Agreements are also mentioned among the measures. In the definitive text recently published, we read that from this type of financial instrument "a contribution of renewable energy equal to at least 0.5 additional TWh is expected every year". Finally, the MiSE also recognizes the importance that PPAs will assume in achieving the declared objective of 30% of renewable energy (gross final consumption) between now and 2030.
But let's take a step back. What are the PPA? These are renewable energy supply contracts stipulated between those who produce energy (and own the plant, photovoltaic or wind) and those who buy it (often a company that markets or distributes it).
As long-term agreements (around 10-15 years), they have the advantage of bringing a certain stability in the input flows for producers, avoiding the problem of market volatility and facilitating the financing or "bankability" of the projects . On the other hand, thanks to these financial instruments, sales companies purchase energy at better economic conditions than they would have had by purchasing it on the wholesale markets, thus obtaining competitive benefits - in the short and medium term - in energy supply compared to to competitors.
This type of contract is usually accompanied by guarantees that protect both parties. On the seller's side, there are forms of credit insurance available (which protect the seller from the insolvency of the buyer) or financial mechanisms that mitigate any excessive fluctuations in energy prices. On the buyer's side, for example, there are certifications such as Guarantees of Origin which attest to the renewable origin of the energy sources purchased.
This system, widespread first in the United States (a federal law has regulated its use since 2005) and then in Europe, is still little known or at least underused in Italy. The reasons for this delay call into question the regulatory uncertainty of the renewables sector and the consequent fear of operators in stipulating agreements that have a duration of more than 5 years. It is enough to think of the long and slow approval process of the long-awaited FER1 Decree.
Hiccups and contingent problems aside, a certainty has emerged in recent years: once the era of incentives and subsidies is over, PPAs are the most suitable and effective tools for changing the face of renewable energy, especially that coming from from solar photovoltaic and, secondarily, from wind. This appears clear, observing the increasingly significant agreements stipulated on the world energy markets, especially if we look at the Spanish one.
A situation we know closely. In fact, both as an integral part of the Audax Group and as Audax Energia Italia, we can define ourselves as "pioneers" in the use of these financial instruments. From 2017 onwards, Audax Renovables has signed PPAs for over 1.7 GW, activating strategic partnerships with entities such as Trina Solar, WeLink, Innogy, Statkraft, Cox Energy.
In our country, Audax Energy it was ahead of the curve and in January 2019 signed a 20 MW PPA in Basilicata, with BAS FV. A first step that we are working on so that others will follow soon. Compared to 12 months ago, however, something has changed and the road appears less fraught with obstacles and uncertainties.
A situation which, it would seem - the use of the conditional is more appropriate than ever - finds correspondence with i recently published data and which tell of an Italy in second position for budgeted projects, right after Spain.
