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Energy efficiency improvement opportunities for Italian Chemical enterprises
04 Jul 2017

energy-efficiency

This article provides and overview of the Italian regulatory framework supporting Energy Efficiency (“EE”) investments and recent changes in the developments within the White Certificates discipline.

Italy, a front runner of White Certificates in Europe

The main instrument incentivising EE investments in Italy today is the White Certificate mechanism. This mechanism called TEE, (Energy Efficiency Titles) is based on titles assigned to organizations qualifying for EE projects and related savings. It has been introduced in 2005 - well before its inclusion in the European policy framework - in order to encourage the diffusion of EE improvement measures already adopted in some economic sectors, particularly in the industry.

The mechanism is based on EE improvement objectives imposed on energy retailers. It represents an attractive opportunity for industry as the approved projects are presented on a voluntary basis (as it has been the case for the manufacturing industry) and may bring significant economic benefits.

Changing rules

The implementation of the mechanism has undergone several changes. The most important are the following ones:

  • In 2008, industry representatives (energy managers) obtained the possibility to directly present EE improvement projects aimed at TEE allocation. As a result, the approved projects coming from industry reached more than 80% of the assigned TEEs.
  • New rules have been issued regarding the saving targets to be achieved by energy distributors through the TEE mechanism within the planning horizon 2013-2016. The primary energy savings went from 4.6 to 7.6 Mtoe (Decree dated 28 December 2012).
  • New rules have then introduced significant changes regarding the calculation of the incentives. These rules have further increased the quantitative objectives for primary energy savings to be achieved through the TEE mechanism, with yearly values going from 7.1 to 11.2 Mtoe (Decree dated 11 January 2017, published on 3 April 2017).

Increasing TEE market price

In the meantime, after a long period of relative stability, there has been a significant increase of TEE market price. These prices more than doubled, going from 100-115 €/TEE to 220-230 €/TEE. Among the drivers, the (expected) increased ambition of objectives, and actual changes of the rules related to project assessment, perceived as less predictable.

On the one hand, the increase is good news for individual projects; on the other hand, the same amount of financial resources (paid by energy consumers) will correspond to a lower share of the total objective.

Uncertainties around ‘additional savings’

In the near future, some uncertainties could hamper a swift implementation of the mechanism. The application of the concept of “additional saving” as reference criteria for TEE allocation will be problematic. For a given project, TEEs will not be allocated on the basis of “actual saving” (= consumption before – consumption after), but on the basis of “additional saving” (= baseline consumption – consumption after). The baseline consumption refers to notions like “standard market supply” that could prove to be difficult to apply in some industrial sectors, and particularly in the chemical sector.

Could ‘Industry 4.0’ also be an EE investment driver?

As recent changes could hamper the TEE mechanism in the next phase, an interesting alternative could be the possible use of “Industry 4.0”. This scheme is another fiscal incentive recently launched in Italy which supports the diffusion of digital technologies in the industry.

“Industry 4.0” does not aim exclusively at promoting EE, however, this could be considered. The main interest of this mechanism consists in allowing a given project to increase the asset value for the yearly depreciation from 100% to 250% (“iperammortamento”, or hyper-depreciation). In practical terms, this corresponds to a significant and automatically recognised “fiscal credit”.

A second - less advantageous – option allows the increase of the “depreciable” asset value to 140% (“superammortamento”, or super-depreciation), still allowing an additional fiscal credit.

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