1. contributo per un uso razionale dellenergia contribution for a rational use of energy conferenza internazionale sulle tecnologie a risparmio energetico per il riscaldamento e il condizionamento international conference on energy saving technologies for heating and cooling Milano 2 marzo 2006 Milan, March 2nd, 2006

2. Ing. Emanuele Regalini Autorità per lEnergia Elettrica e il Gas Unità Gestione e Controllo della domanda di energia dellAutorità Gas and Electricity Authority Management and control of energy demand Il ruolo rivestito dal mercato dei Certificati Bianchi nellambito degli strumenti di promozione dellefficienza energetica The role of the White Certificates market as a tool to romote energy efficiency

3. Autorità per lenergia elettrica e il gas MARKET-BASED INSTRUMENTS FOR ENERGY EFFICIENCY: WHITE CERTIFICATES IN ITALY Emanuele Regalini Energy Efficiency Policy Unit Autorità per lenergia elettrica e il gas (Regulatory Authority for Electricity and Gas) This is not an official document of the Italian Regulatory Authority for Electricity and Gas IL RUOLO RIVESTITO DAL MERCATO DEI CERTIFICATI BIANCHI NELLAMBITO DEGLI STRUMENTI DI PROMOZIONE DELLEFFICIENZA ENERGETICA 2 marzo 2006 – Robur International Conference

4. Autorità per lenergia elettrica e il gas New policy drivers for control of energy demand Kyoto Protocol Italian compliance plan: more than 25% via enhancement of end-use energy efficiency Natural gas and oil prices Security of supply / foreign dependency Economic benefits spreading of energy services companies (ESCO) trade balance, competitiveness, … Reduction of the energy bill for both households and companies European Directives

5. Autorità per lenergia elettrica e il gas The Tradable White Certificate system A new policy framework for the control of energy demand was established in July 2004 by two Ministerial Decrees, based on: command-and-control type of regulation combined with … market-based mechanisms, including a certificates trading scheme The definition of technical rules, implementation, monitoring and enforcement of the whole mechanism are under the Energy Regulators (AEEG) responsibility.

6. Autorità per lenergia elettrica e il gas The Tradable White Certificate system Energy end-users Energy Regulator (AEEG) Money TWC LEGEND Obliged parties Voluntary Parties sanctions Cost recovery Issuing of TWC Electricity Market Operator (GME) Trading of TWC investments profits investments TWC redemption

7. Autorità per lenergia elettrica e il gas National targets Up to 1.6 Mtoe/y for electricity dstributors Up to 1.3 Mtoe/y for gas dstributors National 2005-2009 energy saving targets

8. Autorità per lenergia elettrica e il gas Distributors targets Individual energy saving targets for large distributors of gas and electricity: 10 electricity distributors 21 natural gas distributors Distributors targets are related to market share Natural gas shareElectricity share Biggest distributor

9. Autorità per lenergia elettrica e il gas Tradable White Certificates (TWCs) are issued to certify the positive evaluation of projects results TWCs represent the amount of energy saved: 1 TWC = 1 certified toe of saved energy TWCs are tradable: via bilateral contracts in a specific market organised by the Electricity Market Operator (GME) Banking is allowed in order to reduce volatility of TWC price The trading mechanism

10. Autorità per lenergia elettrica e il gas At the end of each year distributors will prove the possession of requested TWCs either gained through projects directly managed or bought from ESCOs on the market Non compliant distributors are subject to economic penalties Costs born by distributors can be (partially) recovered via electricity and gas tariffs… 100 /tep in 2005 and 2006 (only for reductions in electricity and gas consumption) an annual update of this amount is possible Enforcement and cost recovery

11. Autorità per lenergia elettrica e il gas Eligible projects Eligible projects: Almost any type of energy conservation measure (ECM), from the substitution of lamps to the insulation of walls and roofs to the construction of brand new district heating systems Projects can be implemented: by distributors by energy services companies (ESCOs) Conventional project lifetime is assumed: 5 or 8 years, depending on the type of project

12. Autorità per lenergia elettrica e il gas The main challenge: quantitative measurement of energy savings for each single measure implemented paying attention to distinguish additional savings from state of the art/business as usual evolution AEEG developed three evaluation approaches to measure energy saving: 1.standardized (deemed savings) approach (no measurement; installed units are considered according to their average energy saving) 2.analytical approach (predefined formula and measurement of some technical parameters) 3.energy monitoring plan (direct measurement of consumption before and after the project) Projects evaluation

13. Autorità per lenergia elettrica e il gas Standardized and analytical approaches approved so far by AEEG Buildings (insulation of roofs and walls, double and special glazing, thermal solar and PV plants) Home equipment (appliances, air conditioning systems, water heaters, boilers, heat pumps, special low flow shower heads) Industrial plants (electric engines, inverters, natural gas decompression) Private and public lighting CHP plants and district heating systems Evaluation approaches for many other types of projects have been proposed by developers (based on monitoring plans) and approved by AEEG.

14. Autorità per lenergia elettrica e il gas Demand: Obligation to own a fixed amount of TWCs every year (distributors, traders) Supply: Measurable energy savings arising from verified projects (distributors, ESCOs, traders) Projects and private+public profits: cost recovery and price of TWC are flat, i.e. independent from the type of measure implemented => selection of measures is based on their cost- efficiency Increase in tariffs is lower than the average cost of measures => spreading of performances contracting is stimulated Public energy bill is lowered at the lowest cost Economic efficiency of the TWCs Market

15. Autorità per lenergia elettrica e il gas Within the TWC mechanism SMEs can play three roles: ESCO, promoting an energy saving project: thanks to the TWC market, energy performance contracts get more attractive because an energy efficiency culture is spread and payback time of investments is reduced; energy end-user, hosting an energy saving project: thanks to the value of TWC obtained, they profit from the reduced cost of efficient technologies, reducing their expenses for O&M and energy supply; efficient technology developer, offering to end-users and ESCOs new measures to obtain TWCs. Opportunities for SMEs and for efficient technologies

16. Autorità per lenergia elettrica e il gas More that 400 Energy Services Companies registered so far (increasing) 350 projects submitted for 2005; more than 1000 different energy efficiency programmes 100 projects monitored; about 88.000 TOEs of saved energy : 59% in public lighting 22% in the residential sector 17% from district-heating, CHP, … 2% in the industrial sector White certificates market: starting in February 2006 Early results

17. Autorità per lenergia elettrica e il gas The overall TWC mechanism: Can work fine with the rules defined up to now… but it is ambitious and complex to manage. Due to the late development of TWC market: Profits for investors (including SMEs) are still uncertain, risks are still high for all participants, economic efficiency is probable but not proved yet, Key success factors will include: gradual implementation and simplicity of rules, adequate market development. involvement of engineers and technology designers to create a true competition among efficient technologies. After one year of implementation…

18. Autorità per lenergia elettrica e il gas Thank you! Autorità per lenergia elettrica e il gas http://www.autorita.energia.it consumatori@autorita.energia.it

19. contributo per un uso razionale dellenergia contribution for a rational use of energy conferenza internazionale sulle tecnologie a risparmio energetico per il riscaldamento e il condizionamento international conference on energy saving technologies for heating and cooling Milano 2 marzo 2006 Milan, March 2nd, 2006