Europe continues its push towards renewable energy sources

How Italy's energy industry restructuring is shaping up, and how wind power can meet expectations, despite earlier pessimism.

Once again this week European energy bodies have voiced their backing for renewables energy resources as a cornerstone of government policy.

The International Energy Agency, Paris, turned its spotlight on Italy, which it berated for its inconsistent energy taxation regime but commended for its ambitious approach to energy reforms.

Meanwhile, although the IEA recently voiced concerns about the ability of wind power to meet 10% of electricity demand by 2020 as proposed, environmental campaign group Greenpeace, the European Wind Energy Association, and the Danish Forum for Energy & Development produced a report to dispel doubts.

The IEA said Italy has high energy taxes in comparison with other IEA countries: " In December 1998, parliament adopted a tax on carbon dioxide emissions. Multiple tax rates on electricity and natural gas that are intended to incorporate fiscal, social and regional policies, can distort competition among fuels and industries.

"The IEA recommends that the government devise a long-term strategy to make taxes consistent across different sectors and fuels and to internalize more efficiently the externalities associated with energy use."

The agency said Italy has low energy consumption and CO2 emissions in proportion to gross domestic product, but significant energy savings can be made, and the IEA report makes several recommendations on increasing energy efficiency. In particular, it recommends that the regions' responsibilities for energy efficiency improvements be clearly set out.

"The Italian government," said IEA, "has set ambitious targets for energy production from renewable sources. The new electricity law mandates large electricity plants and importers to build renewable based power plants."

The IEA recommended that the Italian government ensure that this system does not distort competition between utilities. Efforts should also be made to reduce the cost of generating electricity from renewable energy sources, it added.

Robert Priddle, Executive Director of the IEA, said: "The government is committed to making a large number of reforms to its energy sector. A timetable for the implementation of these reforms should be set to ensure that commercial decisions can be made in a clear regulatory framework."

Priddle welcomed the Italian government's efforts to liberalize energy markets and improve their functioning. He commended the consensus at the National Conference on Environment and Energy among the Italian government, energy industries and unions on increasing the role of the market in the energy sector.

In February 1999, the government issued a legislative decree to implement the EU directive on electricity. This decree instructed state utility ENEL to divest itself of at least 15 Gw of generation capacity and set up a single purchase system for captive consumers. The IEA predicts that this reform together with the revision of prices to end users, access to the grid and the buy-back tariffs, will lower the price of electricity, especially for small and medium enterprises. It recommends to the government to ensure that the legislative decree, and in particular ENEL's divestiture of assets, does in fact generate competition.

In the gas sector SNAM, owned by state petroleum firm ENI, has a dominant position in natural gas imports and transport. In May 1999, parliament mandated the government to implement the European Union Directive on natural gas within 1 year: "The IEA recommends implementing this reform as soon as possible. Because SNAM's take-or-pay contracts are likely to account for a substantial amount of gas imports, the IEA recommends that the government seek ways to reduce their anti-competitive effects."

Natural gas consumption has increased rapidly in Italy, and import sources are being diversified. The IEA said that Italy would continue to be dependent on large foreign gas suppliers. However, the agency added the removal of unnecessary barriers to oil and gas exploration and production would increase domestic production and enhance security of supply.

Pushing wind energy as a viable replacement for fossil fuels, Greenpeace said its study showed that a total of 1.2 million Mw of wind power capacity could be installed worldwide by 2020, to produce 10% of the world's power.

This capacity, said Greenpeace, would equate to more than the total electric power consumption in Europe today, or 20% of worldwide electric power consumption in 1998.

The three groups reckon that this wind power boom would create 1.7 million jobs worldwide and reduce carbon dioxide emissions by more than 10 billion tonnes. One fifth of the additional capacity would be required in Europe, creating about 250,000 jobs there.

At the end of 1998 worldwide wind power capacity amounted to 10,153 Mw, of which 2,597 Mw was installed during that year.

The three groups predict that the growth rate for installation of new wind power plant will be 20%/year during 1998-2003, after which worldwide wind power capacity would be 33,400 Mw.

To meet the 10% by 2020 target, though, the growth rate for installation would need to be 30%/year during 2004-2010, after which growth rates would be expected to decline to an annual installation rate of about 150,000 Mw/year.

This would be achievable, they maintain, because the wind industry demonstrated during 1993-98 that it can install new capacity at a rate of 40%/year, because unit costs are expected to decline as wind turbine production volumes increase, and because a boom is envisaged in offshore wind power installations.

Crucially, wind turbine manufacturers are judged able to keep up with this anticipated growth spurt: "By the end of 1999 manufacturing capacity is expected to reach a level of 5-6,000 Mw/year, with adequate venture capital available for further development."

The three groups maintain that this blossoming of wind power would only be possible with the demonstration of will power by governments.

Corin Millais, Greenpeace renewable energy campaigner, said: "Governments must now act to establish the regulatory framework and set legally binding targets for renewables.

"There's no excuse for inaction because wind power is an affordable, feasible, mainstream global energy force that is able to substitute for conventional fuels."

Denmark is leading Europe's wind power program, but the U.K. wind industry's recent downturn following a reduction in government concessions shows that wind technology still needs government help to get established.

Danish Forum Chairman Hans Bjerregard said: "We are already approaching 10% of wind power in Denmark and the official target for wind in Denmark is 50% of electricity consumption by 2030, including pioneering the development of offshore wind.

"This report proves that we can replicate the success of the Danish model if governments will step up the promotion of renewable energies."

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