The hydropower energy market - Italy (2023)

1.2 The global market

The size of the global hydropower market has been estimated at $*** billion in **** and is expected to exceed about $***.** billion by the end of **** and register a compound annual growth rate(***) of *.* percent during the forecast period from **** to ****.

the total demand for electricity is rapidly increasing due to the huge number of industries and production units emerging in the global market that require a strong supply of energy to continue their operation. The domestic sector has seen a huge increase in electricity consumption related to the vast number of household appliances used on a daily basis.

The rapid consumption of electricity has increased the demand for renewable sources that help reduce the overall consumption of fossil fuels for electricity generation. In order to reduce global warming and rapid climate change, people have begun to adopt the use of renewable energy sources on a larger scale.

Global hydropower market World, ****-****, in billions of dollars precedenceresearch.com

Global production

Hydropower generation increased by nearly ** TWh, ossi by nearly * percent, in **** reaching about *,*** TWh. Production has increased due to strong capacity deployment in ****-****, but the global capacity utilization factor remains below historical levels due to persistent drought in hydropower-rich countries such ...

1.3 The Italian market

In ****, electricity demand falls by * percent compared to ****, or about * TWh less. Even more acute is the decline of renewables, which fall below the *** Twh threshold for the first time since ****, covering a lower percentage of electricity demand than in past years: from **.*% in **** to **.*% in ****.

In addition, demand for fossil-generated electricity increases by crica ** TWh in ****, which, in part, replaces the lack of hydropower generation that loses about **.* TWh in **** compared to the previous year, or **.*%. In terms of domestic electricity production, renewables go to meet about **.* percent of total needs.

In May ****, hydropower production returns to increase, and compared to the same month in **** records +**.*%. The contribution of hydropower in May allowed renewables to cover **.*% of Italian electricity demand in the month

Renewables in the first months of **** generated ** TWh, +*.*% compared to the same month in ****, however it is still a low figure for the targets to be achieved by ****. In terms of domestic production, electric renewables contributed **.*% to total net production.

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Percentage share of renewables in electricity demand Italy, January-May ****-****, % qualenergia.co.uk

Looking at the trend of domestic hydropower generation, we can see that the ****-**** vintages have seen a decrease, particularly severe in ****. In ...

1.4 Import-Export

Import of electricity

Generally speaking, as far aselectricity is concerned, Italy does not produce enough of it for its energy needs and is one of the largest importers in Europe.

In ****, Italy imported $**.** billion worth of electricity (***). Italy's main supplier countries are: Switzerland, France, Slovenia and Montenegro.

Import-export of components for hydropower generation

To understand Italy's dependence on hydropower generation, we examine below the Import-Export related to HS code ****: turbines, water wheels and related regulators. The turbine is, in fact, the most important component of a hydroelectric plant as it has the task of converting water energy into mechanical energy, which will then in turn be converted into electrical energy.

Looking at the graph below, it is clear that Italy is primarily an exporter of this type of component. However, the gap between import and export appears to be progressively decreasing, which is also reflected in the coverage rate, which decreases from *.** in **** to *.** in ****.

Import-Export of turbines, water wheels and related regulators Italy, ****-****, in millions of dollars comtradeplus.un.org

italian exports related to turbines and related components are mainly directed to twoLatin American countries, namely Peru (***). Next, with both *% are Germany and Switzerland, and finally Austria. Main export ...

1.5 The impact of the Russian-Ukrainian conflict

Regarding theimpact of the Russian-Ukrainian conflict on thehydropower sector, reference must be made to the energy sector in general and in particular, to Italy's energy needs in order to understand the need for the use of renewable sources.

Central in this context is the link that Russia and Europe have on the energy front: gas infrastructure runs from Siberia to the heart of Europe; a considerable part of Russian oil production fuels our transportation; and industrial and financial holdings bind our countries' energy operators.

The graph below shows Italy's annual gas consumption; a considerable contraction can be seen in ****. The consumption of gas is clearly symptomatic of the need ltaly has for this resource and ,consequently, can make one understand the extent of dependence on Russia, being the main supplier.

Annual gas consumption Italy, ****-****, in Smc (***) aspeniaonline.it

As can be seen from the data in the table, Russian supplies represent, on average, ** percent of Italian consumption, and over the years Russia has been the most stable supplier.

billions of Smc **** **** **** russia **.* **.* **.* domestic production *.* *.* *.* total Italy **.* **.* **.*

From the table below, it can be seen that energy demand decreased by about * percent in **** due to the contraction of the economy due ...

2.1 Demand in Italy

In the first * months of ****, electricity demand decreased by *.*% compared to the same period in ****.

In the period from January to May, renewable sources met **.*% of electricity demand, while **.!% from non-renewable sources and the remaining **.*%, related to the balance with foreign countries, is increasing compared to other years ocn an increase in imports (***).

Between January and May ****, the source that produced the most is photovoltaics(***), whilehydro gains +*.*% from a year ago.

Regarding the percentage contribution of different renewables to electricity demand, photovoltaics comes in first place with*.*%. Compared to January-May **** photovoltaic and wind grew slightly,but together they generate more than twice as much as hydro, **.* TWh and **.* TWh respectively.

In the first * months of ****, wind and photovoltaics accounted for **.*% of all electric renewables (***), whilehydro stood at around **.*%.

Renewable energy percentage contribution to electricity demand Italy, January-May ****, % qualenergia.co.uk

2.2 Demand drivers

Energy transition and decarbonization

United Nations and the European Union have determined that the electricity system in the coming years must necessarily be sustainable, decarbonized and with a prevalence of energy from renewable sources. The Green New Deal accelerates Europe's climate commitment, enshrining the goal of climate neutrality for **** and revising the EU's **** emission reduction targets to at least ** percent (***).

The energy vectors that can contribute to decarbonization are mainly: hydrogen, solar, wind and hydropower. According to theInternational Energy Agency report, Hydropower Special Market Report, devoted to a **** analysis and forecast of the hydropower sector, this technology is among the best sources of renewable energy production.hydropower today is responsible for generating more than ** percent of electricity in as many as ** countries around the world, most of which are emerging economies where hydropower plays a key role in development. Bucking the trend, however, are the G* countries that have decreased the share of hydropower in meeting their needs. As evidence of the centrality of this renewable energy source, Europe has about ** percent of the world's hydropower generation with the installation of *** GW of power, enabling the generation of about *** TWh.

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Advantages of hydropower

Flexible resource: faced with water availability ...

2.3 The geographical distribution of demand

In order to have an overview of the geographical distribution regarding the demand for hydroelectric power, reference is made to the production of electricity for consumption in each Italian region.

Looking at the map, it emerges that the highest consumption is in Lombardy(***).

2.4 New trends in demand

Energy dependence to meet demand

Italy does not substantiate itself as an energy-sufficient country. In early ****, italy maintained the highest podium position as the largest importer of electricity in Europe, while exporting a very small share.

The graph below shows Italy's electricity import-export with neighboring countries, the main ones by magnitude of trade being Switzerland and France.

Gas import accounted for **.* percent of energy purchases in ****, showing that gas is still the main source for energy production.

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Electricity Import-Export Italy, ****-****, GWh terna.it

Investor misalignment on hydropower potential

On the other hand, as for the installed capacity of hydropower, which is one of the most productive sources as an alternative to fossil fuels, it should more than double by **** to meet the climate goals set by the Paris Agreement. This requires annual investment in hydropower to quadruple. Despite the high value of this type of energy in terms of flexibility, water management and socioeocnomic benefits, this is often not recognized by existing markets. Regulatory frameworks and markets should therefore seek to reduce the mismatch between to reduce the mismatch between offsets and infrastructure needs.

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3.1 The market structure

According to Terna's data, as of June **** there are **** hydropower plants.

These are mainly concentrated along the Alpine arc, where we find the largest number of reservoirs: **** in Piedmont, *** in Trentino-Alto Adige, *** in Lombardy and *** in Veneto.

In contrast, this energy source is not particularly widespread in the south and the islands: Puglia with ** plants, Sardinia with ** and Basilicata with ** are in the utlimates.

However, the number of plants seems to be subject to constant growth: in ****, for example, the number of power plants was ****, or *** less than today. In **** the number consisted of about half, with **** plants.

The installed hydroelectric power capacity in Italy is about ** thousand MWh and production varies from region to region.

The most peculiar case is that ofAbruzzo, which, despite owning only ** power plants, has an installed capacity of **** MWh. In comparison, Piedmont with **** plants has a capacity of **** MWh. The reason is related to the large size of Abruzzo's plants, which are on average more powerful.

At the top in terms of hydroelectric power produced are two regions in northern Italy: Lombardy with **** MWh and Trentino-Alto Adige with **** MWh.

3.2 The value chain

The following are the steps that contribute to value generation in hydropower generation.

3.3 Distribution

In order to gain insight into the distribution of electricity in Italy, reference is made to data on energy consumption broken down by business scope.

In **** , total energy consumption settled at a lower level than in ****, registering -*.*%, i.e. ***,***.* GWh versus ***,***.* GWh. Of the total consumption, almost half is related toindustrial activity(***).

Electricity consumption by activity Italy, ****, % terna.it

3.4 The main actors

The main companies active in the hydropower sector in Italy, in descending order of turnover, are listed below.

Edison s.p.a: an important company in the sector, it operates several hydroelectric power plants, including the one in Meduno.

A*A Energia s.p.a: a multiservice company, in addition to the production and distribution of electricity and natural gas, it is also active in hydroelectric power generation.

Enel Green Power s.p.a: part of the Enel Group, is a leading renewable energy company, including hydropower, and has significant installed capacity.

Dolomiti energia s.p.a: a company that operates the Santa Massenza hydroelectric power plant in Trentino, with significant generating capacity.

IREN s.p.a: operates the Bardonetto Hydroelectric Power Plant, located in Locana.

Alperia s.p.a: located in South Tyrol, specializes in the production and distribution of renewable energy, including hydropower, with several power plants in Trentino-Alto Adige.

4.1 Supply analysis

Hydropower (***) is a renewable and alternative energy source. This is based on two main elements: water and the force of gravity. In fact, all types of hydropower plants use the force of gravity to accelerate water and release all its potential energy. To harness water by producing electricity, it is necessary to enclose it within a reservoir, usually an artificial lake protected by a dam placed upstream. A series of large pipelines are responsible for allowing the water to flow downstream, where the actual power plant houses the turbines. Thanks to the difference in elevation created by the path of the pipelines, the water gradually increases its energy and, once in the power plant, sets in motion the turbines, which - mechanically connected to an alternator - produce electricity. At that point, the electricity is passed through a transformer, which lowers the intensity of the current and raises the voltage to facilitate its input into the grid. Used to produce this type of energy, hydroelectric power plants are divided into * macro categories, depending on the type of plant used: run-of-river power plants, reservoir power plants and storage power plants. (***) flowing water power plants They make use of the natural flow of ...

4.2 The prices

to understand the pricing scenario related to electricity, it is necessary to analyze the production costs of a hydroelectric power plant.

The largest cost relates to theinitial investment for the construction of a hydroelectric plant, since, in addition to the electromechanical machinery required for the production of electricity such as turbines, generators,...it includes several civil and hydraulic works: the dam, diversion system, penstocks,centrle building and the restitution work downstream of the plant.

The size of the investment depends on the size of the plant. In the case of large plants (***) it does not exceed **-**%.

The most representative cost item regarding hydropower generation is related to the specific cost: cost per MWh produced. These generation costs can vary in a very wide range.

Plant size costs average size ** e/MWh low specific investment costs useful life **-** years mini-hydro (***) *** €/MWh high specific investment costs useful life **-** years Hydropower technology exhibitshigh variability among plants of different sizes, but also depending on location, these factors effectively limit the accuracy of cost estimates. In general, operating costs for medium to large sizes remain low. (***)

in the interest of greater completeness, theprice index for energy production is shown below. It can be ...

4.3 New supply trends

The following are the main new trends affecting hydropower generation.

Marine and hydrokinetic technology

Wave and tidal energy represent a huge opportunity to create reliable and clean energy. MHK (***) is gaining ground as a promising addition to renewable energy sources, especially in coastal regions.this technology harnesses the energy of ocean currents, tides and waves to generate electricity. Weir technology, tidal flow generators and in-current hydrokinetic technology are some of the recent advances in MHK technology.

New types of turbines

Hydropower plants are implementing new turbine designs to improve efficiency, cost-effectiveness, and sustainability. Innovative designs such as very low jump turbines, vortex turbines, Alden turbines, and minimum gap turbines enable power plants to generate more power without altering water flow.for example, very-low-gap turbines operate efficiently in low-water-jump environments, making them ideal for sites with scarce water resources. Alden turbines minimize fish damage and improve efficiency, while vortex turbines are perfect for low-velocity flows. In addition, minimum-gap channel turbines use variable-gap technology to improve efficiency and minimize material costs.

Modular power

Modular power generation systems enable the implementation and scaling of hydropower plants. To facilitate this, modular power systems, such as hydraulic gravity machines, water wheels, and Archimedes screws, are developed. ...

5.1 The legislation

The main laws and regulations affecting hydropower are listed below.

-Under current legislation, Legislative Decree ***/****, the use of the water asset is considered public domain; in contrast, the use of other renewable sources for energy production is defined as "economic activity not reserved to public entities and not subject to a private regime."

-The hydroelectric source (***) has the characteristic of needing a concessionary act: the concession for derivation of public surface water for hydroelectric use. Reference must be made to Royal Decree ****/**** for the procedures for obtaining the concession.

-The Concession has an average duration of ** years; therefore, it is temporary, but renewable upon expiration. In addition,Article ** of Decree-Law No. **/**** - the "Growth Decree" - redesigned the criteria for the renewal of large derivation Concessions.

-During the **th legislature, the regulation of concessions for large hydroelectric deriv ations (***), and most recently by Competition Law ****, Law No. ***/****.

-The legislation concerning authorization procedures for the construction and operation of hydroelectric power plants is represented by Legislative Decree No. ***/****, which introduced the simplified Single Authorization procedure for RES plants, and subsequent implementing guidelines.

6.1 Segmentation

• Enel Green Power s.p.a
• Edison s.p.a
• A2A Energia s.p.a
• Dolomiti energia s.p.a
• IREN s.p.a
• Alperia s.p.a