January 28, 2011By Alberto Mucci
ROME — Enel, the leading Italian energy company, has been accused of illicit behaviour in dealings in the burgeoning Italian renewable energy market. The accusations stem from alleged abuse of Enel’s control of the electric distribution grid including allegedly widespread corruption at the local level.
Italy, like a plethora of other European and North American countries has been subsidizing investments in renewable energy such as solar panels and photovoltaic plants. For every kilowatt of electricity produced through such green energy systems the Italian government pays a percentage, rendering the investment highly lucrative, with returns reaching almost 10 percent.
“It’s a strange situation in Italy’ Francesco Damici, an Italian entrepreneur working on renewable energies told the Italian Insider, “Enel Green Power, an aggregate of different companies, is the leading electric company involved in the renewable energy business but at the same time controls the electric distribution channels. It’s obvious they have little interest in facilitating competitors like myself and hundreds of others making the situation quite unfair.”
Such problems reached the public eye when a multitude of complaints filed by different investors made it impossible for the Italian government not to intervene, promulgating a law on Aug. 13 that granted plants an extension to the attachment to the electric grid.
‘Obtaining permission to attach the electricity we produced to the national grid could take up to 12 months, risking to put some of us out of business’ said Damici. Many entrepreneurs said they started construction and investment in a photovoltaic plant before they received permission making the situation quite difficult. “The choice is to go bust or pay someone a backhander at the local Enel office to get permission’ Damici added.
The subsidies to the renewable energy market are distributed in proportion to the amount of energy produced, which is calculated by the Italian government once the energy has entered the national distribution grid. If a plant is unable to attach itself to the grid it cannot benefit from government subsidies consequently damaging the investment.
In order to benefit from the 2010 government incentives solar panel plants had to be attached to the electric grid Dec. 31. Consob’s intervention has now extended the deadline to June 30, 2011.
Enel’s public relation office strongly denies the accusation made by Damici and the other entrepreneurs. In a statement Enel spokesman said that “in 2010, Distribution Service Operator (DSO) Enel Distribuzione connected to its grid more renewable capacity than any other Italian Operator, namely over 72,700 renewable plants (of which 150 wind, 100 hydro, 72,200 photovoltaics and 250 from other sources), for a total installed capacity exceeding 2,400 MW (of which 360 MW wind, 75 MW hydro, 1,580 photovoltaics and 410 MW from other sources).” ENEL press officesaid the charges against EGP are baseless, stating that Green Power’s plants connected to Enel’s distribution grid in 2010 were just 2 (of which 1 wind and 1 photovoltaic) for a total capacity of 12.7 MW (of which 10.2 wind and 2.5 MW photovoltaics).”
Despite the controversy the latest research by IMS — a leading market research company - suggests that Italy’s renewable energy systems reached a power output of 3 GW in 2010, about 17 percent of the global total, with predictions of further growth in the upcoming year. In an accelerating market that promises one of the world’s highest internal rates of return, solar installations in Italy are predicted to double, growing a full 100 percent compared to Germany’s 19.8 percent expansion, industry sources say.
A further positive push to the Italian renewable energy market seems set to come from the release of positive reports by JP Morgan, Bank of America Merril Lynch, Goldman Sachs and Barclays on Enel Green Power (EGP), pushing its stocks to an average +1.68%.
Under an agreement reached last December between EGP SpA and the European Investment Bank (EIB), EIB will grant EGP a loan of 440 million Euro (that may be increased further to 600 million Euro) to help finance EGP’s plan to expand its operations in Italy. EGP’s aim is to make the financial structure of wind and solar energy projects more competitive and to finance the installation of 840 MW of new renewable energy generation capacity in the form of wind turbines and photovoltaic plants.
For EGP this operation is part of a growth strategy outlined in its 2010-2014 business plan which calls for significantly expanding installed capacity from its current level of about 5.9 GW to 9.2 GW. With total investment set to reach 1.3 billion Euro in 2011 and 5.2 billion by 2014, the renewable energy market in Italy is fast becoming an important and lucrative area of investment.