A portion of Italy's hydropower output could be pushed out of the market according to new regional laws on hydro concessions, although the actual realisation of this mechanism could be hard to implement.
Italy last year approved plans to transfer the ownership of hydro concessions to regional authorities, raising the possibility of individual regions requiring a free supply of energy as part of the payment of companies' fees. Regions need to legislate on hydro licences separately and can introduce "the obligation for concessionaires to supply annually and free of charge to the same regions 220kWh for each kW of nominal average capacity of concession", according to national guidelines. This would mean that a small part of national hydropower production would be reserved for regions without being available in the market.
Each region had until 31 March to legislate on the matter, although the deadline was postponed to at least 31 October owing to the Covid-19 pandemic.
But the northern regions of Lombardy, Piedmont and Veneto recently published their regulations and included the obligation. The three regions had hydropower capacity of 10.3GW at the end of 2019, equal to about 47pc of the national installed capacity. And while Veneto has not yet disclosed the average capacity — which is different from installed capacity — upon which the amount of power requested by the region is calculated, the combined value for Lombardy and Piedmont is equal to about 2GW, according to the regions. This would mean a potentially regulated hydro generation of about 430 GWh/yr from these two regions — equal to 1pc of national production last year, according to grid operator Terna data.
But the implementation of the physical option could be hard in practice.
A first form of partial free transfer of energy was introduced in the Italian legislation in 1933 before it was replaced by financial fees about 20 years later. National energy regulator Arera expressed concerns over the physical possibility, pointing out that regions should consider monetisation as the best option. The physical transfer clashes with the current structure of the Italian system, where sellers in the market can be independent from producers, Arera said. Considering that the amount needed is calculated on capacity and not on actual generation, the physical option could be risky for producers leading to increased power prices, it added. And Lombardy's law was also contested by the national government. The regional law does not respect the legislative competence of the central state regarding environmental protection and it also violates the constitution regarding the production, transport and distribution of power, the cabinet said in June.
