December 12th, 2012 Smart Grids in Italy: situation and perspectives Michele de Nigris

Electricity Systems are evolving SOURCE I.E.A. Smart Grids can be described as an upgraded electricity network characterized by a high level of flexibility and self-adaptability fostered by a two-way digital communication between supplier and consumer, intelligent metering and monitoring systems. 2

THE SITUATION IN ITALY - THREATS HIGH ENERGY PRICES UNFAVORABLE ENERGY MIX HIGH COSTS OF NATURAL GAS - CONTRACTS HIGH INCENTIVES TO R.E.S. – THE HIGHEST IN EUROPE SYSTEM INEFFICIENCIES AND BOTTLENECKS – COUNTRY TOPOLOGY DEPENDENCE FROM IMPORTS 82% PRIMARY ENERGY IS IMPORTED LIMITED ENERGY PORTFOLIO – FOCUSED ON FOSSIL FUELS INSUFFICIENT SYSTEM RESILIENCY TO EXTERNAL STRESSES (E.G. GAS) DIFFICULT FINANCIAL SITUATION OVERCAPACITY PRODUCTION GAS PLANTS – REDUCTION OF ENERGY DEMAND, OVER-PERMITTING, COMPETITION FROM RES TYPES OF GAS ACQUISITION CONTRACTS (LONG TERM TAKE OR PAY) COMPETITION FROM FAR EAST (REFINING) SOURCE MiSE

THE SITUATION IN ITALY - OPPORTUNITIES ENERGY INTENSITY 15% LOWER THAN AVERAGE EUROPEAN HIGH ENVIRONMENTAL STANDARDS ITALY IS IDEALLY LOCATED IN THE MEDITERRANEAN REGION GEOGRAPHICAL POSITION THE POWER QUALITY SCORES ARE AMONG THE BEST IN EUROPE VERY HIGH QUALITY OF SERVICE NATIONAL REGULATOR IS PROACTIVE IN MOTIVATING NETWORK OPERATORS TO INTRODUCE INNOVATION ADVANCED REGULATORY FRAMEWORK COMPETITIVE AND ADVANCED INDUSTRIAL SECTOR EXCELLENT TECHNOLOGICAL LEVEL SOURCE MiSE

A RAPID GROWTH IN RES INTEGRATION WIND [GWh] PHOTOVOLTAIC [GWh] SOURCE GSE

ITALY’S PRESENT SITUATION ON SMART GRIDS Distribution operator among the most advanced worldwide – 33 Million smart meters and wide system automation; Medium and small size industry developing and proposing advanced or breakthrough technologies: power electronics, DMS, small storage, DG control, ICT solutions; Regulator allowing for incentives to smart grids innovation pilots; Public research centers and universities active in house and internationally.

APPLIED RESEARCH PROGRAMS 15-20 M€ dedicated to smart grids R&D Scenarios for the development of the Italian network; Active networks: costs and benefits; Control systems and tools of active networks; Interconnections with neigbouring countries; Security of the infrastructures; Power quality issues; Technologies and components: power electronics, ICT and protocols, HTS applications, metering; E-mobility; Funding scheme based on a fee on the electricity bill of each customer, dedicated to national strategic research activities in the field of the electricity system. Activities regulated according to the Decree of the Ministry of Industry, trade and handicraft dated 8 March 2006

INCREASING THE RES HOSTING CAPACITY IN DISTRIBUTION 8 projects awarded Several regions concerned Projects started January 2011 – 3 years demonstration Total 16.5 M€ (higher ROI rate) Transformation of portions of HV/MV substations and medium voltage network already experiencing reverse energy flux; Management of DG (dispatching, protection, supervision, automation, voltage regulation, communication); Pre-requisite: high replicability ARG/ELT 39/10 25/3/2010: Incentives for smart grids investments of Distribution companies

ELECTRIC MOBILITY: REGULATOR’S INITIATIVES COLOUR COMPANY CHARGING POINTS A2A 75 ENEL 310 MUNIC. PARMA 200 ENEL ENERGIA 26 CLASS ONLUS 150 INSTALLATION AND OPERATION OF SLOW OR QUICK E.V. CHARGING POINTS, TESTING DIFFERENT BUSINESS MODELS: TECHNICAL ASPECTS, INTEROPERABILITY, BILLING, ROAMING, ETC. – 5 projects - < 728 €/point PROBLEMS: NUMBER OF E.V.s : 350 IN 2011 – 2500 INCLUDING FLEETS AND LIGHT E.V.s ARG-242/10

ELECTRIC STORAGE: REGULATOR’S INITIATIVES ARG - 288/2012/R/eel Pilot projects on transmission network, using electrochemical storage technologies Up to 3 projects (based on CBA) – incentives: WACC+2% for 12 years Size sufficient to demonstrate real increase of large scale VRES integration including dynamic network control systems Benefits calculated on: Reduction of production curtailment Efficiency of charging/discharging cycles Costs of energy – based on benchmarks Costs include CAPEX, OPEX including dynamic rating evaluation systems Widespread dissemination of results

CONCLUSIONS As in many other fields, Italy reacts to structural difficulties with creativity and intelligence. In the case of energy, the enlargement of the national mix to include renewables is a must, together with the energy efficiency measures and the load flexibility. The geographical topology of the country and the limited margins of the network require intelligent solutions of network modernisation. Stakeholders are joining forces to facilitate this transformation and to leverage national competences.

CONCLUSIONS Synergies and collaboration are made possible between research and operators to facilitate the smartgrids developments and deployment. Smart grids technologies are demonstrated in the field thanks to national research programs, operators investments and regulatory intelligence. The results of the pilots and demonstration activities are shared among stakeholders and leverage national competences . Italy wants to remain at the forefront of the smart grids developments and applications and will participate actively in all European and worldwide smart grids collaborative efforts.