L R AS Published on Sunday 5 April 2020 - n° 316 - Categories:European countries
Italy in the current crisis
According to the Italian consultancy firm REF-E, unsubsidised photovoltaic projects (PPAs) can still be financed by banks (they are called bankable), but investors are unlikely to accept the risk of small margins: current prices do not justify investments and new entrants will wait for market stability.
In reality, the situation is too uncertain
to make forecasts and therefore to commit to purchase contracts.
The current situation in Italy is one of containment. Its potential economic consequences are still difficult to quantify. First of all, it is necessary to understand what effect it will have on the demand for electricity; secondly, how quickly the various sectors will resume their activity and with what energy intensity; it will also be necessary to perceive how the structure of the Italian productive system will change according to future measures aimed at reviving it.
A°) In the best case scenario, when the Italian economy returns to normal in mid-May, total electricity demand for this year would be 5% lower than in 2019.
B°) In a more realistic scenario, energy demand could decrease by about 7% this year. This would correspond to a 9% drop in gross domestic product in 2020, which would be greater than the impact felt after the global financial crisis of 2009, when GDP fell by 5.3%. A rebound would not occur in this scenario before 2021: next year, Italian GDP would grow by about 6%, with 3% growth expected in 2022.
C°) In a more pessimistic scenario, economic activity would not return to normal until late summer 2021. In this case, the annual contraction in demand for 2020 would be close to 13% of GDP.
Italian gas prices are now close to production cost levels. During the week of 9 to 15 March, they remained stable at around $10/MWh, down 46% over the year. Throughout the period from 16 to 22 March, gas prices fell by around €1/MWh to €9.60/MWh, reflecting the sharp contraction in gas demand, i.e. a period of overproduction.
The fall in the price ofCO2 from €25 per MWh to €15 per MWh is due to the fall in demand for electricity, but this decrease is reviving interest in coal as a fuel.
Combined gas generators are the technology that sets prices for use throughout the year. Margins for electricity producers on the DAM (Day-Ahead Market) are now being reduced.
Before the start of the coronavirus crisis, there was a positive period with a favourable market for investments financed through PPAs. Renewable energy projects at market parity will eventually face delays. The range of the average cost of solar electricity (LCOE) in Italy can be very wide, from around 38 € / MW to around 52 € / MWh. These are only indicative values. The location of the plants and other financial parameters have to be taken into account. Unsubsidised PV projects can still be financed through PPAs, but investors are unlikely to be willing to take the risk of only a small competitive advantage. The market risk is not more important now. It is the perception of investors that is different.
https://www.pv-magazine.com/2020/04/01/covid-19-pandemics-impact-on-europes-ppa-market-part-iii/
PV Magazine of1st April
Editor's note Without knowing the measures that will be taken to revive the economy (Italian, French or global), the prospects for development are particularly daring and uncertain. The alternatives are certainly wrong, but we don't know in which direction!
