Italy: Solar prices on power exchange lower than reference price in 2016

Italian government-run renewable energy agency, Gestore dei Servizi Energetici (GSE) has released a new report in which it highlights that prices on the Italian Power Echange (IPEX) decreased significantly in 2016, while prices for solar and wind energy traded on the wholesale electricity market were, on average, lower than the average peak and off-peak wholesale power price, the so-called Prezzo Unico Nazionale (PUN).

The GSE specified that the average price calculated for every energy source provides only a general assessment of the value of the energy, but it does not represent its total remuneration. Renewable energies, the report stresses, are being less affected by the price drop, as their incentive is calculated from the difference between the PUN and the price of energy.

According to the study, the average PUN for 2016 was €42.78/MWh, which was around €10 lower than that of the prior year. “This was the lowest average annual price ever registered by the IPEX,” the report specified.

For comparison, the average PUN for 2015 was €52.1/MWh in 2014, €63.0/MWh in 2013, and €75.5/MWh in 2012. This price decrease, according to the GSE, is mainly due to a drop in power demand, increasing production from renewable energies and a drop in prices of commodities such as gas and coal.

The development of renewable energies, on the other hand, was also responsible, along with the decommissioning of old power plants with high marginal costs in regions with higher power prices, for the lower spread of zonal prices, GSE expert claims.

The report also reveals that the average price of wind and solar power registered over the past years can be lower by between €2 and €6 per MWh compared to the PUN. “The geographic concentration and the simultaneity of solar and wind power production create the conditions for a large offer, thus reducing drastically marginal prices,” the GSE stated.

As for the solar power, the report notes that its prices on the IPEX last year were between 5% and 12% lower than the PUN.

“Taking into account a progressive reduction of incentives and an increasing integration of renewables in the market dynamics, it is now crucial to collect data on the value of renewable energy in the wholesale market,” the authors wrote.