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Italian power plants bag €80m refund for 2012 carbon costs

06 Nov 2013 16:40:39 | edcm

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Three Italian electricity plants fuelled by waste products from oil refineries, which together emitted 8.1m tonnes of CO2 in 2012, are the largest recipients of an overall €79.9m reimbursement for carbon costs to installations as part of a controversial incentive scheme.

The country’s energy regulator ruled this week to grant the refunds to plants covered by the so-called CIP 6 incentive scheme, a controversial programme implemented in 1992 by the Interministerial Committee on Prices (CIP) and closed for years for applications.

The scheme was created to promote building renewable plants or plants fuelled by “assimilated” sources, i.e., municipal solid waste, biomass, fossil fuels, process or residual fuels, such as the waste from refineries. It set out that CIP 6 plants receive a regulated tariff for a fixed amount of years for the amount of electricity that energy services operator GSE buys from them to sell on the power exchange.

The Italian Council of State suggested that “assimilated” CIP 6 plants are entitled to a refund of the costs of buying EU allowances (EUAs), certified emissions reductions (CERs) and emissions reduction units (ERUs) to cover the associated emissions for the electricity that they sell to GSE, as the original incentive scheme text left the door open for refunds if subsidised plants incur additional costs from regulatory changes.

Refund calculation

Italian power plants are entitled to use ERUs and CERs to cover up to 19.3% of their emissions in 2012 after the free allocation, with the remainder using the more expensive EUA allowances. The regulator calculates the refunds assuming the maximum use of ERUs/CERs, priced on the basis of the average 2012 price for each type of allowance.

The biggest chunk of the refunds will go to three integrated gasification combined-cycle (IGCC) plants fuelled by gas from the residual particles after the refining process. Some €23.5m will go to a 575MW plant managed by refiner Saras and integrated with the Sarroch refinery in Sardinia, to cover 3.2m permits.

Energy company ERG’s 528MW ISAB Energy plant in Sicily, generating electricity from asphalt, the last residue of the ISAB Impianti Sud refinery’s process, will get €18m for 2.5m certificates. Refiner API will get €9.8m for its Falconara plant to cover 1.4m certificates.

Other receivers include energy company Edison and Cofely Italia.

The reimbursement will be given for the plants’ costs for the entire phase III, but these are likely to get progressively lower as some of the plants under the scheme are opting out earlier ( see EDCM 22 July 2013 ). Silvia Molteni

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