Master of Science Thesis KTH School of Industrial Engineering and Management Energy Technology TRITA-ITM-EX 2021:14 Division of Heat and Power Technology SE-100 44 STOCKHOLM Large Scale Photovoltaic Market Analysis In Italy Federico Annese Feb 2021 Master of Science Thesis TRITA-ITM-EX 2021:14 Large Scale Photovoltaic Market Analysis In Italy Federico Annese Approved Examiner Supervisor Björn Laumert Rafael Guédez Commissioner Contact person Abstract The environmental targets set by Europe of reaching a net zero carbon emission by 2050 and the European Green Deal have increased the environmental targets previously set. The Italian government managed to reach the targets set by 2020 in advance and started to work on the 2030 targets in 2017. Nevertheless, after the EU agreement on the Green Deal, the strategy has been revised and the Integrated National Energy and Climate Plan has been published with the aim of setting clear targets to reach by 2030 in compliance with the strategy of the European Union. The Italian strategy will strongly rely on solar and wind energy: the government intends reaching 51 GW of installed solar capacity from the 20.8 GW currently installed. The cost-competitiveness of solar energy is well known, and it has already reached the grid parity stage in Italy. This study is aimed at giving in the first part an insight on the current status and future trends of photovoltaic technology. In the second part, the analysis has been focused on the Italian photovoltaic energy, market schemes and permitting phase. The biggest threats to the deployment of large scale photovoltaic are: the land procurement due to the national and regional/municipal constraints and the impossibility of knowing a priori the availability of connection capacity. Lastly, a feasibility study has been performed on a site in the northern part of Italy. The scope was to assess which was the best design solution that maximized the IRR. Therefore, a technoeconomic optimization has been carried out on three different systems: the fixed mounting, the single axis tracking (astronomical) (SAT-A) and the single axis tracking with backtracking (SAT-B). For the economic analysis, a financial model has been built to account for taxation and the debt schedule. The optimization showed that the backtracking system is a good trade-off between the system with the higher production (SAT-A) and the system with less land consumption (fixed mounting). For the optimization in the feasibility study also bifacial modules have been tested. Unfortunately, the cost figure found for the modules led to IRR lower with respect to the other systems. Nevertheless, all the systems have shown an economic and technical feasibility. As emerged from the sensitivity analysis, the continuous reduction in system cost will further benefit the system. I Sammanfattning De miljömål som fastställts av Europa för att nå ett nollutsläpp av koldioxid till 2050 och European Green Deal har ökat de tidigare uppställda miljömålen. Den italienska regeringen lyckades nå de mål som sattes upp i 2020 i förväg och började arbeta med 2030-målen 2017. Ändå har strategin reviderats efter att EU-avtalet om Green Deal och den integrerade nationella energi- och klimatplanen har publicerats med målet att fastställa tydliga mål för att nå 2030 i enlighet med Europeiska unionens strategi. Den italienska strategin kommer starkt att förlita sig på solenergi och vindkraft: regeringen avser att nå 51 GW installerad solkapacitet från de 20,8 GW som för närvarande är installerade. Kostnadskonkurrenskraften för solenergi är välkänd och den har redan nått nätparitetsstadiet i Italien. Denna studie syftar till att ge den första delen en inblick i den aktuella statusen och framtida trender inom solceller teknik. I den andra delen har analysen fokuserats på den italienska solcellsenergin, marknadsplaner och tillståndsfasen. De största hoten mot utbyggnaden av storskaliga solceller är: markupphandling på grund av nationella och regionala/kommunala begränsningar och omöjligheten att på förhand veta tillgängligheten av elnätskapacitet. Slutligen har en genomförbarhetsstudie genomförts på en plats i norra delen av Italien. Räckvidden var att bedöma vilken som var den bästa designlösningen som maximerade IRR. Därför har en teknoekonomisk optimering genomförts på tre olika system: fast montering, enkelaxelspårning (astronomisk) (SAT-A) och enkelaxelspårning med backtracking (SAT-B). För den ekonomiska analysen har en finansiell modell byggts för att redogöra för beskattningen och skuldplanen. Optimeringen visade att backtracking-systemet är en bra avvägning mellan systemet med högre produktion (SAT-A) och systemet med mindre markförbrukning (fast montering). För optimering i genomförbarhetsstudien har även bifaciala moduler testats. Tyvärr ledde kostnadssiffran för modulerna till IRR lägre i förhållande till de andra systemen. Ändå har alla system visat en ekonomisk och teknisk genomförbarhet. Som framgår av känslighetsanalysen kommer den kontinuerliga minskningen av systemkostnaderna att gynna systemet ytterligare. II III ACKNOWLEDGMENTS It has been a long journey, but the end is right around the corner. I have written this work during an internship at Eco Energy World, a developer of utility scale photovoltaic. My acknowledgments go to Svante Kumlin for giving me the opportunity to work firsthand with the solar development of large scale photovoltaic in Italy, and Giulia Castoldi who followed me directly during the work. Moreover, I would like to thank all the members of EEW for the support and advice received. Secondly, I would like to express my gratitude to Rafael Guédez who got me passionate to the topic of project development during his lessons, and who has been my supervisor during the master thesis project. I would like to express my gratitude to Politecnico di Torino who gave me the opportunity to participate to the double degree project at KTH allowing me not only to continue my formation, but also to experience the life in a country very different from Italy. A special thanks goes to ICHTus (Luca, Antonio and Giuseppe “Sax”) who has made days in Politecnico funnier, although the working load was extenuating. I would like to thank Luca who has always been a reference point and has joined me in Sweden for the Erasmus projects. Moreover, I am thankful to all the new friends I made in Sweden, in Björksätravägen, who gave a completely different rhythm to the Swedish daily life. I am extremely thankful to Marion, the person I am sharing my life with since I arrived in Sweden. She, who has seen me working day and night to carry on the project regularly and who has always been there to give her support whenever I needed it. I cannot express in simple terms how much just some words can have strong impact. Lastly, I want to express my gratitude to my family who has always been there for whatever I needed and always encouraged me in my studies and desires. There are no words to express how much I appreciate what you have done for me so far. Federico Monaco, February 2021 IV V NOMENCLATURE Here the Notations and abbreviation used in the thesis are described. Notations Symbol Description 퐶푃퐴 Cost per unit power case A (€/kW) 퐶푀퐴 Cost per unit power and length case A (€/kW km) 퐶푃퐵 Cost per unit power case B (€/kW) 퐶푀퐵 Cost per unit power and length case B (€/kW km) 퐷퐴 Distance from Low/Medium voltage substation (km) 퐷퐵 Distance from High/Medium voltage substation (km) 퐷푎푒푟 Connection distance realized in overhead line (km) 퐷푐푎푏 Connection distance realized in cable line (km) 푆푇푀퐷푟푒푞푢푒푠푡 Request of the STMD fee (€) 푃 Connection power (kW) 푇푟 Reference tariff (€/MWh) 푇푠 expected tariff (€/MWh) %푅표푓푓 Proposed reduction factor (-) %푅푛 Additional reduction factor (-) %푅1 Delays reduction factor (-) %푅2 Change of ownership reduction factor (-) 푃 Connection power (kW) WACC Weighted average cost of capital (-) 푁푃푉 Net Present value (€) CAPEX Investment cost (€) OPEX Annual expenditure (€/yr) 푅푒푣푒푛푢푒푠푡 Revenues in year t (€) 푇푎푥푒푠푡 Taxes paid for year t (€) d Discount rate (-) ncons Construction years (yr) LCOE Levelized cost of energy (€/MWh) 퐸푄푈퐼푇푌푆ℎ푎푟푒 Share of equity (-) 퐶퐷푒푏푡 Loan interest rate (-) VI 퐷푒푏푡푆ℎ푎푟푒 Share of debt (-) 퐶푒푞푢푡푦 Cost of equity (-) 퐶표푟푝표푟푎푡푒푡푎푥−푟푎푡푒 Corporate tax rate (-) 퐶퐹 Capacity Factor (Adimensional) 푃푛푠푡푎푙푙푒푑 Installed power (MW) 퐸푠표푙푑푡 Energy sold year t (MWh) 푃푅 Performance ratio (-) 푃푂퐴 퐼푟푟푎푑푎푡표푛 Plane of array Irradiation (MWh) 휂푚표푑푢푙푒 Module efficiency (-) 퐶퐸푃퐶 Engineering procurement and construction cost (€) 퐶푝푒푟푚푡푡푛푔 Permitting cost (€) 퐶푃푀 Project margin (€) 퐶퐹푛푎푛푐푛푔 Financing cost (€) 퐶푠푦푠푡 System cost (€) 퐶퐸푛푔&퐷푒푣 Engineering and development cost (€) 퐶푙푎푛푑 Land cost (€) 퐶퐼−퐶 Installation and construction cost (€) 퐶푔푟푑−푐표푛 Grid connection cost (€) 퐶표푛푡푛푔푒푛푐푦 Contingency amount (€) 퐶푃푉푆푦푠푡 Photovoltaic system cost (€) 퐶푚표푑푢푙푒 Module cost (€) 퐶푛푣푒푟푡푒푟 Inverter cost (€) 퐶퐵푂푆 Electromechanical components, fence, CCTV… cost (€) 퐶푠푡푟푢푐푡 Mounting structure cost (€) 퐶퐿푉\푀푉−퐸푆푆 Low/medium voltage substation cost (€) 퐶푀푉퐿푛푒 Medium voltage line cost (€) 퐶퐻푉퐿푛푒 High voltage line cost (€) 퐶푀푉\퐻푉−퐸푆푆 Medium/high voltage substation cost (€) 퐷푀푉 Medium voltage line distance (€) 퐷퐻푉 High voltage line distance (€) 퐶푆푇푀퐺 Connection solution request cost (€) 퐶푆푇푀퐷 detailed connection solution request cost (€) 퐶퐴푈&표푡ℎ푒푟 Authorisation and/or other permitting cost/studies (€) 퐶푇푆푂 Transmission system operator connection cost (€) 퐶푎푐푞 Land Acquisition cost (€) VII 퐶푝푟푒푝 Land preparation cost (€) 퐹푛푎푛푐푛푔푓푒푒푠