IEABioenergyExCo77workshop

Thepoten7alroleofbiomethaneinItaliantransport

Rome-17May,2016

GiovanniPerrellaandWolfgangD’InnocenzoMinistryofEconomicDevelopment

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TheEuropean2030targetshavebeendefinedatEUlevel:-  27%RESinfinalconsumpLon-  40%reducLonofCO2emissionscomparedto2005-  anenergyefficiencytarget

Inthecoming7metherewillbetheupdateofItaly’sNESwiththeEU2030targetsandamonitoringreport

TheEnergyUnionRoadmap2016:CommissionlegislaLveproposal&referencescenario2017:publicconsultaLon&regionalcooperaLonmechanismbetweenMSs2019:“EU2030”naLonalacLonplans

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NaLonalEnergyStrategy:foracompeLLveandsustainableenergy

Key elements of the Italian National Energy Strategy March 2013

Competitiveness: Significantly reduce the energy cost gap for consumers and businesses, with a gradual alignment to European prices

1

Growth: Enhance sustainable economic growth through the development of the energy sector

4

3

Environment: Outperform the environmental targets set by the ‘20-20-20 Package’ and take a lead role in the European ‘Roadmap 2050’ decarbonisation process

2

Security: Strengthen security of supply, especially in the gas sector, and reduce the external energy dependence

Thechoicesofenergypolicyaresettoreach4mainobjec7ves,bothby2020andby2050

(€bn/year, difference between 2020 and 2012 (base year, total cost ~ €70 bn)

Development of electricity and gas bills – the incremental costs on the public are more than compensated by expected benefits

Estimated incremental costs to the public

4.0-5.04.0Total

Furtherinfrastructuredevelopment

~0.4

Gasandelectricitygriddevelopment ~0.6

Thermalrenewables ~0.7

RenewablePower 1.5-2.511.5

Energyefficiency ~0,8Tariffs

Red

uced

pric

es

Total ~13.5

~2.5

~2.1

Totalreducedprices ~8.9

Electricitybill ~4.5

Gasbill ~4.4

Gasbill

Electricitybill

Red

uced

vol

umes

(c

ompa

red

to b

asel

ine)

Estimated benefits on bills

Expectedbenefit~9bn€/yearontotalgasandelectricitybills2020vs.20122

1 The 2012 base doesn’t include installations subject to registries and auctions (non-PV) registered between 2012 and 2013 2 Assuming equal international commodity prices

The potential savings in Italian energy imports are significant (and reflect positively on security of supply) Billions of €/year, estimation based on the assumption of constant import prices

1 Assuming discontinuation of energy efficiency measures, discontinuation of renewables‘ incentives, natural decline of hydrocarbons production 2 Primary energy, Eurostat method, vs. 2010 values

8

6

5 48

5

2011

Potential increase by 2020

in absence of measures1

Potential import in 2020 with measures

Hydrocarbons production

Renewables production

Energy efficiency

Net imports

62

-19 -14

Savings of ~20 Mtoe2

Increased production

by 15-16 Mtoe2 Increased production

by ~12 Mtoe2

Reducing imports equivalent to ~1% of additional GDP (and, at current terms, sufficient to shift the balance of trade in a structural surplus)

3

petroleumproducts

negligibleamountsofcrudeoil,naturalgasandelectricity

crudeoil

naturalgas

petroleumproducts

electricity

coal

-61,4 -63,3

-33,1

-85

-70

-55

-40

-25

-10

5

20

35

1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Tradeinenergyproductsandexternalenergybill(in€bn)

externalenergybill

e x p o r t s

i m p o r t s

Italy’sexternalenergybill

Naturalgasintransport1.  NaturalgasintransportisanItalianspecialty2.  77%ofNGvehiclesintheEUcirculateinItaly3.  ThenumberofNGfillingstaLonsexceeds1100andconsumpLonwasover1,1

bcmin2015;morefillingstaLonsareexpectedwithimplementaLonofDAFI4.  NGvehiclesaleshavebyfaroutperformedtheregularvehiclemarket

0

100,000

200,000

300,000

400,000

500,000

600,000

700,000

800,000

900,000

2000 2003 2005 2008 2010 2012 2014

Vehicles-Italy

LDCNGvehiclesincirculaLon HDCNGvehiclesincirculaLon

0

200

400

600

800

1,000

1,200

2000 2003 2005 2008 2010 2012 2014 2015*

fillingsta7ons&gasconsump7onItaly

RoadsideCNGfillingstaLons(n.) Naturalgasconsumedintransport(Mcm)

4

0

1,000

2,000

3,000

4,000

5,000

6,000 NGbusesandtrucks-EuropeanUnion2014

MD+HDBuses

MD+HDTrucks

NaturalgasintransportNaturalgasintransportintheEU

5

1

10

100

1,000Naturalgas(CNG)consump7on

intransport(logscale)ktoe,2014(Eurostat)

Eurostat2014(ktoe)

Italy 862 Germany 178 Bulgaria 100 France 91 Spain 51 Sweden 51 Netherlands 30 CzechRepublic 25 Austria 17 Greece 14 Portugal 12 Lithuania 5 Finland 4 CroaLa 3 Belgium 2 Estonia 2 Hungary 1 EU28 1.448

Publicac7ontoimplementnaturalgasintransport- lowtaxa7onofautomoLvemethane,consistentwiththeEUDirecLveonfueltaxaLon- useofbiomethaneintransporttoreachEU20-20-20targets- variouscarscrappageschemesovertheyearshavefavouredcleanfuelvehicles(CNG,LPG,electricityorhydrogen)

€0.00331 €0.0125

€0.17

€0.00

€0.05

€0.10

€0.15

€0.20

automoLve industrial residenLal(modalvalue)

excisetaxonmethane(in€/m3)asof1Jan.2015

Lawn.27/2012,para17“Liberalisa7onoffueldistribu7on”• FillingstaLonsshallbeprovidedwithseveraltypesoffuels,includingnaturalgas,ifthisobligaLondoesnotimplytechnicalbarriersorexcessivecosts;• TheMinistryofEconomicDevelopmentestablishesthegeneralprinciplesofdevelopmentofthenaturalgasdistribuLonnetworkconsistentlywiththeautonomyofRegionsandlocalAuthoriLes;• SimplificaLonofproceduresfortheinstallaLonandoperaLonoffaciliLesfornaturalgasdistribuLonforvehiclesandthoseforfueldispensers.

Publicac7ontoimplementnaturalgasintransport- mul7servicefuelpumpswithmethane(reducedminimumdistancerulesbetweengaseousandnongaseousfuels);- introducLonofselfserviceformethane;- reducedconnec7onfeesforfillingstaLonsbothtotransportanddistribuLonnetworks;- centralgovernmentacLonwithlocalgovernmentstoextendthefillingstaLonnetwork

Lawn.27/2012,para17“Liberalisa7onoffueldistribu7on”TheMinisteroftheInteriorandtheMinisterofEconomicDevelopment,incompliancewithsafetystandardsandtechnicalregulaLonsinforceinEUandconsistentlywiththeautonomyofRegionsandlocalAuthoriLes,idenLfycriteriaandproceduresfor:• self-servicesystemsinnaturalgasandLPGfillingstaLons,andinresidenLalcompressionfaciliLesofmethane;• simultaneousdispensingofliquidandgaseousfuels(methaneandLPG)inmulLproductdispensers.TheDecree31March2014alsolaysdownotherrequirementsfortheself-servicedistributorofCNGunamendedTheItalianRegulatoryAuthorityforElectricityandGassetsrulesforspeedinguptheconnecLonsofnewnaturalgasfillingstaLonsandforreducingtherelevantconnecLoncosts,mainlyinareaswheretheyarenotpresent.

Workinggrouptoreviselegisla7ononfirepreven7onIn2013ItalianfueldistribuLonoperatorstogetherwithothernaLonalstakeholders,joinedaworkinggroupestablishedbytheMinistryoftheInterior(NaLonalFireDepartment)withtheaimtoreviewItalianlegislaLontopreventfiresinnaturalgasfillingstaLonsinlinewithotherEuropeancountries.

LNGinmari7me&roadtransportDirec7veonAlterna7veFuelInfrastructure(Direc7ve2014/94/EU)–DAFIAnimportantsteptowardsfosteringnaturalgas(CNG/LNG/biomethane),hydrogenandelectrical

refuelinginfrastructures,bothinurbanareasby2020andalongtheexisLngTEN-TCoreNetworkby2025.ThiswillallownaturalgasmotorvehiclestomovethroughouttheEU.

InItalythetransposiLonintonaLonallegislaLonofDAFIwilloccurin2016;thetransposiLonprocess

wasprecededforLNGbyapublicstakeholderconsulta7onin2015thatproducedawealthofdata.ThreekeyaspectsemergedfromtheconsultaLon:I.  overwhelminglyposiLveresponsefromallstakeholders;II.  naturalgas(bothbioandconvenLonalandbothCNGandLNG)isregardedasthe

transiLonfuelintheEuropean2050EnergyRoadmaptowardsdecarbonisaLon;III.  twocaveats:

a)  maintainthefavorableexciseregimeforalternaLvefuelsb)  addresssocialacceptanceissues,includingsafety(socialacceptancehasavery

limitednegaLveimpacttodaybutcouldgrowasinfrastructuresareexpanded).

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SafetyofCNGcylindersinLDandHDvehiclesAmajorpublicconcernandbothtechnologicalandlogisLcalchallengesincethe1950ies(aperWWIIItalyexperiencedashortageinpetroleumproducts;methane,discoveredinthatperiodinnorthernItaly,wasusedasasubsLtuteintransport).Adedicated,publiclycontrolledcompanywassetup-“eni-ServiziFondoBomboleMetano”(Act640of8July,1950)taskedwiththeperiodicsafety-checkofallCNGcylindersinstalledonvehicles(LDandHD).

eni-ServiziFondoBomboleMetano–opera7ons- collec7onofCNGcylinders(every4or5years)tobecheckedthroughanetworkofca.32accreditedcollec7oncentersandca.120accreditedcylinderswapgarages- inspec7onofCNGcylindersin2dedicatedinspecLonsites(Jesi(Ancona)andSanLazzaro(Bologna))andtwocontractedsites:approvedcylindersarehandedback,failedorexpiredcylindersarewrecked- numberofinspectedcylindersvarieseveryyear(420.000in2012,640.000in2013,420.000in2014,501.000in2015)andca.5%arewreckedandreplacedwithnewones(90%duetoendoftechnicallife)

eni-ServiziFondoBomboleMetano–finance- operaLonsarefinancedthroughasurchargeincludedinthepriceofCNGsoldinCNGfillingstaLonsfinanceseni-SFBMoperaLons(collecLon,inspecLonandreplacement)

- thesafetysurcharge–setbythepubliclycontrolledmanagementCommimee–currentlystandsat€0,035perm3;totalcostofthesystem:ca.€30.000.000p.a.

- typicalcostbornbyendusers:ca.€60-80percylinder(2-4cylindersperLDvehicle)every4or5yearstothegarageforman/hoursofwork(nocostforthenew/recycledCNGcylinder)

SafetyaspectsofCNGcylinders- ca.2.700.000CNGcylinderscurrentlyinuseinItaly

- internalpressureofcylindersca.200bar(!)

- cylindersbuilttoneverbreakduetoheatorexternalpressure;valvesbuilttowithstandheatandreleasegasatlowpressureincaseofextendedexposuretoheat

- lastrecordedaccidentduetofailureoftheCNGcylinderintheyear2000

Frombiogastobiomethane

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heat

power

upgrading/purification ofbiogas:frombiogas (about50-60%methane,about40%CO2)tobiomethane (about95%methane)

anaerobic digester

biogas

biomethaneotheruses

transportsector

Accoun7ngbiomethaneinthe10%biofueltargetInItalythereishugepotenLalforbiomethaneinthetransportsector.Italyconsumesoveronebillioncubicmeters(over1,1bcm)ofnaturalgasinroadtransportperyearandthisprovidesforasolidcontextforthedevelopmentoftheuseofbiomethaneintransport.Italyisdevelopinganobliga7onschemeforbiomethaneintransportconsistentandcomplimentarywiththeoneforliquidbiofuels(blendingscheme).The“ILUC”revisionofREDDirecLveprovidesfora“subtargetforadvancedbiofuels”inDirec7ve2015/1513/EU;Italyhasestablishedahighersubtarget(of1,6%by2020vs.0,5%minimumtarget)ofadvancedbiofuels.

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Withaspecificalloca7onofbiomethanetothetransportsector,nowpossibili7eswillbeprovidedtoreachthe10%target

IssueisveryhighinItalianGovernmentagenda-  newobligaLonscheme

topromotetheuseofbiomethaneintransport

-  reachthenew“advancedbiofuel”targetinlinewiththetargetsofDirecLveUE2015/1513.

Mcm 2016 2017 2018 2019 2020

annual - 50 100 200 300

cumulaLve - 50 150 350 650

Es7mateddevelopmenttrendofbiomethaneintransport2016-2020

UseofbiomethaneintransporttoreachEU20-20-20targets1.  BasedontheobligaLon,placedongasolineanddieselsellers2.  SellerstradecerLficatesamongeachother3.  Biofuelsmustbecer7fiedassustainable4.  BiofuelsDecree2014establishedthetrajectoryfrom2015to2022forthe

biofuelquotaobligaLon5.   “Advancedbiofuels”areintroduced:biofuelsproducedfrombiomassfracLon

ofwastesandresidues,animalmanure,sewagesludge,grapemarcs,winelees,nutshells,non-foodcellulosicmaterials,etc...

6.  Thesub-targetinadvancedbiofuelsisawaytopromoteadvancedbiofuels(includingbio-methanefromwasteandresidues)

Bio-methanecouldreachaproducLonofcloseto1Bcmp.a.,replacingtheuseofbiogasforpowergeneraLonandincreasingsustainabilityofthebiofuelmix

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EUframeworkforbio-methaneintransportisnecessaryCurrentEUROSTATmethodologydoesnotallowforproperaccounLngofbiomethaneinjectedintothegridandusedintransport:newESWGapproachisnecessary

Technicalchallengesofbiomethaneintransport- technicalspecificaLonsofbiomethane- networkcodesneedtobeupdated- Lmehorizonofinvestors:tooshort- valueofbiomethanecerLficates- noswitchingbetweenexisLngsupportschemes

- ->verymuchinterest,verylimleactualinvestmentsinbiomethaneproducLoncapacity- ->MinistryofEconomicDevelopmentisdrapingnewrulestoaddressissues

5%5.5%

6.5%

7.5%

9%

10% 10% 10%

1.2% 1.2% 1.6% 1.6% 2%

0%

2%

4%

6%

8%

10%

12%

2015 2016 2017 2018 2019 2020 2021 2022

Biofuelandadvancedbiofueltrajectories

Q% Q%Advancedbiofuel

Biomethaneaccoun7ngmechanismThecompulsorybiofuelblendingschemeforliquidfuelsinplace.Tocomply,transportfueldistributorscaneitherblendliquidbiofuels(biodiesel,bioethanol,etc.)orusebiomethaneinthetransportsector.GiventhathugequanLLesofnaturalgas(CH4)areusedintransport(over1,1Bcmp.a.)inItaly,partofthebiofuelblendingobligaLonderivingfromthesalesofliquidfossilfuelscanalsobecompliedwithbysellingbiomethane,insteadofnaturalgas.Inordertodoso,transportfueldistributorswhoalsosellnaturalgasneedtosignlong-termcontractswithbiomethaneproducersinordertobuybiomethaneinjectedintotheNGgrid.AnewDecreeforthepromo7onofbiomethaneisbeingdrajedAllcontractsandflowswillberegisteredinaspecificcentraliseddatabase,managedbyItalianstate-ownedRenewableEnergyAgency(GSE),allowingtotracetheflowofbiomethaneinjectedintothegridanddeterminethespecificuseofit.

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Theakribu7onofconsump7ontothetransportsectorwillbedrivenbythe10%obliga7onschemeandregisteredinacentraliseddatabase.

Technicalandsta7s7caltomakethecorrectalloca7ontothecorrectsectorofusewithoutanypropor7onalalloca7on.

Theproposedbiomethaneaccoun7ngsystemTHEITALIANBIOMETHANEMONITORINGMECHANISM(inprogress)GiventhecentraliseddatabaseofbiomethaneinjecLonsto,andwithdrawalsfrom,thegrid,inItalyallinformaLonontheuseofbiomethaneinthetransportsectorwillbebasedonhighqualityadministraLvedataandcentralizedarchives,consistentlywiththeEnergySta7s7csRegula7on1099/2008,ar7cle3,paragraph1,lekerc).

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CERTIFICATES–bothofsustainabilityandforproofoftheuseofbiofuels–willnotbeusedforsta7s7calpurposes;instead,“biomethanecerLficates”areissuedbyGSEandcanbetradedbetweenobligatedandnonobligatedenLLestoproveindividualcompliancewiththebiofuelobliga7onandsustainability.

TheItaliansystemisdesignedtomeasuretheflowofbiomethaneinjectedtothegridanddeterminewhetheritissoldtotransportfueldistributors,incompliancewiththecriteriastatedbyDirec7ve2009/28.

ADMINISTRATIVEDATA,i.e.datatakenfromcontractsregisteredinthecentralisedinjecLonandwithdrawalcontractsdatabasewillbeusedtoassesstheactualquan77esofbiomethaneusedinthetransportsector

Theproposedbiomethaneaccoun7ngsystem

THEITALIANBIOMETHANEMONITORINGMECHANISM(inprogress)ADMINISTRATIVEDATA,i.e.datatakenfromcontractsregisteredinthecentralisedinjecLonandwithdrawalcontractsdatabasewillbeusedtoassesstheactualquanLLesofbiomethaneusedinthetransportsector

1.  ProducingenLty2.  Geographiccoordinates&gridentrypoint3.  Gastransportcontractwithgridoperator(nominatedcapacity,injecLonpressure,ecc.)4.  BiomethanegasqualityspecificaLons(includingcalorificvalue)5.  Biomethanefeedstock6.  Biomethaneamountsold7.  Controlonthebiomethane-methanesoldbyeach“CNGpumpstaLon”withtheFiscalAgency

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ThankyouforyouramenLon!

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