The challenges of the hydroelectric sector

Hydroelectric operations constitute a key sector in the Company’s development strategy, especially at this time of profound change. In this context, Edison strengthened its position in 2016 with two acquisitions.

In May, it acquired 90 MW in the Friuli Venezia Giulia region (Cellina area): Edison and Alperia, the company resulting from SEL’s merger with AEW, finalised the transaction by exchanging Edison’s investments in Hydros and SelEdison and Alperia’s investment in Cellina Energy, the company that owns the 90-MW hydroelectric power plants in Friuli Venezia Giulia. The hydroelectric complex in the Cellina area comprises 23 large and small intake plants, for total installed capacity of 90 MW.

In the same month, Edison increased the installed capacity of its mini-hydroelectric operations by 35%, bringing total installed capacity to 15 MW. It acquired seven power stations in the Piedmont region and two in Friuli Venezia Giulia for total annual average production of 70 GWh (equal to the consumption of about 25,000 households). These power stations, which previously belonged to IDREG Piemonte, have also enabled Edison to optimize plant management and maintenance synergies with its pre-existing operations in the two regions.

The Company’s commitment to developing new greenfield projects in the mini-hydroelectric sector has also been significant. The regions on which it is focusing in particular are Piedmont, Lombardy and Calabria, where low and medium drop projects have begun authorisation processes.

Construction work continued in 2016 at the Pizzighettone mini-hydroelectric site in the province of Cremona. The plant will be on the Adda River with capacity of 4.5 MW and annual production of approximately 18 GWh. It is slated for completion in 2017.

During the work, the remains of a wall and water mill dating back to Medieval times were discovered. They will be restored in 2017. An explosive remnant of World War II was also discovered in the site. It was disarmed, removed and burned out in a protected area in collaboration with the 10th Engineering Regiment of Cremona. The area was evacuated and no pedestrians nor vehicles were allowed to transit, while railway, air and river traffic was also suspended to ensure the safety of people and things in the area, in agreement with the local authorities.

A focus on the environment while the site was being built is demonstrated by the constant interfacing with the oversight bodies to take advantage of possible synergies and recommendations arising from them. For example, at the same Pizzighettone site, cooperation with AIPO (the inter-regional agency for the Po River) enabled Edison to manage the environmentally sensitive stages of the project on the riverbed.

In 2016, Edison also took over management of two mini-hydroelectric projects in Cellina: Campolessi and Campagnola, for a total of 2 MW.

Wind power leader in Italy

Renewable sources are an essential factor in the future of energy, also considering the growing focus on fossil fuel consumption levels and in the light of the COP21 commitments. Edison has set the medium-term goal of becoming Italy’s top wind power player through its partnership with F2i and EDF Energies Nouvelles and the development of e2i energie speciali. In this complex market context, characterised by a progressive reduction in incentives, whether the development of renewable energies is effective will largely depend on economies of scale and the ability to manage the energy market and its growing volatility. In this way, Edison, with e2i’s critical mass (operating capacity of 600 MW for total production of 1.1 TWh) and its distinctive technical expertise, know-how and energy management skills, is now one of the leading operators offering reliability not only in the short term but in the medium and long term as well.

In 2016, e2i was the third largest player in the renewable energy from wind power sector in Italy.

In its second year of operation, e2i has grown stronger and is steadily committed to developing greenfield projects and complete rebuilding projects, while also increasing the number of authorisations obtained. It pursued its objective of increasing installed capacity by analysing various potential mergers and acquisitions which would make it a hub grouping together and consolidating small and medium players in the renewable energy sector.

e2i did not invest in new capacity in 2016: in November, it registered eight projects in auctions for the assignment of 2015-2016 incentives, all of which were admitted. In the meantime, it is focusing on maintaining and improving the performance of its existing plants in terms of availability and production.

Edison set an ambitious business goal in 2016: become, together with its partners in this sector, Italy’s top wind power player.

In forthcoming years, a large part of its installed wind power capacity will need repowering or complete rebuilding (over 2,000 MW in 10 to 15 years). e2i is also involved in this updating process, which will be based on transparency, reliability and sustainability.

2016 saw Edison involved in updating recently acquired assets to company standards.

Non-recurring activities in the field of renewable energies included the plant in Farigliano (Cuneo), which was affected by the exceptional overflow of the Tanaro River in November 2016: personnel managed the overflow in accordance with operating rules and plant emergency management procedures. The Division is currently involved in restoring the plant so operations can resume quickly. The photovoltaic plant in Altomonte (Cosenza) underwent extraordinary maintenance during the year, which consisted of technical improvements to boost productivity.

Transition of energy to renewable sources

Edison’s thermoelectric power stations, which run on natural gas, make up 82% of the Group’s electricity production and 9% of the energy produced from national fossil fuels (sources: national data, Terna).

In 2016, in line with national production trends, Edison’s thermoelectric production grew by roughly 20% on the previous year. This was due to the reduction in imports from abroad, weather conditions and low water levels in the period.

Since all of Edison’s thermoelectric power plants run on natural gas, Edison sees natural gas as the transition fuel towards an increasingly low carbon production model.

Therefore, in order to make the most of new market opportunities, the main activities with respect to thermoelectric assets in the year consisted of the optimisation of existing production plants and the study and implementation of technologically innovative solutions to improve the performance of existing plants and their position on the power market.

During the year, the thermoelectric power plants in Torviscosa, Altomonte, Simeri Crichi and Marghera Levante received specific technical improvements to increase operating flexibility and efficiency. There was a fire at the Castellavazzo power plant owned by Compagnia Energetica Bellunese CEB Spa (also referred to as CEB) in the machine room, without any damage to people or the environment. The Division is currently focused on rebuilding the damaged sections of the power station, in order to quickly put it back into operation. Edison is also studying options for the industrial reuse of plants not currently operating.

In addition, in 2016, the Piombino and Milazzo power stations were removed from the Edison Group’s scope of consolidation. These two power stations joined two leading industrial groups in Italy, which will ensure their production continuity and the re-employment of workers in the new groups.