geothermal energy - comparison of regulatory framework germany - italy

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European Geothermal Congress 2013Comparison of regulatory framawork Germany - Italy

Benjamin Richter & Giorgio Castorina| Pisa | 5 June 2013

Agenda

01 Introduction Rödl & Partner

02 Legal security regarding ownership of geothermal re sources

03 Legal security regarding water license

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04 Economic feed-in tariffs

05 Priority and guaranteed access to the power grid

06 Legal security regarding district heating prices

07 Drilling and power plant construction licenses

08 Your contact

Agenda




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08 Your contact

Introduction Rödl & PartnerWe are a one-of-a-kind success story from Germany

� Founded in 1977 – international expansion since 1989

� Your one-stop shop: audit, legal, management and tax consulting

� Most familiar with your culture and language

� Tailor-made solutions for internationally active companies

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� Tailor-made solutions for internationally active companies

� Our interdisciplinary and comprehensive services offer

Audit

Legal consulting

Tax consulting

Management and IT consulting

Audit

Consult Develop OperateIn close collaboration with our clients we develop information for well-founded decisions that we implement together

Introduction Rödl & Partner Rödl & Partner in Europe (excluding Germany)

Almaty ▪ Barcelona ▪ BelgradeBirmingham ▪ BolzanoBratislava ▪ Brno ▪ BucharestBudapest ▪ Chişinău ▪ ClujGdańsk ▪ Gliwice ▪ IstanbulKaluga ▪ Kharkov ▪ KievKrakow ▪ Ljubljana ▪ Madrid Milan ▪ Minsk ▪ Moscow

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Milan ▪ Minsk ▪ MoscowPadova ▪ Paris ▪ PlovdivPoznań ▪ Prague ▪ RigaRome ▪ Sochi ▪ SofiaSt. Petersburg ▪ Stockholm Tallinn ▪ Tbilisi ▪ TimişoaraVienna ▪ Vilnius ▪ WarsawWrocław ▪ Zagreb ▪ Zurich

Worldwide 3.200 colleagues - 89 offices - 39 countries

Our references – main focus geothermal energyNational projects

General information Services

Monitoring of the realization of the geothermal project Unterhaching

� Complete project management� Subsidy procurement� Development of the worlds first geological risk insurance� Creation of price system for district heating

Different municipalities in the field of geothermal energy

� Demonstration and evaluation of possible options of action� Estimation of adoption potential� Economic efficiency control / business plan

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� Economic efficiency control / business plan� Valuation� Consideration of legal form� Forms of participation

Financing institution � Project control and economical calculations concerning the market entry in geothermal energy

UniCredit � Legal, economical and organizational consulting for the creation of a power plant portfolio and its risk management

Industrial company � Site selection concerning economical, operative and geological factors as well as the preparation of applications for the backup of the approved area

Federal Ministry for the Environment, Nature Conservation and Nuclear Safety

� Development of a concept for the realization of a German wide exploration risk insurance

Our references – main focus geothermal energyNational projects

General information Services

Federal Ministry for the Environment, Nature Conservation and Nuclear Safety/ World Bank

� Development of a benchmarking-study (Pilot project Hungary)

World Bank � Examination of two geothermal projects in Kamchatka, Russia, in economical, legal and technical terms (Electricity supply and district heating)

GEOFAR � Financed by the Intelligent Energy Europe – Program of the EU;

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GEOFAR � Financed by the Intelligent Energy Europe – Program of the EU; � Joint project with 8 partners from 5 EU-countries; � Topic: Financing system geothermal energy

UNEP – United Nation Environmental Programme

� Identification of risks that affect the realization and financing of world wide renewable energy projects

Industrial companies � Advisory service with regard to market entry

Financing institutions � Legal and economical due diligence of projects and portfolios

Agenda




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08 Your contact

Legal security regarding ownership of geothermal resources

� Long term security for an exclusive exploration and exploitation of a specific geothermal reservoir is highly important due to high investment costs and project related risk management

� Different steps:Legal security

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� Different steps:

1. Determination of the exploration field � allows preliminary geological investigations and exploration drillings

2. Based on these results determination of a sufficiently large exploitation field � secures a long-term exclusive right for exploitation

3. Allocation of the resource ownership for a specific area

regarding ownership of geothermal resources

Legal security regarding ownership of geothermal resourcesComparison Germany vs. Italy

� Subsoil owned by the state

Germany

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� Exploitation permit issued for a period of 50 years

� Royalty payments of max. 10% can be imposed• Currently not implemented in the case of geothermal

resources

Legal security regarding ownership of geothermal resourcesOwnership in Germany

Procedure

� Requirements for application for ownership• Being the holder of the exploration and exploitation permit

• Economic exploitation has to be credibly shown

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Procedure for

application and

advantages

� At the moment of awarding the ownership of the resource the exploitation permit for the respective area expires

� Ownership can be entered into the land registry and used to safeguard a credit

Legal security regarding ownership of geothermal resourcesComparison Germany vs. Italy

� Land property extends to the subsoil

� Resources in the subsoil are owned and kept by the state or the region, and their exploration and exploitation need the issuance of licenses

Italy

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� Exploitation permit can be issued for a period of 30 years, preferably to the holder of the exploration permit

� Royalties are provided for the issuance of the permits. Further royalties are provided for power generation, but limited to plants with nominal power higher than 4 MW

Agenda




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08 Your contact

Legal security regarding water license

� Exploitation permit according to mining law only allows for the exploitation of geothermal energy Legal security

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exploitation of geothermal energy

� Further license necessary for the utilization of water or steam

Legal security regarding water license

Legal security regarding water licenseComparison Germany vs. Italy

� Legally possible to obtain water licenses for decades

� License, generally granted for few years and have to be prolonged on a regular basis

� Period of validity of water license and exploitation permit differ considerably

Germany

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considerably

• Further risk in project realization

• So far all necessary water licenses for geothermal projects have been issued

� Proof of disposal of test water and drilling fluid necessary

� In water legislation no legal claim possible• In some states mining authority entitled to override the interests of water

legislation

Legal security regarding water licenseComparison Germany vs. Italy

� License can be granted for up to 30 years

• Same period of validity as for exploitation permit

• Security of the investment, once both licenses are obtained

Italy

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• Security of the investment, once both licenses are obtained

� Granted by the province or region upon payment of a yearly fee

� No specific prescriptions concerning geothermal fluids and its treatment

� Legal claims delegated to the court of public water

Agenda




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08 Your contact


Economic feed-in tariffs

� In relation to geothermal power plants, the amount and especially the long-term security of feed-in tariffs play a crucial role, due to the long project preparation phase

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� Feed-in tariffs should allow for an adequate risk-award ratio that rewards the relatively high risks of the drilling exploration

� Reference value for the calculation of the feed-in tariff (net vs. gross capacity of the installation) has major influence on the profitability of a project

Economic feed-in tariffs

Economic feed-in tariffs Comparison Germany vs. Italy

� Renewable Energy Source Act (EEG) offers in general a stable and

Germany

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� Renewable Energy Source Act (EEG) offers in general a stable and secure investment environment

• Gross capacity of the renewable energy technology can be fed into the distribution network

• Feed-in tariff for hydro-geothermal power: 25 €cent/kWh

• Fixed feed-in tariff secured for 20 years

Economic feed-in tariffs Comparison Germany vs. Italy

� Incentive for the power generated

• Added to the income for the sales to the public entity (GSE)

Italy

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• Added to the income for the sales to the public entity (GSE)

• Granted for 20 years

• Sliding Feed-in Premium � Value of Feed-in tariff MINUS hourly zonal energy market price

• Current value: 85 – 135 €cent/kWh, depending on the nominal power of the plant

• Premium tariffs for innovative technologies provided

Agenda




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08 Your contact


Priority and guaranteed access to the power grid Comparison Germany vs. Italy

� Has to be ensured by all EU Member States (Directive 2009/28/EC on the promotion of the use of energy from renewable sources)

Priority and guaranteed access to the power grid

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� Immediate and priority connection to grid systems shall be granted by grid system operators (GSOs) to installations generating electricity from renewable energy sources (RES)

Germany


� GSOs are only then entitled to reduce output of RE plants to prevent a grid overload

Germany

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� Costs for the connection to the grid are to be borne by the installation operator• The GSO bears the additional costs in case of assigning a grid

connection point which is not at the shortest linear distance form the installation

� Costs for optimizing, strengthening and expanding the grid system have to be borne by the GSOs


� Applications aimed at the connection of RE plants must be given priority by the grid operator

Italy

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� The Energy Authority shall prioritize the dispatch of power generated by RE

� Only in cases of high risk for the national grid, the grid operator is entitled to reduce the input of RE plants

� Costs for the connection to the grid shall be borne by the installation operator

Legal security regarding district heating prices

� Determination of prices in a way that allowsLegal security

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� Determination of prices in a way that allows

• Achievement of a certain rate of return on the investment

• Passing increasing prices to consumers

Legal security regarding district heating prices

Legal security regarding district heating prices Comparison Germany vs. Italy

� Any heat supply contract (except for industrial customers) has to be based on the “regulation on general conditions for the supply with district heat”

Germany

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� The price sliding clause should appropriately include:• Development of production and supply costs

• Respective circumstances of the heat market

• The price factor associated to the contribution of the costs for fossil fuels has to be shown separately

� Price is not completely free of any regulation but can be oriented to the present situation of the heat supply costs

Legal security regarding district heating prices Comparison Germany vs. Italy

� Regulatory framework missing. Risks of cartel and monopoly of the operators

Italy

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� Investigations have been started up on 2012 by the ”Antitrust Authority”

� Possible creation of an indipendent Authority

� Due to the expansion of district heating and to the growing attention of the institutions, regulation of the sector in the next years predictable

Drilling and power plant construction licensesComparison Germany vs. Italy

� Drilling regulated by mining legislation

Germany

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� Construction of the power plant subject to building law

Drilling and power plant construction licensesComparison Germany vs. Italy

� Issuance of drilling licenses by:

• The respective region (When geothermal resources of national/local interest)

Italy

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(When geothermal resources of national/local interest)

• Ministry for Economic Development(For geothermal resources found in territorial waters)

� Construction license issued by the region, province or municipality depending on

• Plant’s nominal power

• Source

• D.lgs. 387/2003 created a specific rapid procedure for renewable energies plant (so-called Autorizzazione uUnica”

Conclusions

� Regulatory framework offering legally secure and economic conditions is of utmost importance for the realization of deep-seated geothermal energy projects

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� This country comparison illustrates the necessity to gain extensive knowledge on the regulatory conditions of any specific location before taking an investment decision.

Your contact

Benjamin RichterRödl & PartnerDenninger Straße 84D-81925 Munich

Germany

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„Each and every person counts“ – to the Castellers and to us.

Human towers symbolise in a unique way the Rödl & Partner corporate culture. They personify our philosophy of solidarity, balance, courage and team spirit. They stand for the growth that is based on own resources, the growth which has made Rödl & Partner the company we are today. „Força, Equilibri, Valor i Seny“ (strength, equilibrium, valour and common sense) is the Catalan motto of all Castellers, describing their fundamental values very accurately. It is to our liking and also reflects our mentality. Therefore Rödl & Partner embarked on a collaborative journey with the representatives of this long-standing tradition of human towers – Castellers de Barcelona – in May 2011. The association from Barcelona stands, among many other things, for this intangible cultural heritage.

D-81925 MunichPhone +49 (89) 928780-350Fax +49 (89) 928780-300E-Mail [email protected]

Your contact

ItalySvenja BartelsRachtsanwaltin/Avv.PartnerVia Francesco Rismondo 2/E

Giorgio CastorinaDottoreVia Francesco Rismondo 2/E35131 Padova

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„Each and every person counts“ – to the Castellers and to us.

Human towers symbolise in a unique way the Rödl & Partner corporate culture. They personify our philosophy of solidarity, balance, courage and team spirit. They stand for the growth that is based on own resources, the growth which has made Rödl & Partner the company we are today. „Força, Equilibri, Valor i Seny“ (strength, equilibrium, valour and common sense) is the Catalan motto of all Castellers, describing their fundamental values very accurately. It is to our liking and also reflects our mentality. Therefore Rödl & Partner embarked on a collaborative journey with the representatives of this long-standing tradition of human towers – Castellers de Barcelona – in May 2011. The association from Barcelona stands, among many other things, for this intangible cultural heritage.

Via Francesco Rismondo 2/E35131 PadovaPhone: +39 (049) 80 46 911 Fax: +39 (049) 80 46 920E-Mail: [email protected]

35131 PadovaPhone: +39 (049) 80 46 911 Fax: +39 (049) 80 46 920E-Mail: [email protected]

We and the Castellers de Barcelona

The human towers are like us: “every single individual counts” – when working together and when supporting our clients.

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geothermal energy - comparison of regulatory framework germany - italy

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