A recent report released by The European house Ambrosetti, sponsored by Rete Geotermica, put under the spotlight the geothermal energy market in Italy, analysis opportunities and challenges connected to geothermal development in Italy and highlighting how geothermal binary technology might play a major role in driving its renaissance and accelerate decarbonisation and economic development in Italy.
Let’s dive into this report and discover the key points outlined by Ambrosetti.
What is geothermal binary technology and what is driving its growth?
Geothermal energy is a renewable energy source that harnesses the heat stored within the earth through the drilling of wells. The technological advancements of recent decades now allow the creation of geothermal plants with zero emissions, using advanced geothermal technology, known as binary technology or ORC cycle employing a secondary fluid (hence “binary” for the name) instead of water that, when converted into steam, drives a turbine to produce electricity. By completely re-injecting the geothermal fluid back into the deep reservoir, this technology can generate electricity with zero emissions released into the environment.
Globally, from 2015 to 2021, binary cycle geothermal energy has exceeded 25% of installed capacity in comparison to steam flash power plant, representing almost 60% of installed power. In Europe, several countries are investing in this technology to meet energy goals by 2030. The main reason driving this growth are:
- the lower footprint of binary technology, allowing zero-emission geothermal plants with total reinjection of the geothermal fluid into the reservoir, also avoiding water consumption
- their highest capacity factor, exceeding 95%, compared to the maximum value of 89% recorded by traditional geothermal plants.
- lower Operation & Maintenance (O&M) costs due to complete plant automation and minimal maintenance activity
Geothermal development trend in Italy and its potential
Italy has a century-long tradition in geothermal energy, starting in Larderello, Tuscany, where the first geothermal plant for electricity production was inaugurated in 1913. In contrast with the geothermal development happening globally in the last decades, the stagnation of development in Italy in the same period has caused the country to lose positions, from 4th in the world in 2000 to 8th in 2022. In the last ten years any new power plant has been installed in Italy and only 1 MWe with binary technology is operational, installed by Exergy in 2012 at Bagnore III geothermal field, in Tuscany, for Enel Green Power.
As of 2023, there were 87 geothermal projects under development, 78 of which are with zero-emission binary technology, potentially leading to nearly 1.2 GW of installed capacity by 2040 if properly supported to come to life.
In contrast to this trend Ambrosetti analysis reveals a huge potential of geothermal resources in Italy, which would be sufficient to meet over four times the entire Italian energy demand in terms of electricity and heat and generate up to 2,900 TWh of electricity each year, reducing geopolitical risk and foreign dependence while safeguarding the competitiveness of the production system for energy supply.
What are the obstacles to the development of geothermal potential in Italy?
Main reasons hampering geothermal development in Italy are connected to the lack of adequate policies supporting its growth.
In Italy, national energy plans do not focus on geothermal energy. The new draft of the PNIEC (Integrated National Energy and Climate Plan), presented on June 30, 2023, confirmed the lack of interest in geothermal energy in the national strategies for energy transition.
The FER2 Decree, recently approved by the European Union which will come into force soon, aims to incentivize the installation of innovative renewable energy technologies, including geothermal binary systems. Nevertheless, the share of zero-emission geothermal energy in FER2 decree is limited to only 1.4%, equivalent to a quota of 60 MW of power out of a total available of 4,400 MW, while 100 MW of power (2.3% of the total) is allocated for traditional geothermal energy.
In Italy’s long-term energy plans, geothermal energy plays a limited role in the energy mix, without a specific target for zero-emission technology.
In contrast to Italy’s energy strategy, the European Union considers geothermal energy a valuable and local renewable energy source. The European Commission’s Net Zero Industry Act (published in March 2023) identifies geothermal energy as a strategic technology for achieving zero emissions by 2050. This support aims to strengthen Europe’s manufacturing capacity for zero-emission technologies considered strategic for the energy transition, resilience, and technological independence of the EU.
The potential contribution to decarbonization of zero-emission geothermal energy in Italy
The European House Ambrosetti estimated in its report that by reversing this course and start developing geothermal energy in Italy would accelerate the energy transition, making it easier to achieve decarbonization goals.
To achieve carbon neutrality by 2050, the potential contribution of geothermal energy can develop in two dimensions:
- Power Generation using geothermal binary plant. Even by exploiting just 2% of Italy’s geothermal potential within the first 5 km of depth, we could contribute up to 10% of electricity generation by 2050.
- Heatin purposes by means of district heating networks and geothermal heat pumps. The geothermal potential to power district heating networks amounts to nearly 1.6 Mtoe, providing about 18 TWh of thermal energy. Referring to the heat pump segment, it is estimated that the potential market could reach 5.8 Mtoe in the residential sector and 7 Mtoe in the tertiary and services sector. Geothermal energy could contribute to over 14 Mtoe of thermal energy, equivalent to 25% of final thermal consumption in 2021, allowing Italy to reduce natural gas consumption by about 40%.
Other benefits of geothermal energy development in Italy
Reducing energy and critical minerals independency
- Geothermal energy resides in the national subsoil in many regions in European Union and harnessing it would allow to exploit a local resource to produce power onsite and lower the energy dependence from foreign procurement.
- Extracting lithium from geothermal fluids represents a strategic opportunity to reduce geopolitical risk and support the European supply chain.
- Geothermal energy is the least dependent green technology on critical raw materials, capable of reducing Italy’s energy and technological dependence on foreign countries.
- Geothermal energy represents a functional renewable source to produce green hydrogen, ensuring a continuous and stable supply of electricity to power electrolysers. Geothermal power production is strategic for developing a green hydrogen market in Italy, addressing the intermittency issue of some renewable sources.
Fostering the growth of Made-in-Italy geothermal supply chain leadership
To analyse the potential of geothermal energy in Italy, The European House – Ambrosetti has reconstructed the geothermal technology supply chain in Italy and other European countries. 135 industrial technologies in the geothermal supply chain have been identified highlighting Italian leadership in this sector:
- Italy boasts an industrial production in the geothermal supply chain of approximately 38 billion euros, ranking second in the EU.
- Italy ranks in the top 3 positions in Europe for absolute production value, for 52% of the technologies, and in the top 5 positions overall.
- Moreover, Italy is the leading country in the EU for the trade balance of geothermal technologies, with a value of 7 billion euros.
In addition to manufacturing know-how, Italy is among the leading countries in Europe in providing highly specialized services, both in exploratory activities and feasibility studies, covering the entire value chain for geothermal project development.
Italian companies are global leaders in producing key technologies for zero-emission geothermal plants, such as ORC turbines and power plants. Exergy International ranks among the top 5 companies globally for supplying binary power plants among those operational in Europe as of 2022.
Activating further inducted economic and social benefits
Investing in geothermal energy in Italy generates significant positive externalities: every euro invested activates another two in the economy, with a higher economic multiplier compared to other renewable sources. Every installed GW generates an overall value added at the country-system level equivalent to 8 billion euros.
Moreover, the geothermal sector plays a key role, activating approximately 6,131 new jobs for every installed GW and being the green technology with the highest employment intensity.
What are the strategies to unlock geothermal energy development in Italy?
After a description of the benefits of zero-emission geothermal energy,let’s conclude with the barriers to overcome and policy proposals outlined by Ambrosetti for Italy.
Zero-emission geothermal energy is crucial for Italy’s energy transition, but it is hindered by:
- high costs
- initial risks
- regulatory complexity.
To overcome these constraints, measures of incentivization, de-risking, and regulatory simplification are necessary. Here a list of key consideration for the development of zero-emission geothermal energy.
| Technology cost | Initial risk | Permitting | |
| SITUATION | Geothermal technology with zero emissions is an innovative technology; consequently, it has a higher development cost compared to traditional renewable technologies. | The development of zero-emission geothermal energy involves significant risk from the early stages, especially during drilling phases. | Currently, the regulations and authorization process for the construction of geothermal plants are complex and fragmented. |
| SOLUTION | Industrialization, supported by incentives, could ensure a significant reduction in costs. | It is necessary to establish, as in other countries, an insurance fund that mitigates exploration risks and incentivizes the development of these projects. | Streamline and simplify the permitting process by creating a dedicated Authority |
Zero-emission geothermal energy is an innovative technology and, therefore, has a higher development cost than traditional renewable technologies. Consequently, the development of zero-emission geothermal energy must be accompanied by adequate support mechanisms. In Italy, the incentivization system for zero-emission geothermal energy is lower compared to the main European peers. Germany provides an incentive of €252/MWh, France provides €250/MWh, and the United Kingdom provides €230-263/MWh.
It is advisable to establish incentivization mechanisms for zero-emission geothermal plants, defining specific incentive tariffs, a certain, stable, and medium-to-long-term incentivization system, and definite and congruous terms for the commissioning of geothermal plants.
To protect sector operators, it becomes necessary to establish an insurance fund that mitigates exploration risk and incentivizes the development of these projects. It is appropriate to establish de-risking measures that support developers in the initial phase of drilling exploratory wells, protecting entrepreneurial activity from the intrinsic risk of the technology. Drawing inspiration from the French model, such instruments should provide compensation for geothermal project developers conditioned on the success/failure of drilling the first exploratory well.
Currently, the authorization process for geothermal plant construction is complex and fragmented. In order to address these issues and enhance the potential of zero-emission geothermal energy in Italy, it is desirable to:
- Establish a dedicated National Geothermal Authority to coordinate sector development and define simplified procedures and definite timelines for the authorization process.
- Institute a Single Authorization Title that provides a single authorization and environmental process for geothermal plant development, to ensure the concession issuance in case of successful initial phase.
- Allow for the extension of Environmental Impact Assessment Decrees at least twice (up to a maximum of additional 10 years) upon submission of project status updates and impact assessments.
- Review Non-Suitable Areas for geothermal plant development and identify “optimal” areas based on geothermal potential mapping and studies already prepared by the Ministry.
Conclusion
While Italy boasts a rich history and vast potential in geothermal energy, its current energy policies do not fully harness this resource. With strategic investment and policy support Italy could bolster energy security, foster economic growth, and lead the charge in Europe’s renewable energy transition.
Want to learn more about Exergy’s binary technology features?
Discover more on our website by clicking here
Do you have any question for us?
Contact us for more information and details.
