Italy Energy update - January 2014

"Destination Italy Plan" ("Piano Destinazione Italia")- Introduction of an optional incentive system offered to renewable electricity producers and reduction of the guaranteed minimum prices (Link to the page of the Official Gazette of the Republic of Italy (Gazzetta Ufficiale))

On December 24, 2013, the Decree n. 145 (published on the Official Gazette of the Republic of Italy on December 23, 2013), which provides for a package of measures aimed at the economic development known as "Destination Italy Plan" (Piano Destinazione Italia), has entered into force. Such Decree provides, inter alia, for the introduction of an optional incentive system offered to renewable electricity producers and for the reduction of guaranteed minimum prices granted to plants with a power capacity of less than 1 MW. The conversion process of the decree into law has not yet started as of today and therefore it may be amended through this conversion process; a new version of this alert will be issued in order to reflect changes, if any.

In order to "contain the annual charge on electricity prices and tariffs of the incentives for renewable energies and to maximize the production of the existing plants in the medium and long term ", the producers of electricity from renewable sources, who own power plants admitted to incentives in the form of green certificates, feed-in tariffs or premium tariffs, in connection with such power plants can opt for a reduction of the incentive and for a simultaneous extension of the incentive period. In detail, the producers can decide whether:

  • continue to benefit from the currently applicable incentive scheme and for the original remaining period. In this case, for a ten-year period starting from the end of the original incentive period, any new initiative realized on the same site will not benefit from further incentive measures, including dedicated withdrawal and on-site exchange; or
  • opt for a remodeling of the due incentive. In this case, the producer will benefit of a new incentive reduced by a percentage which will be specific for each typology of plant, as defined by an inter-ministerial decree, to be applied for a new incentive period equal to the remaining incentive period increased by 7 years. The date starting from which such new scheme would operate is the first day of the month following the deadline set for exercising the option.

Within 60 days from the coming into force of the Decree, the Italian Minister for Economic Development, jointly with the Italian Minister for the Environment, Land and Sea, taking into account the opinion of the Italian Regulatory Authority for Electricity and Gas (AEEG), must issue a specific decree defining the reduction percentages.

The option shall be exercised within 90 days from the date of the coming into force of the aforementioned inter-ministerial decree. The modalities for exercising the option will be defined by Italian Energy Services Management (GSE - Gestore dei Servizi Energetici) within 15 days from the same date.

The reduction percentage will apply to:

  • as for the power plants which benefit from green certificates, to the multiplying coefficient referred to in Table 2 of Law 244/2007 (e.g. with regard to on-shore wind farms, to the coefficient equal to 1 according to which the on-shore wind farms receive one green certificate for each MWh they produce);
  • as for the power plants which benefit from feed-in tariffs, to the amount of the tariff net of the sale price of electricity as defined by the Italian Authority for Electricity and Gas (Autorità per l'Energia Elettrica e il Gas) and registered during the previous year; and
  • as for the power plants which benefit from premium tariffs, to such premium tariff;
    and shall be differentiated on basis of the remaining incentive period, to the kind of renewable source and to the incentive scheme, also taking into account the costs arising from the operation of remodeling of the incentives, including a premium for those power plants for which the applicable law does not provide for any incentives, other than on-site exchange and the dedicated withdrawal, for the period following the end of the incentive applicable to them in case of new initiatives realized on the same site.

The new provisions will not apply to:

  • power plants which benefit from the so-called CIP 6 scheme; and
  • power plants which benefit from incentives under Ministerial Decree July 6, 2012 (FER Decree), with the exception of those falling within the interim regime provided in the FED Decree itself.

The second provision is the reduction, starting from January 1, 2014, of the guaranteed minimum prices, which will be equal, for the energy produced by power plants that benefit from incentives charged on electricity rates, to the hourly zonal electricity price. The guaranteed minimum prices were introduced with AEEG resolution n. 34/05 in order to grant a coverage to the production costs for the power plants that produce electricity from renewable sources having a power capacity of less than 1 MW and are acknowledged to the first 2 millions of kWh produced and injected into the grid. The new criterion for their determination implies a significant reduction of the aforesaid minimum prices.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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