In Depth

On 30 June 2016, the long awaited new Ministerial Decree providing incentives to electricity production from renewable energy sources (RES) other than photovoltaic (PV) energy entered into force after its publication in the Italian Official Gazette.

The new decree provides for incentives to newly installed or regenerated RES plants as follows:

• For RES plants up to 500 kW, a feed-in tariff (FiT) that includes the price for the electricity, which will be taken by the Gestore Servizi Energetici (GSE).
• For RES plants above 500 kWp, and smaller RES plant that expressly request this option, the same FiT as for plants up to 500 kW, reduced by the hourly zonal price for electricity. These RES plants will sell the electricity privately, rather than to the GSE.

The amount of incentives and their duration vary, depending on the type and size of the RES plants.

The new decree replaces the previous Ministerial Decree of 6 July 2012, which continues to apply to

• RES plants that had been ranked as eligible in the registers or had won the reverse auction, provided they start operations within the timelines provided under the previous RES decree.
• RES plants directly accessing incentives pursuant to the previous decree, which started operating by 31 May 2016 and submitted the relevant FiT application to the GSE by 30 June 2016.

The higher tariffs provided under the previous decree will only continue to apply to RES plants that access incentives directly or through registers, as described below, provided they start operating by 30 June 2017.

The overall cap on incentives for RES plants remains at €5.8 billion per year. As of 31 May 2016, the annual incentive payments amounted to €5.55 billion per year. Accordingly, the new decree will remain in force until the date on which the €5.8 billion threshold is reached, or 31 December 2016 (or 31 December 2017 for micro plants), whichever is the earlier.

Access to the Incentives

Similar to the previous decree, the new decree provides for three different methods to access the incentives, depending on the type and size of the RES project:

1. Direct access for micro plants
2. Access through a register and a ranking system based on priority criteria
3. A reverse auction process.

By 20 August 2016, the GSE will publish notices calling for applications to access incentives through the register and reverse auctions. Applications must be submitted within the following 70 days. Applicants must hold a valid authorisation title to build and operate the plant, plus the final and accepted estimate for the connection (preventivo di connessione) issued by the competent grid operator.

RES projects located in neighbouring countries, or in EU Member States that provide for adequate reciprocity, are allowed to participate in the reverse auction process (but not in the direct access or register), provided they deliver the entire electricity production to Italy.

Allocation of Incentives

While the allocation of incentives for micro plants with direct access is made on a first come first served basis, irrespective of the type of RES plant, the new decree provides for capacity caps on incentives accessed through the register and reverse auction process, showing a clear preference for onshore wind projects > 5 MWp. 

Anti-Splitting Rule

Article 29 of the new decree contains provisions aimed at limiting the artificial splitting of one large plant into several smaller plants to access higher tariffs or avoid the register or reverse auction systems.

The GSE is entitled to evaluate any possible evidence of one plant being artificially split into multiple smaller ones. The decree notes, for example, that the use of the same grid connection point by multiple plants belonging to the same owner would constitute evidence of splitting. Should a plant be found to have circumvented the anti-splitting rule, the GSE can re-determine the applicable tariff or, if the split enabled the plant to have access to the incentives, the GSE can terminate the incentives agreement and claim back any tariffs already paid.

The broad wording of Article 29 causes concern: First, it seems to apply to RES plants that have already been granted incentives under previous incentives schemes. Second, although Article 3 excludes PV plants from the scope of the new decree, the wording of Article 29 seems to extend the anti-splitting rule to PV plants, although the GSE has not yet clarified this.

If Article 29 does apply to PV plants, the GSE’s decision to reduce or revoke previously granted incentives would be subject to legal scrutiny, as it would change the applicable rules with retrospective effect, violate the principles of legitimate trust, and contradict the Ministry’s, and the GSE’s, previous actions and statements.