On 23 June 2016, the Italian Ministry for Economic Development issued a new decree (“RES Decree 2016”) – which entered into force on 30 June 2016 – aimed at promoting renewable power plants (“RES Plants”) through a revised set of incentives (“Incentive”).
General principles and access procedures do not deviate from the previous regime under decree 6 July 2012 (“RES Decree 2012”).
RES Decree 2016 does not apply to photovoltaic plants, in relation to which currently no incentives are granted.
I. Access to Incentives
As in the previous regime, RES Plants may benefit from:
- All-inclusive tariff (tariffa onnicomprensiva), applicable to RES Plants with nominal capacity up to 500kW; or
- Feed-in tariff (tariffa incentivante), applicable to RES Plants RES Plants with nominal capacity up to 500kW which do not opt for the above All-Inclusive Tariff and RES Plants with nominal capacity in excess of 500kW.
Incentives are granted either to direct access, registry procedure or tender procedures, as set out in the following chart.
Click here to view table.
RES Decree 2016 confirms a trend aimed at reducing the incentives granted to RES Plants. The Incentive values under Annex I to the RES Decree 2016 decreased significantly compared to those set out under the RES Decree 2012. Additionally, the capacity caps applicable to the Incentives are lower than those previously set out under RES Decree 2012. Therefore, it is expected that they will not suffice for RES Plants which have been excluded to the previous incentive regime due to overrun of the capacity caps set out therein.
This is likely to result in more generators moving to private PPAs as opposed to the statutory offtake regime (ritiro delicato).
II. Timeframe and New Investments
Another indicator of the more restrictive, incentive policy is the very short timing windows allowed, for obtainment of the Incentive, particularly in respect of large RES Plants.
Whilst small RES Plants may access the incentive until the end of 2017 (subject to the Euro 5,8 million cap being reached), for large RES Plants, only one register procedure and one tender procedure will be launched by 20 August 2016.
Applications for the Incentives may be submitted until 30 days after the earlier of the following dates:
- either 1 December 2016 (for small RES Plants subject to direct access, 1 December 2017); or
- the date on which the average annual cost of the Incentives reaches the threshold of Euro 5.8 million.
It follows that Incentives are likely to be granted only to fully developed RES Plants which, however, had no access to the previous incentives under RES Decree 2012.
This is also confirmed by the fact that, both in respect to the registry procedure and the tender procedure, an applicant must obtain the authorization (autorizzazione) – or the concession (concessione) for hydro, geo-thermal and oceanic sources – and the acceptance of the definitive connection estimate (preventivo di connessione), before filing the application to the procedures above. Therefore, investments on the new generating capacity are highly unlikely given the short timing for obtaining the relevant authorization/concession and filing the application to access to the Incentives.
III. Transfer of RES Plants
RES Plants admitted to the Incentives under register or tender procedure may be transferred to third parties only after (i) entry into operation and (ii) execution of the contract between GSE and the producer under which the payment of the Incentive is regulated.
IV. Special Rules
1. Register Procedure
Further to the application by a producer to be admitted in the registers managed by GSE (related to the different renewable sources and types of RES Plant), GSE establishes rankings according to the priority criteria listed in article 10. GSE admits to the rankings RES Plants up to a cumulative capacity not exceeding the capacity caps under Articles 9 and 17. 1 Only admitted RES Plants are entitled to benefit from the Incentives, provided that they enter into operation within the deadlines set out in respect to each specific source.
A producer may abandon the construction of its admitted RES Plants within six months from the date on which the GSE publishes the ranking. In this event, the Incentive will be attributed to the first not admitted RES Plant according to a rolling ranking principle.
Only RES Plants for which construction works have not been commenced at the date of admission to the relevant ranking may benefit from the Incentives. This confirms that the RES Decree 2016 is aimed at granting the Incentives only to RES Plants already developed (and that may have been suspended due to the lack of financial subsidization).
2. Tender Procedure
Further to the publication by the GSE of the tender notice, producers having the necessary requirements may bid for the Incentives. GSE generates the rankings in relation to each type of plant and renewable source, giving priority to the higher reduction of the Incentive values offered by the applicants. Other criteria apply in hierarchical order if an equal reduction of the value above is offered. In this respect, the legality rating (ranting di legalità) is the first criterion applied in hierarchical order to generate the ranking of admitted RES Plants (if the reduction of the Incentive value cannot apply). GSE admits to the rankings RES Plants up to a cumulative capacity not exceeding the capacity caps under article 12. 2
Only admitted RES Plants are entitled to benefit from the Incentives, provided that they enter into operation within certain deadlines set out in relation to each specific source.
Rankings may be updated, granting Incentives to the first of the excluded RES Plants, only if the producer does not provide GSE with the definitive security deposit (cauzione definitiva) referred to its admitted RES Plant or, according to a rolling ranking principle, if the awarded producers abandon the construction of the admitted RES Plant.
In respect to certain Italian areas with high concentration of non-programmable plants, the local distribution operator must inform GSE of the maximum capacity cap that, for network safety purposes, can be incentivized in their area. GSE must assign the Incentives in that area according to the indication of the local distribution operator.
3. Revamping and Maintenance of RES Plants
GSE must publish the rules and procedures concerning revamping and maintenance interventions (ammodernamento e manutenzione) to safeguard the efficiency of the RES Plant according to, inter alia, the following criteria:
- maintenance interventions are allowed only if they do not entail an increase of more than 1% of the nominal capacity of the RES Plant, the single machines or sections composing it and the engines. For RES Plants having nominal capacity up to 20kW, an increase in the nominal capacity up to 5% is allowed. For CSP plants, the absorption surface cannot be increased;
- in case of definitive replacement of components, new or restored components must be used; and
- maintenance interventions carried out using spare machinery or elements (also temporary use) and not increasing the nominal capacity of the RES Plant are allowed.
V. Application of the Previous RES Decree 2012
Incentive values granted under RES Decree 2012 continue to apply to RES Plants entering into operation next year (by 30 June 2017), even if admitted to the Incentives under RES Decree 2016.
Additionally, access rules and procedures set out under RES Decree 2012 continue to apply to:
- RES Plants admitted to the register and tender procedures under the RES Decree 2012; and
- RES Plants eligible for direct access which entered into operation in the 30 days preceding the date of entry into force of RES Decree 2016.
Admitted RES Plants included in the rankings of the register procedures under the RES Decree 2012, if not completed within the deadlines set out under the RES Decree 2012, may access the incentives under RES Decree 2016 subject, however, to a 6% reduction.