The Italian solar PV industry has seen a further set-back following the recent press release from the Constitutional Court regarding the appeal requesting the law on retrospective cuts to the FIT be ruled unconstitutional. The announcement came just before the Christmas break. The outcome was not what the majority of the stakeholders in the solar PV industry were expecting.

Background

The FIT cut was introduced by the so-called “spalma incentivi” law (91/2014). The law gave >200kW solar PV plant owners three options to implement the FIT cuts: (i) spreading the FIT over a longer period; (ii) a direct cut to the FIT; or (iii) recalculation of the FIT and set-off. Plant owners had to elect which option was to apply to their plant(s) by 30 November 2014.

The default position is that if an owner did not notify the regulator by the deadline above, option (ii) was automatically applied i.e. the direct cut. The cut does not affect the 20 year length of the tariff period and the reduction percentages vary according to the nominal capacity of the plant:

- 6% for plants with nominal capacity greater than 200 kW and up to 500 kW

- 7% for plants with nominal capacity greater than 500 kW and up to 900 kW or

- 8% for plants with nominal capacity above 900 kW

What this means for solar PV plant owners

The exact ramifications of the ruling are not entirely clear at this stage as the Court has yet to issue its reasons for the ruling. Further analysis of the decision will be required in the coming days and weeks to fully understand the extent and scope of the FIT cuts. From the ruling, it appears that there are certain exceptions for IV and V Energy Bill plants but how this will play out in practice is not clear at the time of writing.

What happens next

Anie Rinnovabili and other clean energy associations are considering their options. An application to the European Court is one possibility, whereas Assorinnovabili is considering all options including appeal in the Italian courts.

International investors are considering whether a challenge can be mounted at a European Level. The European Commission has already expressed its view that the law goes against the underlying principles of creating stability for infrastructure investment within the EU.

Arbitration under the Energy Charter Treaty (“ECT”) and/or bilateral investment treaties entered into by Italy offers foreign investors another potential route to compensation for losses suffered as a result of the new measures. Although Italy withdrew from the ECT in 2016, existing investors affected by the rollback of incentives may still potentially rely on international law protections under the Treaty by virtue of its “sunset” clause. The Italian Court decision may be the trigger for many who were already considering claims and this would certainly not be unchartered territory - Italy is already facing at least 5 ongoing treaty claims by investors in the renewable energy sector.

As such, whilst this is not the outcome that stakeholders were hoping for, it is not the end of the issue and there may still be changes to how this law is implemented.