In brief: renewable energy projects in Italy

Projects

What government authorisations must investors or owners obtain prior to constructing or directly or indirectly transferring or acquiring a renewable energy project?

For the construction of new renewable energy plants, investors must obtain all public permits and authorisations required under Italian law. The required permits may vary according to the type and the size of the project.

As for transferring and acquiring energy projects, no government authorisations are required. However, pursuant to the Italian ‘golden power’ regulation, as recently amended by Law Decree No. 21 of 21 March 2022, as converted into law by Law No. 51 of 20 May 2022, EU and extra-EU companies that intend to acquire Italian strategic companies in the energy sector have the duty, under certain circumstances, to notify the Italian government. If a company is in breach of such notification duty, the government may undertake ex officio proceedings in order to verify the potential risks related to the relevant transaction.

What type of offtake arrangements are available and typically used for utility-scale renewables projects?

In most cases, the renewable energy produced by utility-scale projects is sold ‘on market’ following the execution of short-term/indexed power purchase agreements (PPAs) between the energy producers and the off-takers (ie, traders) who operate in the IPEX market. Pursuant to such short-term/indexed PPAs, the producer allows the off-taker to trade the energy in the IPEX market as ‘market operator’ and gives mandate to the latter to execute, on behalf of the producer, the energy dispatching contract with Terna, the Italian transmission system operator. The main reason why producers do not directly operate in the energy markets but prefer to enter into a PPA with traders, is that trading on such markets requires technical expertise and some minimum financial requirements that producers do not normally possess. Indeed, the traders who act as market operators shall release, in favour of the Electricity Market Manager, specific first demand bank guarantees or non-interest-bearing deposits depending on the market where they act. This kind of off-take arrangement may, however, expose the producer to the risk of trader’s insolvency. Therefore, the producer usually requests the trader to a provide a first demand guarantee from a reputable bank for the due performance of the latter’s payment obligations under the relevant off-take agreement.

How are long-term power purchase agreements procured by the offtakers in your jurisdiction? Are they the subject of feed-in tariffs, the subject of multi-project competitive tenders, or are they typically developed through the submission of unsolicited tenders?

The long-term PPAs are not the main tool for the offtake of the renewable energy. When executed between the energy producer and a private company, such long-term contracts are not subject to specific templates or public regulations but only to negotiations between private parties.

However, a wider diffusion of long-term PPAs is expected following the recent implementation by the Electricity Market Manager (GME) of the bulletin board of long-term energy contracts from renewable sources (the 'PPA Bulletin Board'), which has the aim of promoting the meeting and negotiation between parties potentially interested in the stipulation of long-term contracts for the sale of electricity from renewable sources.

What government authorisations are required to operate a renewable energy project and sell electricity from renewable energy projects?

The government authorisations required to operate a renewable energy project are all dealt with in the Single Authorisation Procedure, the PAUR procedure or in the alternative simplified procedure (PAS). Depending on the size of the project and on whether an environmental impact assessment is required, these are the public procedures to be carried out prior to constructing and operating a renewable energy plant. 

As for the trade of electricity and environmental attributes from renewable energy projects, no public authorisations are required. In any case, the owners of renewable energy plants must comply with the procedures set out by the Energy Services Manager (GSE) and the GME, depending on the market where they operate.

Are there legal requirements for the decommissioning of renewable energy projects? Must these requirements be funded by a sinking fund or through other credit enhancements during the operational phase of a renewable energy project?

The legal requirements for the decommissioning of renewable energy projects are set out in the Legislative Decree No. 49 of 14 March 2014, which regulates the management and disposal of waste electrical and electronic equipment. In addition, in April 2019, the GSE published an operational guide on decommissioning with a focus on PV plants. According to this technical guide, the GSE shall oversee all decommissioning procedures related to PV plants.

Moreover, in order to cover the risks associated to the potential breach of decommissioning obligations, the titleholder of the relevant renewable plant shall provide the region where the renewable energy sources project is located with a first demand bank guarantee. The value of such guarantee may vary depending on the size of the plant, its specific location and the expected works foreseen for full decommissioning.