Feed-in tariffs (FITs) are financial incentives, paid by the government, for electricity generated from renewable energy plants. The intention is that FIT payments help the renewable electricity generator to overcome the cost disadvantages of installing and operating a renewable energy technology until that technology achieves cost parity with conventional generation.
For photovoltaic plants a FIT was introduced in Italy for the first time in 2005. Thereafter the award of FITs to photovoltaic plants was controlled by different regulatory regimes enacted from time to time (the last one in 2012), the application of each depending upon the date of entry into operation of the plant. In all cases the FIT awarded was intended to last for 20 years from the entry into operation of the relevant plant. This resulted in a significant increase in the number of installations of photovoltaic plants.
However, the Italian government has recently decided retrospectively to reduce the FITs already awarded to operational photovoltaic plants. Specifically, according to the new rules set out by Law Decree no. 91/2014, converted with amendments into Law no. 116/2014, photovoltaic plants with a capacity of more than 200 kW will have to choose one of the following three options for change by 30 November 2014:
- they can decide to cut their FIT rate by 17-25% and extend the payment period from 20 to 24 years in exchange: the operators would get less money per kWh, but for a longer period; or
- depending on the plant size, they can accept a 6-8% cut of the FIT rate they receive per kWh; or
- they can opt for deep immediate cuts to the FIT rate, but instead of an extension of payment period, the FIT rate will increase once again after 2020.
In case of failure to adopt and notify an express choice, the second of the above options will apply. The new regime will be applicable from 1 January 2015.
The government is likely to face legal action by operators and investors over the retroactive nature of the regulations. As the provisions will apply retrospectively to plant owners that have previously been awarded the FITs, and whose entitlement to the FITs has been reflected in binding agreements, critics have queried if the new provisions are compatible with the principles of the Italian Constitution, EU law and Italy’s obligations under international treaties.