Partner Macchi di Cellere Gangemi
This is a peculiar historical moment, where investment in the renewable energy sector in Italy is seen multiplying, but it is also at a time of great regulatory uncertainty.
The eleventh auction and register procedure for the allocation of incentives to renewable plants (provided for in the July 4, 2019 Ministerial Decree and n. 1999/2021 Legislative Decree) has recently kicked off. The GSE (the Italian Regulator of the Energy Services) is putting a total of 2,149 MW up for bidding. The Registration Period starts from 01/31/2023 until March 2, 2023. The tariff offered for wind and photovoltaic plants must be less than Euro 65,17. It should be kept in mind, however, that plants eligible for GSE tariffs can “delay” up to 18 months after entering into operation the agreement with the GSE and thus benefit for the first 18 months of operation from market prices, that are expected to be much higher and favourable for operators.
It should be recalled that the tenth call for tenders showed the allocation of only 144.7 MW against a quota of 2,321 MW, Outcome even less than the 520 MW awarded in September 2022 in the ninth auction. This is probably due to the few permits issued and to the competition from PPAs (especially in PV). Therefore, the declines in the 11th auction are expected to be minimal.
And what will happen after the 11th auction? Will there be a new auction to exhaust the quota or will a new decree finally be issued for new auctions and new rules? What might these new rules be?
Theoretically, the Ministry says that “by March” the implementing decrees of DL No. 199/2021 should be completed, the main ones of which are still pending including.
(i) the guidelines on eligible areas for the construction of renewable energy plants with simplified procedures,
(ii) the call for agrivoltaics plants,
(iii) the Fer 2 Decree that will replace Fer 1 on the new auction system.
But these terms appear to have little credibility.
Also in the works is the Simplification Decree to be issued in execution of the NRPR (the National Recovery and Resilience Plan). From the draft decree circulated in the last week, but still being finalized, the simplified enabling procedure for PV plants up to 50 MW is expected to be applicable “provided that the energy produced by the plants themselves” is sold to the Gse for at least 15 years (Art. 66). It would mean a procedure that reduces the permitting process to 30 days. Also, in the draft decree are streamlining for storage and agrovoltaic plants (Art. 70); merging single authorization and Via into a single procedure (Art. 71); and further simplifications for Fer offshore plants (Art. 72).
Finally, uncertainties also exist in the field of profits from operating renewable energy plants, whereby under Law No. 197/2022 “aggravated” taxation regulations had been introduced in Italy (the so-called Extra-profits Decree) on revenues from the “extraprofit” on electricity caused by the economic situation resulting from the Ukrainian invasion. This legislation, issued in execution of Regulation from the EU 1854/2022, was challenged by numerous operators (believing that the legislation, by calculating the reference price on the basis of the arithmetic average and not on price peaks, was discriminatory and unreasonable as well as contrary to EU law). The Milan Regional Administrative Court, in a decision dated December 7, 2022, the reasons for which, however, are still awaited, had declared the rule unlawful. Although we are still waiting for the reasons for the Milan TAR ruling, the Council of State in a ruling of January 2023 has already suspended its effectiveness. So, one wonders what should operators do now?
In this context, there is an increasing diffusion and revival of power purchase agreements (PPAs) in Italy. According to the latest Pexapark report of December 2022, PEXA indices of 10-year PPAs fell in Italy in December to 84 euros per MW/h compared to 110 euros per Mw/h in November 2022.
Such regulatory uncertainties are not stopping operators, and there are increasing applications for new connections and new authorizations, MISE alone in 2022 unlocked more than 7.1 GW of authorizations.