Energy Community and Collective Self-Consumption – New Renewable Energy Business Opportunities in Italy

published on 20th May 2021

As the legal framework regulating energy communities and collective self-consumption has been completed, it is now only a matter of time before various energy communities are created throughout Italy. This shows that the new regulation has great potential, even though the corresponding EU directive has only recently been implemented and, due to its experimental nature, only on a transitional basis and subject to various restrictions.

As is well known, with the PNIEC - Piano Nazionale Integrato Energia e Clima 2030 (National Energy and Climate Plan 2030), Italy has set itself the goal of covering 30 per cent of gross final energy consumption from renewable energy sources by 2030. This goal is to be achieved by strengthening and expanding self-consumption and, in particular, by introducing energy communities and collective self-consumption systems.

Until recently, self-consumption was mainly possible through SAP self-consumption models (Legislative Decree No. 79/1999) and SEU efficiency systems (Legislative Decree No. 115/2008). However, these systems are subject to the significant limitation that only a maximum of two parties - a producer and a consumer - are allowed to participate and, consequently, they do no allow collective consumption of the electricity. With Decreto Milleproroghe 2019 (Legislative Decree 162/19, Article 42-bis), the Italian legislator has created the possibility of using collective self-consumption of renewable energy produced by installations with a capacity of less than 200 kWh on an experimental basis. It has thus forestalled the transposition of the Renewable Energy Directive II (RED II, 2018/2001/EU) planned for June 2021.

With the model of collective self-consumption and energy communities, legal entities that previously could not develop renewable energy projects can plan the installation of photovoltaic systems and collectively consume energy for their own purposes or participate in energy communities and thus reduce their energy costs. Collective self-consumption systems can be implemented in the case of residential buildings (for example, apartment buildings in big cities), tertiary sector buildings (offices, hospitals and nursing homes, buildings for commercial activities, etc.), industrial properties or public administration buildings (authorities, schools, hospitals and nursing homes, buildings for sports activities). All members of an energy community are connected to the same medium- or low-voltage transformer substation; members may include natural persons, SMEs and local authorities.

These collective legal entities must use the existing electrical grid, for which they pay the corresponding grid charges (also for shared energy), as well as renewable energy power plants commissioned as from 1 March 2020 and within sixty days of the entry into force of the act implementing the aforementioned RED II. In the case of collective self-consumption, net metering (scambio sul posto) is not permitted and the support tariffs of the Decreto FER1 do not apply, either.

By decree of 16 September 2020, the Ministry of Economic Development has introduced support tariffs to encourage the development of the self-consumption model: collective self-consumption is eligible for an incentive of €100/MWh on self-consumed energy. For energy communities, the incentive will be increased to €110/MWh to compensate for the higher fees associated with this system. The incentive is granted for a period of 20 years.

With resolution no. 318/2020/R/eel, the regulatory framework has been adopted by the Italian electricity authority ARERA. This resolution regulates, among other things, financial compensation for the electricity used in the collective self-consumption systems, also by setting amounts payable by GSE (Gestore dei Servici Energetici) as compensation for these systems. These benefits, i.e. the support tariffs plus amounts recognised by GSE, together with savings in energy costs result in an estimated overall economic benefit of around €150-160 /MWh.

In addition, it should be noted that the support tariffs for energy communities and collective self-consumption systems can be combined with the tax benefits for building renovations (Article 16-bis (1) of Presidential Decree No. 917/1986) and with the so-called superecobonus of 110 per cent, which significantly increases the prospective returns on necessary investments.

In the meantime, GSE has issued technical rules regulating the incentivisation of self-consumption and energy communities and launched a web portal through which applications for the allocation of incentives are to be submitted.

Market experts agree that energy communities and collective self-consumption systems will play an important role in achieving the goals set out in the PNIEC and will contribute to the emergence of a prosumer market.
Currently, the definitive transposition of RED II is being debated in the Italian Parliament. Based on the motions already submitted, it is to be expected that the currently still existing hurdles hindering a broader use of collective self-consumption systems will be removed.