Italy: New measures adopted to promote decarbonisation and energy independence

publishedn on 29th February 2024

At the beginning of December last year, the Italian government issued a decree containing a series of regulations that are of great interest to the renewable energy sector.

Ministerial Decree No. 181 of 9 December 2023, which entered into force on 10 December (hereinafter referred to as the „Energy Decree”), introduces regulations that are intended to promote Italy's energy independence and decarbonisation, make it easier for companies with high energy requirements to supply themselves from renewable energy sources and contribute to the reconstruction of the Italian regions that have been severely affected by the floods since the beginning of May 2023.

After adoption of the implementation act in the parliamentary procedure, the Energy Decree is now law. The following summarises some of the regulations from the draft implementation act that are of interest to the renewable energy sector.

The implementation act of the Energy Decree stipulates that the Italian Ministry for the Environment and Energy Security will develop a mechanism by 8 February 2024 that will make it easier for companies with very high energy consumption to build new renewable energy plants or repower existing ones. New photovoltaic, wind and hydropower plants with a capacity of at least 200 kW and repowering projects that increase capacity by at least 200 kW will have access to the support mechanism. Under certain conditions, companies will be able to purchase a portion of the electricity that will be produced by the new or improved plant three years before it goes into operation. The energy advance must then be paid to the Italian management company for energy services (Gestore dei Servizi Energetici Spa, hereinafter referred to as „GSE”) within 20 years of commissioning. Companies can also benefit from the subsidy in association with other companies or with a third party with which a PPA is concluded.

Establishment of a fund to finance regional measures

The implementation act also contains various provisions aimed at motivating the regions to implement measures for decarbonisation, to promote the sustainable development of the territory and to accelerate and digitalise the approval procedures for renewable energy installations and their grid infrastructure. In particular, a fund will be set up that will be financed by part of the proceeds from CO₂ auctions. The much-discussed provision in the first draft, which envisaged that owners of new renewable energy installations could also contribute to the financing of the fund, was cancelled in the parliamentary procedure by the first legislative chamber and is no longer included in the law.

Incentives also for ground-mounted PV systems in agricultural areas

Following the amendment of the draft law in the first legislative chamber, PV systems installed on the ground in agricultural areas can now also benefit from the incentives provided for in Legislative Decree no. 199/2021. The only exclusion for these systems is access to the „old” incentive system provided for in Legislative Decree No. 28/2011.  

Introduction of an alternative incentive mechanism for energy production from renewable sources

By amending Decree Law No. 199/2021, an alternative incentive mechanism will be introduced alongside the existing one, from which renewable energy producers can benefit. This enables participation in the tenders for the purpose of concluding contracts for differences with the GSE independently of an individual power plant project. The mechanism requires the RE producer to feed a certain amount of renewable energy from newly certified plants into the grid each year, with the option of offsetting this amount over several years and/or purchasing certificates issued by the GSE from third parties.

Refurbishment of existing renewable energy systems

With regard to the refurbishment of existing renewable energy systems, access to incentives is made easier for those who carry out improvement work on existing PV systems in agricultural areas, which involves the construction of new systems or system components on the same area while retaining the agricultural land originally used and increasing the overall output of the system. Further, the implementation act stipulates that the renovation, modernisation or complete new construction of wind or PV systems is subject to environmental impact assessment (so-called VIA screening) in accordance with Legislative Decree no. 152/2006.
 
Other provisions of the implementation act of the Energy Decree include the introduction of a PV technology register, measures promoting the development of the floating offshore wind power sector, the refinancing of the Italian Climate Fund, the financing of district heating and cooling projects and the geological storage of CO₂.
Overall, the Energy Decree constitutes a positive step on the way to decarbonising the country.