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The transposition of RED II Directive into the National Legislation: the main amendments introduced through the Decree published in the Italian Official Gazette

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Prepared by Energy Team

By means of the Legislative Decree no. 199/2021 published in the Italian Official Gazette no. 285 of 30 November 2021 (the “Decree”) and which will entry into force starting from 15 December 2021, the Italian Legislator has implemented the Directive 2018/2001/EU of the European Parliament and of the Council of 11 December 2018 on the promotion of the use of energy from renewable sources.

In line with the targets provided under the Integrated National Energy and Climate Plan (“PNIEC“), the Decree is aimed at achieving the minimum target of 30% as the overall share of energy from renewable sources in gross final consumption and the reduction of greenhouse gas emissions by at least 55% by 2030.

In that respect, please find below a brief recap of the main amendments introduced through the Decree in relation to the Italian energy sector.

Incentive mechanisms

The Decree introduces several incentives mechanisms which granting criteria and modalities could be summarized as follows:

1.plants > 1MW (so-called large plants): access to the incentives through downward auctions (these auctions apply also as to plants falling within self-consumption configurations or energy communities and in relation to plants built on unused agricultural areas and identified as suitable areas referred – for further details please see paragraphs 3, 4.1. and 4.2. below).

In addition, it should be noted that, upon request of the applicant, plants with a capacity greater than 10 MW could be subjected to an experimental phase launched by the Gestore dei Servizi Energetici – GSE S.p.A. (“GSE“) simultaneously to the authorization process and aimed at assessing the eligibility of the relevant project to get access to the incentives.

The regulation of downward auction mechanisms will be defined by decree to be enacted by the Italian Ministry of Ecological Transition (“MITE“) within 180 days from the date of entry into force of the Decree.

2.plants ≤ 1 MW (so-called small plants):

  • direct application at entry into operation: for plants with generation costs closer to market competitiveness;
  • calls for tenders: for innovative plants and for plants with higher generation costs.

The tariffs regulation for small plants will be defined by a decree to be enacted by the MITE within 180 days from the date of entry into force of the Decree.

As to the aforementioned provisions, it is worth underlining that:

  • the MITE decrees aimed at implementing the aforementioned incentives’ mechanisms will set forth the timeframe and criteria to be applied for granting the incentives;
  • pending the enactment of the MITE decrees, within 15 days of the entry into force of the Decree and following the seventh procedure referred to in the Ministerial Decree of 4 July 2019 (“FER1“), the GSE will set up further register/auction procedures on the basis of the residual power contingency not assigned yet;
  • after 90 days from the entry into force of the MITE decree, the net-metering regime (scambio sul posto) will be repealed and the plants which will entry into operation after that deadline could access to the new incentive mechanisms or the dedicated withdrawal (ritiro dedicato).

Power Purchase Agreements

The Decree defines the power purchase agreements (“PPA“) as follows: the “contract by which a natural or legal person undertakes to purchase electricity from renewable sources directly from an electricity producer“.

Moreover, the Decree provides that within 180 days from the date of entry into force of the Decree:

  • the Gestore dei Mercati Energetici – GME S.p.A. (“GME“) shall set up a digital board aimed at promoting the match between the operators potentially interested in entering into such contracts so to ensure a gradual start-up of the PPA negotiations;
  • the Concessionaria Servizi Informativi Pubblici – Consip S.p.A. (“Consip“) will define and provide public authorities with one or more tender tools for the supply of energy from renewable sources through PPA schemes. The use of these tendering tools will be added to the purchasing procedures for the supply of electricity from renewable sources defined by Consip, as part of the national action plan on green purchases by the public administration, in order to enable the latter to purchase mainly energy from renewable sources;
  • in view of promoting the energy supply by means of PPAs, the Italian Regulatory Authority for Energy, Networks and Environment (“ARERA”), will update the guidelines on purchasing groups provided under Law no. 124/2017, including the chance to supply energy through independent aggregators and providing that interested consumers should receive adequate information assistance to join the GME digital board. This, in order to ensure the aggregation of several final customers and the active participation of domestic and non-domestic consumers, in the purchase of electricity produced by renewable source plants through PPAs.

Suitable areas for the installation of RES electrical production plants from renewable sources

Art. 2, letter (ggg) of the Decree defines “suitable area” as the “area with a high potential to host the installation of electrical production plants from renewable sources, also in case of certain technical-localization conditions“.

The “suitable areas” will be identified in line with the overall power capacity provided under the PNIEC and needed for the achievement of RES targets and on the basis of principles and criteria to be laid down through MITE decrees within 180 days from the date of entry into force of the Decree.

After a 180-day period starting from the enactment of the aforementioned MITE Decree, the Regions shall detect the suitable areas; should they fail to do so in that timeframe, the State may replace the Regions by exercise a substitutive power.

Pending the identification of suitable areas by the Regions:

  • no moratorium (moratorie) or suspension of the terms of the authorization procedures can be imposed;
  • shall be considered as suitable areas:
  1. the sites where plants of the same source are already installed and where non-substantial modification interventions are carried out;
  2. the areas subjected to reclamation activities;
  3. quarries and mines that have been closed, not recovered or abandoned or in conditions of environmental degradation.

In the areas that will be declared suitable, the construction and operation of plants for the production of energy from renewable sources will be regulated as follows:

  • during the authorization processes the competent landscape authority can only express non-binding opinion and, even in case the landscape authority does not express its opinion, the authorization process could move on;
  • the deadline for the conclusion of the authorization process for plants in suitable areas are reduced by 1/3.

Self-consumption, energy communities and forms of incentives

1. Self-consumption

Collective self-consumers are households or other subjects located within the same building or condominium which collectively benefit from the electricity produced by a RES plant.

The final customer can assume the status of self-consumer of renewable energy and in that case:

  1. he can produce and storage renewable electricity for his own consumption (by setting up a RES production plant or with one or more RES production plants located at buildings or at sites other than those at which the self-consumer operates, but, in any case, at his disposal). In these cases, it may access the incentive mechanisms provided for the sharing of energy referred to in paragraph 4.3 of this alert.
  2. he can sell the self-produced renewable electricity and can offer ancillary services and flexibility, possibly through an aggregator.

Several end-use customers may also join together to become collective self-consumers. In that case:

  1. the self-consumers must be in the same building or condominium;
  2. each self-consumer can produce and store renewable electricity;
  3. the distribution network is used to share the energy produced by the renewable energy plants, also using storage facilities;
  4. self-produced energy is used primarily for the needs of self-consumers and surplus energy can be accumulated and sold, including through PPA;
  5. participation in the group of self-consumers of renewable energy acting collectively may not constitute the main commercial and industrial activity of private enterprises.
2. Energy Communities

Energy communities are an aggregation of consumers composing a community that produces, self-consumes and, potentially, sells renewable energy through renewable energy facilities including those with capacities greater than 1 MW.

Final customers may organize themselves into renewable energy communities, subject to the following requirements:

  1. the target must be identifiable in environmental, economic, or social benefits at the community level;
  2. the community control shall be demanded to one or more of the following categories: natural persons, SMEs (PMI), territorial entities and local authorities, including municipal administrations, research and training entities, religious entities, third sector and environmental protection entities as well as local administrations;
  3. as to companies, participation in renewable energy communities cannot constitute their main commercial and industrial purpose.

Furthermore, renewable energy communities shall operate in accordance with the following conditions:

  1. self-produced energy shall be used primarily for instantaneous on-site self-consumption or for sharing with community members while any surplus energy may be stored and sold also through PPAs;
  2. the members of the community use the distribution network to share the energy produced. The energy can be shared, but for access to incentives is necessary the existence of the requirement of connection to the same primary cabin;
  3. the community may promote integrated home automation interventions, energy efficiency interventions, as well as offer electric vehicle charging services to its members and assume the role of a retail company and may offer ancillary and flexibility services.
3. Regulation of incentives for energy production and sharing

For self-consumers and energy communities there are incentives for the production of electricity from renewable sources already mentioned in paragraph 1, as well as the possibility of accessing a direct incentive as an alternative to those mentioned above, which rewards the energy consumed instantly through a specific tariff adjusted according to the capacity of the plants (only for plants with power below 1 MW).

In addition to incentives for production, the Decree also includes incentives for energy sharing, providing that:

  • renewable source plants with a capacity not exceeding 1 MW that come into operation after the date of entry into force of the Decree may access this incentive;
  • for self-consumers of renewable energy acting collectively and renewable energy communities, the incentive is provided only with reference to the portion of energy shared by plants and consumption users connected under the same primary cabin;
  • the incentive is provided in the form of an incentive tariff attributed only to the portion of energy produced by the plant and shared within the configuration;
  • the application for access to the incentives is submitted on the date of entry into operation and there is no requirement to be registered in calls or registers.

In addition, by ministerial decree of MITE, to be adopted within 90 days of the entry into force of the Decree, in implementation of the measures of the National Recovery and Resilience Plan (“PNRR“), will be defined criteria and procedures for the granting of interest-free financing up to 100% of eligible costs, for the development of the energy community in small municipalities through the construction of RES production plants, also combined with energy storage systems. With the same decree will be defined the conditions of cumulation between this financing and the tariff incentives mentioned above.

Incentives for biogas and biomethane production and authorization simplifications

With regard to biomethane produced or injected into the natural gas grid, the Decree provides for incentives through the provision of a specific tariff, ensuring the producer the same level of incentive for use in the transport sector and in other uses (including those for the production of electricity and heat in industrial cogeneration plants, also in connection with district heating (teleriscaldamento) grids and heat grids and excluding non cogenerative thermoelectric uses).

According to the draft implementing decree of MITE, already being elaborated, regarding incentives for biogas and biomethane production, it can be inferred that:

  1. will have access to the new incentives the newly built plants (or subject to conversion) that will complete the implementation of the works admitted to financing by 30 June 2026.
  2. For biomethane production plants that will enter into operation after the date of entry into force of the MITE’s implementing decree and by 31 December 2022, the option of accessing, as an alternative, the mechanism established by art. 6 of the Ministerial Decree of 2 March 2018 (“Incentives for advanced biomethane fed into the natural gas network and for use in transport“), under the conditions and in accordance with the procedures established therein, is reserved.

In addition, with the decree of the MITE referred to in letter b), which must be adopted within 90 days from the date of entry into force of the Decree, in implementation of the measures of the PNRR, criteria and procedures will be defined for the granting, through competitive procedures, of a non-refundable contribution on eligible expenses related to the investment for the efficiency improvement, the partial or total conversion of existing biogas plants, for new biomethane production plants, for the valorization and proper environmental management of digestate and zootechnical wastewater, for the purchase of agricultural tractors powered exclusively by biomethane.

The same decree will define the conditions of cumulation between the tariff incentives provided by the Decree and the benefits provided by the PNRR.

With reference to the authorization procedure, the Decree makes some significant modifications to art. 8-bis of Legislative Decree no. 28/2011, among which:

  • it is specified that the applications for authorization will include the connection works and infrastructures necessary for the construction and operation of the plants, including the feeding of biomethane into the grid;
  • it will be possible to proceed with a simple communication to the competent authority in case of non-substantial modifications for interventions of partial or complete reconversion to the production of biomethane of electricity production plants fueled by biogas, landfill gas and residual gas from purification processes. It should be noted that changes are considered non-substantial if, compared to the existing situation, they do not lead to an increase in atmospheric emissions and do not increase the surface area occupied by the site by more than 25%.

Hydrogen

The Decree provides for the possibility of forms of incentives related to hydrogen, establishing that by decree of the MITE, to be adopted within 90 days from the date of entry into force of the Decree, in implementation of the measures of the PNRR, will be defined ways to encourage the construction of infrastructure for the production and use of hydrogen, procedures for the recognition of hydrogen produced from renewable sources and conditions of cumulation.

In addition, the Decree introduces some important simplifications regarding the construction and operation of electrolyzes (elettrolizzatori), including:

  1. electrolyzes ≤ 10 MW in any area: free construction activity (subject to the acquisition of the acts of consent, opinions, authorizations or clearance and clearance for connection by the operator of the electricity grid or the operator of the natural gas grid);
  2. electrolyzes in industrial areas or areas where there are industrial plants also for the production of energy from renewable sources: simplified authorization procedure (the realization must not involve occupation in extension of the areas, nor increase the overall dimensions in height compared to the existing situation and must not require a variation to the urban planning tools);
  3. stand-alone electrolyzes other than cases sub. a) and b): single authorization (Autorizzazione Unica);
  4. electrolyzes to be built in connection with plants for the production of electricity from renewable sources: authorized within the single authorization issued (i) by MITE if functional to plants with a capacity greater than 300 MW thermal or offshore electricity production plants; (ii) by the Region or Autonomous Province with territorial jurisdiction in cases other than those referred to in point (i).

Guarantees of origin

The guarantee of origin is intended to demonstrate to e final customers the quantity of energy from renewable sources in the energy mix of an energy supplier as well as the quantity supplied to consumers under contracts for energy produced from renewable sources.

Each guarantee of origin corresponds to a standard quantity of 1 MW/h produced from renewable sources and is valid for 12 months after the production of the relevant energy unit and, if not annulled, expires after 18 months at the latest.

In relation to the production of electricity from renewable sources, the guarantee of origin may be issued, at the indication of the producer, directly to the purchaser who purchases the energy under PPA agreements. In the event that the purchaser is a final consumer of electricity, the guarantee of origin is immediately annulled upon issue.

Updates will be provided following the enactment of the afore described MITE decrees.

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