Italy: Italian Feed-In-Tariffs For Photovoltaic And Other Renewable Sources Plants: New Provisions

Last Updated: 2 September 2014
Article by Elisabetta Ventrella

The new Italian feed-in-tariffs scheme has been recently further amended.

01.09.2014 - Law no. 116/2014 of 11th August 2014 has partially modified the Decree no. 91/2014 of 24th June 2014 on "Urgent provisions for agricultural sector, environment, companies development and, inter alia, reduction of energy bills" and enacts new provisions on feed-in-tariffs for photovoltaic and other renewables sources plants.

In particular, the Law amended Article 26 of Decree on remodulation of feed-in-tariffs for photovoltaic plants with a capacity above 200 kW (for more details on this, please click here to see our previous article) and introduced a new option for the payment of feed-in-tariffs for all the renewable power sources, as better illustrated in Section II) below.

The Law provides for the following scheme.

I) New provisions to photovoltaic plants with a capacity above 200 kW

For photovoltaic plants having a capacity higher than 200 kW, the Law now provides that, starting from 1st January 2015, the feed-in-tariffs will be paid on the basis of one of the following three options, to be selected and communicated by the owner of the plant to GSE within 30th November 2014:

a) The so-called "spalma incentivi" procedure. In substance, the current feed-in-tariffs will be reduced (on the basis of the table below) and distributed over a period of 24 years starting from the grid connection date. The feed-in-tariffs period will pass therefore from 20 years to 24 years.

As to the reduction, the Law confirms the different percentages of reduction (already provided by the Decree, click here to see our previous article) depending on the actual remaining period of life of the plant. The percentages are as follows:

Remaining period (year) - % of feed-in-tariffs reduction

12 - 25%

13 - 24%

14 - 22%

15 - 21%

16 - 20%

17 - 19%

18 - 18%

More than 19 - 17%

In the light of the above, the Regions and the other competent authorities shall automatically adjust the term of the validity of authorisations of the plant.

b) The fixed reduction of feed-in-tariffs. The owner of the plant can opt for a reduction of the current feed-in-tariffs by a fixed percentage. In such a case, the GSE will grant the reduced feed-in-tariffs for the current remaining life period of the plant (still calculated on the 20 year period). As to the percentage of reduction, the Law now provides for the following different percentages (instead of the 8% reduction provided by the Decree, click here to see our previous article), depending on the nominal capacity of the plant:

  • 6% for plants with nominal capacity with nominal capacity above 200 kW and up to 500kW;
  • 7% for plants with nominal capacity with nominal capacity above 500 kW and up to 900kW; and
  • 8% for plants with nominal capacity above 900 kW.

c) The variable remodulation of feed-in-tariffs. Such third option (not provided previously by the Decree) provides that the current feed-in-tariffs granted will be reduced for an initial period in a certain percentage and increased, of same amount, at a later stage. Like option under letter b) above, the feed-in-tariffs will be granted for the remaining life period of the plant (still calculated on the 20 year period). The aim of such option is to have annual savings of euro 600 million in the period 2015-2019.

In respect of the actual percentage of decrease/increase and the relevant periods, it will be necessary to await the issue of a specific decree to be issued by the Ministry of Economic Development by 1st October 2014. By choosing such option, the overall amount of feed-in-tariffs for a plant should remain unchanged as, in theory, the percentage of decrease and subsequent increase of feed-in-tariffs should be the same. However, also such option has been criticized by the energy industry since in the second period (ie the latest years of the life period) the performance of a plant is lower than that of the initial period.

As mentioned above, the owner shall communicate to GSE the selected option by 30th November 2014. If no communication is sent by the owner to the GSE within the above deadline, the option under letter b) above shall apply automatically.

Finally, the Law still grants the possibility to the owners of the plant to apply for new banking financing for a maximum amount equal to the difference between the current feed-in-tariffs and the reduced feed-in-tariffs. Such financing can benefit, cumulatively or alternatively (on the basis of specific agreements with the credit system), of dedicated funding or guarantees by the Cassa Depositi e Prestiti SpA. The exposure of Cassa Depositi e Prestiti SpA will be guaranteed by the State, in accordance with the criteria and modalities to be provided by the Economic and Finance Ministry. It is not clear however if such possibility shall be allowed only in case of the spalma-incentivi option (see a) above) or in all cases, irrespective of the option selected (as it formally seems now from the reading of the relevant article of the Law). The Law does not specify also the modalities for the calculation of the amount to be financed and the interest rate that the owners shall pay for the financing.

II) New option for all renewable power sources plants benefiting from long-term feed-in-tariffs

As anticipated above, the Law now provides for an additional option to be applied for any renewable power sources, benefiting from long-term feed-in-tariffs. It is in fact provided that the owners can sell up to 80% of their expected future feed-in-tariffs to a third investor, to be selected among European leading financial operators, through the participation at competitive tenders which will be won by those which will offer the highest discount rate on the expected income.

The Energy Authority has 90 days from the entry into force of the Law (ie. from 21st August 2014) to implement the above provision, establishing, inter alia:

  1. the procedure and regulation to be followed for the selection of the third investor and the minimum amount, not lower than euro 30 billion, that the third investor shall make available for the purchase of feed-in-tariffs;
  2. the conditions, procedure and modalities for the payment of feed-in-tariffs to the third investor;
  3. the procedure and criteria to be followed to determine the quota of annual feed-in-tariffs to be sold to the third investor, depending on the type and location of plants;
  4. any other condition, procedure and criteria useful for the sale of the feed-in-tariffs which should be made through competitive tenders to be awarded on the basis of the discount rate offered, an indication the minimum discount rate to be offered and the guidelines for participating to such tenders.

From a first reading of the above provision, it seems that:

  1. the owner may immediately receive the payment from the third investor, within the percentage allowed, of the future feed-in-tariffs;
  2. starting from the date of transfer, the feed-in-tariffs reduction options indicated in Section I) above shall not be applied to the part of feed-in-tariffs sold to the third investor. In other terms, the reduction options will continue to be applied only to the remaining part of feed-in-tariffs not sold.

Please consider that the entry into force of such new option is conditioned to the positive assessment by the Ministry of Economics and Finance of the availability of the necessary State funds considering the undertakings assumed by the State at European level.

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