Purpose of the Memo
This Memorandum is aimed to provide a brief description of the main changes introduced by Law Decree no. 4 of January 27, 2022 (better known as the Decree “Sostegni ter”)1 with reference to the energy produced from renewable sources.
Decree “Sostegni ter” (hereinafter, the “Decree“) came into force on January 27, 2022, providing “urgent measures regarding support for companies and economic operators, labour, health and territorial services, related to the emergency from COVID-19, as well as for the containment of the effects of price increases in the electricity sector“.
The Compensation Mechanism (art. 16 of the Decree)
In relation to the matters concerning the energy sector, these are regulated by Title III of the Decree. More specifically, article 16 of the Decree regulates interesting innovations with regard to the energy produced from renewable sources, providing that, as from February 1, 2022 and until December 31, 2022, a two-way compensation mechanism will be applied. The purpose of the compensation mechanism is to try to recover any extra profits that may be accrued by energy producers during the year 2022 and to compensate any producers with plants that operate with reduced profitability.
This compensation mechanism will concern the energy fed into the grid by the following plants2:
- photovoltaic plants with a nominal capacity greater than 20 kW that benefit from fixed premiums deriving from “Conto Energia”3 mechanism, not dependent on market prices;
- plants with a nominal capacity greater than 20 kW powered by (i) solar; (ii) hydroelectric; (iii) geothermal; and (iv) wind power that do not have access to incentive mechanisms4.
The role of the Energy Services Manager – Gestore dei Servizi Energetici (hereinafter, the “GSE”)
The Compensation Calculation
The Decree provides that the compensation mechanism will be managed by the GSE which, in order to determine the amount to be compensated, will have to calculate the difference between the following values5:
- the average reference price of the energy produced until 2020, equal to the average of the hourly zonal prices recorded from the date of entry into operation of the plant until December 31, 2020, revalued on the basis of the annual rate of change in consumer prices for families of workers and employees recorded by ISTAT or, if the plant has entered into operation on a date prior to January 1, 2010, the average of the hourly zonal prices recorded from January 1, 2010 to December 31, 2020 revalued according to the same methodology;
- the current price of energy, identified as:
- the hourly zonal market price of electricity energy; or
- for supply agreements executed before the date of entry into force of the Decree (January 27, 2022) and which do not comply with the conditions set out below, the average price indicated in such agreements.
With reference to the provisions of letter b), point ii, it should be noted that the Decree does not apply to those plants for which supply agreements have been signed before the entry into force of the Decree (January 27, 2022), provided that such supply agreements6:
- are not linked to the trend of the prices of the spot energy markets (and are therefore executed at a fixed price); and, that, in any case
- are not executed at an average price 10% higher than the value of the fair remuneration of the price of energy7 (this exclusion shall be limited to the period of duration of such supply agreements).
Therefore, it follows that the Decree shall apply instead to those plants for which has been executed a supply agreement at a variable price linked to the market prices of energy, as well as to those agreements executed at a fixed price that is more than 10% higher than the value of the fair remuneration of the price of energy.
The GSE, once the compensatory calculation is completed, shall8:
- if the difference in the calculation is positive, disburse the relevant amount to the energy producer;
- if the difference in the calculation is negative, balance or provide for requesting the corresponding amount from the producer.
This is why the compensation mechanism is defined as “two-way“.
Implementation of the Decree
It should be noted that within 30 days from the entry into force of the Decree, ARERA should regulate the methods by which implement the provisions of article 16 of the Decree9. However, it will be possible to have a definitive regulatory framework only once the Decree will be converted into law within 60 days from its entry into force.
Milan, 2 February 2022.
Avv. Pinella Altiero
Avv. Giuseppe Andrea D’Alessio
2 Article 16, paragraph 1 of the Decree.
3 This provision therefore refers to photovoltaic plants which benefit from the incentive mechanisms set out in the ministerial decrees governing the so-called “Conto Energia” (I Conto Energia; II Conto Energia; III Conto Energia; IV Conto Energia; V Conto Energia).
4 With regards of what is provided in the Decree, therefore, the following plants seem to be excluded from the scope of application of the compensation mechanism:
- plants that benefit from incentives, regardless of the incentive mechanism used;
- plants powered by (i) solar; (ii) hydroelectric; (iii) geothermal; (iv) wind power, which have a nominal power less than 20 kW, regardless of profits or incentives.
5 Article 16, paragraph 2 of the Decree.
6 Article 16, paragraph 5 of the Decree.
7 The Decree refers to the provisions of Article 16, paragraph 2, letter a) of the Decree.
8 Article 16, paragraph 3 of the Decree.
9 Article 16, paragraph 4 of the Decree. In addition, in the same paragraph, it is provided that ARERA will be required to outline the methods by which the proceeds from the compensatory calculation referred to in paragraphs 1, 2 and 3 of the Decree, will be paid into a special fund established at the “Cassa per i servizi energetici e ambientali“.