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INCENTIVES MECHANISM FOR RENEWABLE ENERGY POWER PLANTS: “RES 1” DRAFT DECREE GOING FOR APPROVAL

The RES1 Decree is aimed at promoting the deployment of clean energy power plants in Italy from 2019 through to 2021. The RES1 Decree is part of the European Clean Energy Package 2020-2030.

Regulatory context

On 23 January 2019, the Ministry of Economic Development, in consultation with the Ministry of Environment, notified the draft of the Inter-Ministerial Decree on the incentive regime for renewable energy power plants (“RES 1”) to the European Commission. The previous Decree (Ministerial Decree of 23 June 2016) had provided financial incentives for large energy plants (except for Photovoltaic systems) only until 2015 (annual capacity quotas eligible for incentives). The current draft of the Decreto (“RES 1”) provides financial incentives for Photovoltaics and wind power plants (any incentive is provided for the geothermal energy), until 2021.

The final draft has been reviewed by the EU Commission, which has given its green light on June 14th, 2019, given its consistency with EU Rules. The draft will, therefore, soon be approved by the Italian government.

Here below, a snapshot of the main points contained in the draft of the Decree.

Who can apply? Essential requirements

The projects and the plants that have been supported by GSE (State-owned energy supplier), even in the Environmental Impact analysis and socio-economic analysis, are not included in this incentive mechanism.

  • Only renewable energy plants with a nominal capacity exceeding 20 KW are entitled to have access to this incentive mechanism, subject to the condition that the plants are not located and built in areas classified as “agricultural”;
  • Qualifying title for the construction and operation of the plant (according to Art. 4 Legislative Decree 28/2011);
  • Title of connection to the electricity grid (for all types of plants, both photovoltaic and wind power);
  • Photovoltaic plants shall be new plants and made of new construction parts.

The procedure governing the access to incentives

According to the Decree, the procedures under the incentive regime will depend on plant capacity.

Access to the incentives will either be by registration in Registers or participation in competitive lowest unique bid Auctions.

Photovoltaic plants and wind power plants with a nominal capacity of less than 1MW shall have access to the incentives mechanism by entering in the Registers. Plants with a nominal capacity exceeding 1 MW shall have access to the incentive mechanism through the tender procedure.

GSE (State-owned energy supplier) will publish 8 public tenders, from 31 January 2019 until 31 May 2021 (Note: the first two tenders were foreseen in January and May 2019, and they have not been called for, although they were foreseen in the draft, since the Decree has not been approved yet). Submission of the application to be sent to GSE within 30 days after the tender is published.

Regime of premium

The draft of the Decree states that plants with a nominal power output up to 100 kW installed on buildings are entitled to a premium of 10 €/MWh on all energy generated.

Moreover, plants installed on buildings as a replacement of Eternit or asbestos roofing are entitled to a premium of 12 €/MWh. The premiums are both combinable.

For plants that access the incentives through registration procedures and for the realization of which are used regenerated components, the reference tariff (as established in art. 7 paragraph 1) is reduced by 20%.

Financial requirements (only for plants with a nominal capacity exceeding 1 MW –> Auction system)

Adequate financial and economic solidity demonstrated through:

Ø  Declaration of a bank attesting to its financial and economic capacity or, alternatively, the bank’s commitment to financing the intervention;

  • Capitalization, whose minimum value is established in relation to the investment envisaged for the construction of the plant, in the following measure: of 10% on the part of the investment up to €100 million; 5% from €100 to €200 million; 2% over €200 million;
  • The plant managers shall leave a temporary deposit (50% of the final deposit) as a guarantee of the real quality of the project, and a final deposit within 90 days from the communication of the positive result of the procedure, for a total amount of 10% of the envisaged cost of the investment for the construction of the plant.

For more details you can contact the author.

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