European Commission Greenlights Italian Renewable Energy Scheme Worth 4590 MW
The Italian government has notified the European Commission of its plan to introduce a scheme aimed at boosting the production of electricity from renewable sources.
June 05, 2024. By Abha Rustagi
The Italian government has notified the European Commission of its plan to introduce a scheme aimed at boosting the production of electricity from renewable sources. Set to run until December 31, 2028, the scheme will be financed through a levy on consumers' electricity bills.
It will support the construction of new plants using innovative and emerging technologies, such as geothermal energy, offshore wind power, thermodynamic solar, floating solar, tidal, wave, and other marine energies, as well as biogas and biomass. These new plants are expected to add a total of 4590 MW to Italy's renewable energy capacity, with deadlines for operation ranging from 31 to 60 months depending on the technology used.
The scheme will provide aid through a two-way contract for difference for each kWh of electricity produced and fed into the grid. Projects will be selected through a transparent and non-discriminatory bidding process, where applicants will propose the incentive tariff needed to implement their projects. The reference price for electricity will be based on the hourly zonal price at the time the energy is fed into the grid in the respective market area.
When the reference price falls below the strike price, beneficiaries will receive payments equal to the difference. Conversely, if the reference price exceeds the strike price, beneficiaries will pay the difference to the Italian authorities. This mechanism ensures long-term price stability for renewable energy producers and prevents overcompensation.
The European Commission evaluated the scheme under EU State aid rules, specifically Article 107 (3)(c) of the Treaty on the Functioning of the European Union and the 2022 Guidelines on State aid for climate, environmental protection, and energy (CEEAG). The Commission's assessment concluded that:
Economic Activity: The scheme promotes the production of renewable electricity from innovative or less mature technologies, biogas, and biomass, supporting EU strategic objectives like the European Green Deal and the REPowerEU Plan.
Necessity and Appropriateness: The measure is essential for Italy to meet European and national climate targets. It is proportionate, with aid limited to the minimum necessary to stimulate investments. Safeguards include a competitive bidding process and a two-way contract for difference mechanism.
Incentive Effect: The aid encourages investments in renewable plants that would not occur without public support.
Positive Impact: The scheme's benefits outweigh any potential distortion of competition and trade within the EU. On these grounds, the Commission approved the Italian scheme under EU State aid rules.
"This scheme enables Italy to support the production of renewable electricity from various technologies, including innovative ones. The measure helps Italy meet its emission reduction and electricity production targets. It will also contribute to achieving the European Green Deal objectives while limiting possible distortions of competition," said Margrethe Vestager, Executive Vice-President in charge of competition policy.
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