On July 11, 2012 a long-awaited Ministerial Decree regarding renewable energy incentives was enacted and entered into effect (the Decree). The Decree implements the criteria indicated in the so-called “Romani Decree “ (Decree no. 28/2011) and sets out a new incentive scheme for wind-farms, hydro-electrical plants, geo-thermal power plants, biomass, biogas, bio liquids, depuration gas, landfill gas plants, waste treatment plants and wave power plants, which: (i) are new, totally rebuilt, refurbished or enlarged; (ii) possess a minimum power capacity of 1kW; and (iii) will be operational by 1 January 2013. Incentives relating to solar photovoltaic plants are not covered by the Decree.
This brief note summarises the key aspects of the Decree.
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Maximum public contribution
For the first time in the history of legislation on public renewable incentives, the Decree establishes a ceiling, equal to €5.8 billion in public funds for year 2013 (the 2013 Cap) which can be used to support the development of renewable plants. This ceiling does not relate to incentives for solar photovoltaic plants, which are determined by a separate legislative decree. Moreover the Decree sets a cap on public funds which can be used for the refurbishment and rebuilding works of existing plants.
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Access to the incentives
The Decree establishes three alternative ways to gain access to the incentives:
1. Enrol in the Register of Qualified Plants
Application to enrol
The Italian energy authority, GSE, will maintain a “Register of Qualified Plants” (the Register). Enrolment in the Register is mandatory for plants with <5MW capacity (or <10MW if the plant is hydro-electric or <20MW if the plant is geo-thermal).
The application to enrol is submitted to the GSE by the plant’s owner and must contain the plant’s authorisation, a valid grid interconnection proposal and a self-declaration regarding the fact that plant has the necessary requisites to be enrolled in the Register.
GSE will set a time period during which all applications must be submitted; following that period it will publish a list of the plants enrolled in the Register.
The plants will be listed in the Register according to the criteria provided in Art. 10 of the Decree, which gives priority, inter alia, to:
- plants which have been constructed by agricultural companies
- plants using biological products
- plants which have been enrolled in the previous register/s or which have been already been granted the authorisation or that have entered into operation, as well as smaller plants.
Deadline for entering into operation
Art 11 of the Decree provides that once enrolment in the Register is confirmed, the plant must enter into operation within a period of between 16 and 36 months, depending on the type of plant. Failure to comply with this obligation will result in the incentive being reduced by 0,5 percent for each month of delay, until a maximum of 12 months, at which point the plant and its owner will lose its right to the incentive. Moreover, if the owner of the plant re-applies for the incentive, it will have the right only to a reduced incentive (i.e., 15 percent of its current value).
Deadline for the enrolment procedure
As regards the 2013 cap, GSE will publish technical guidance on the functioning of the Register and the method for enrolment; 15 days later it will publish a notice regarding the start of the first enrolment procedure. For subsequent years, GSE will publish the relevant notice within the 31st of March of each year. Each procedure shall include an overall cap which will be applicable to the relevant year.
2. Participate in a Descending Auction
The option to participate in a descending auction applies to renewable plants that exceed the threshold capacities indicated in point 1 above. In the case of enlargement of an existing plant, the capacity of the plant is determined by the difference between the capacity prior to and post enlargement.
Following is a brief description of the descending auction procedure:
The GSE will publish an auction notice 30 days before the start of a 60-day period during which offers may be submitted. The same deadlines for the enrolment auction notice apply.
Application for participation
The application for participation in the auction must be submitted to the GSE together with certain documentation, as specified in Annex 3 of the Decree, together with a self-declaration of the applicant stating that the owner of the plant meets the requisites for participation.
The main requirements for participation in the auction are listed below; other requirements may be imposed by the GSE:
- The applicant must have the plant’s authorisation certificate (or, in certain cases, concession or environmental impact assessment decree).
- The applicant must have a valid grid interconnection proposal.
- The applicant must be able to show financial and economic soundness of the owner of the plant, which can be demonstrated by providing a declaration from a bank, or giving evidence of a capacity of a 10 percent minimum equity of the costs of the project.
- The applicant must provide a temporary financial guarantee (and definitive guarantee in case of awarding of the auction).
- The applicant must demonstrate that it is in compliance with the requirements indicated in public contract codes (i.e., Article 38 Italian Legislative Decree 163/2006).
The ranking list is based on the best reduction of the reference value offered. The reference value must be based on the values indicated by the Decree for each source of energy (i.e. wind, geothermal power, biomass etc); offers containing a reduction of less than 2 percent of the auction base are excluded from the calculation.
If there are two or more equal offers, other priority criteria, contained in Art. 15 of the Decree, will apply. For example, plants already operating and plants using certain technologies will rank higher than other plants.
The GSE will publish the rankings within 60 days from closure of the relevant auction procedure.
Entering into operation
Plants which have been awarded incentives by the descending auction procedure must be operative within certain deadlines indicated by the Decree, which run from 28 to 40 months, depending on the type of plant. Delays will result in a reduction of the incentive by 0,5 percent per month, up to a maximum of 24 months. Once this deadline is exceeded, the plant will lose its right to the incentive (and the definitive guarantee is withdrawn by the GSE).
For those plants subject to refurbishment, rebuilding and/or enlargement works, a procedure similar to the auction must be issued by the GSE.
3. Direct access
This option applies to very small plants as defined in Art. 4(3) of the Decree and include, among others: wind farms with <60kW capacity, hydro-electric plants with <50kW capacity, and wind farms, hydro and biomass plants having double the above-mentioned capacities which are constructed by public entities by way of public bidding procedures.
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Plants enrolled in the Register
As regards plants enrolled in the Register, the amount of the incentive, which is stated in Annex 1 to the Decree for each kind of source, depends on the date of entry into operation of the plant. Annex 1 of the Decree establishes a value which applies to all the new plants that enter into operation in 2013; for the following years a yearly reduction of 2 percent will apply.
For those existing plants subject to refurbishment/rebuilding or enlargement works, a special value for the incentive is established on the basis of the values indicated in Annex 1 divided by a coefficient (greater than 1) which depends on (i) the kind o work and (ii) the sources of energy, as indicated by Annex 2 of the Decree.
Only plants enrolled in the Register that fall within the national cap indicated above are granted the incentive
Plants awarded by a descending auction
Descending auctions envisage offers below the reference value set by the auctioneer. The reference value is represented by the applicable incentive at the date of entry into operation of the plant, as explained above. The yearly reduction of 2 percent apply from 2016 onwards.
The minimum value of the incentive, however, cannot be lower than a 30 percent discount of the reference value.
Only plants awarded by the auction that fall within the national cap indicated above are granted the incentive.
Period that the incentive will be paid
In all cases, the incentive granted will be paid starting from the date that the relevant plant is “commercially operative”, which is the date that the owner of the plant starts to sell energy produced by the plant; this may be different than the date that the plant is connected to the grid.
The period that the owner will be entitled to receive the incentive depends on the source of energy used at the plant. For example: for off-shore wind farms it is 25 years and for hydro power plants it is 25-30 years, based on the capacity of the plant. For tidal waves plants having a maximum capacity of 5MW, the period is 15 years and for geo-thermal power plants with a maximum capacity of 1MW, it is 25 years.
The period for receiving the incentives is calculated net of events of suspension of operation for technical or procedural reasons, such as the issuance of the operative authorisations, earthquakes or other natural disaster situations.
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Temporary incentive regime during the interim period
Art. 199 of the Decree sets out the rules governing the incentive scheme during the transitional period between the old green certificate regime (applicable until 2015) and the new regime.
Plants which received authorisation by or before 11 July 2012 and which will enter into operation from that date up until 30 April 2013 (extended to 30 May 2013 in the case of waste treatment plants), will have the right to an incentive after 2015 calculated according to this equation:
Incentive = k x (180- Re) x 0,78
- “K” is equal to 1 for those plants which have entered into operation within 31 December 2007, or, for those which have entered into operation after this date, K is equal to the coefficient (i.e., 180 - National Energy Price) established by Art. 2(148) of the 2007 Budget Law 2007 (l. 244/2007); and
- “Re” is the electricity sale price, as established each year by the AEEG (for biomass and biogas plants, the price is the 2012 sale price and for bio liquids plants the price is the 2009 sale price).
Moreover, for the years 2012 - 2015, GSE is obligated to issue the relevant green certificates to the operators every three months and withdraw them at the price established by the Romani Decree. The GSE will withdraw the green certificates two times per year, which is different to the past regime which required GSE to withdraw them once a year, by the end of June.
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Special rules for biomass, biogas, bio liquids and waste treatment plants
For biomass, biogas, bio liquids and waste treatment plants, the Decree establishes special rules concerning compliance with the “sustainable criteria” in order to control of the quality and quantity of the raw materials used. As regards waste treatment plants, only certain categories of waste are admitted as renewable sources.
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In addition to the public incentives, the Decree introduces a new system of premium payments for certain categories of plants, including biomass, bio liquid and bio gas plants. For example, premiums are available to:
- biomass plants having between 1MW and 5MW capacity if the owner can demonstrate the plant reduces greenhouse gases emissions
- biomass plants which are fuelled by certain predefined types of biomass, as listed in Table 1-B of the Decree
- biomass plants which comply with certain strict air emission standards, defined in the Decree
- biomass, bio liquids and biogas plants which are part of high capacity cogeneration technology plants that are connected to a heating district network
- bio gas cogeneration plants which permit the recovery of nitrogen for agricultural purposes.
Moreover, Art. 28 of the Decree indicates special rules for the thermo-dynamic solar plants which enter into operation from 2013, introducing a more favourable incentive regime and some additional technical provisions to supplement the existing legislative regime.
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Agreement with GSE
For all plants receiving incentives under the new scheme provided by the Decree, the owner of the plant must send certain documentation to the GSE within 30 days from the date of entry of the plant into operation. The documents, which are listed in Annex 3 to the Decree, include technical data relating to the plant and testing certificates.
Then, within the following 90 days, the GSE will execute an agreement with the relevant plant owner and pay the incentive monthly or as instalments each two or more months if the values do not exceed certain thresholds fixed by the GSE in its guidelines.
The Decree establishes that certain operating costs of the GSE must be reimbursed to the latter by the recipients of the incentives.
The standard agreement must be sent by the GSE to the National Authority for Energy and Gas for its review within 3 months from the entry into force of the Decree.
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