Italy Adopts a New Energy Decree to Boost Energy Security and Renewable Energy

On December 9, 2023 the Italian Government approved Law Decree No. 181/2023 (the “Energy Decree”), which was converted with amendments into Law No. 11 of February 2, 2024.

The purpose of the Energy Decree is to improve Italy’s energy security, promote the use of renewable energy sources, and support energy-intensive companies.

a) Measures to support energy-intensive companies (Article 1)

The Energy Decree includes measures aimed at accelerating investments in the self-production of renewable energy by companies with high electricity consumption (so-called “energy-intensive companies”).[1]

The Italian Ministry of Environment and Energy Security (“MASE”) shall define a mechanism for the development of new renewable energy capacity by energy-intensive companies[2] through: (i) new photovoltaic plants, wind farms and hydroelectric plants with a minimum capacity of 200 kW each; or (ii) photovoltaic plants, wind farms and hydroelectric plants that have been repowered or renovated[3] so as to increase the capacity of each by at least 200 kW.[4]

Until the new plants become operational,[5] and for a maximum period of 36 months, energy-intensive companies may request Gestore dei Servizi Energetici (“GSE”) to supply renewable electricity, with associated guarantees of origin, on the basis of contracts for difference.[6] The electricity supplied will have to be paid back by the companies over a period of 20 years.

b) Measures to strengthen the security of natural gas supply and its flexibility (Article 2)

The Energy Decree provides that GSE shall launch new procedures for the long-term supply of nationally produced natural gas at reasonable prices.

Holders of (i) existing cultivation concessions whose natural gas production facilities are wholly or partly located in some “eligible areas” (aree idonee) specified in ministerial decrees,[7] (ii) unproductive concessions or concessions whose activities have been temporarily suspended, and (iii) existing concessions or applicants for new concessions for the extraction of natural gas in the Upper Adriatic Sea and in marine protected areas, are eligible to participate in these procedures.

Applicants must submit a request to participate in the procedure to GSE, indicating, inter alia, the expected natural gas production and the necessary investments, as well as increases or restorations in natural gas production. They also have to commit to sell quantities of gas - at fixed prices reflecting the costs incurred and the return on invested capital - to GSE, which in turn undertakes to allocate them on the market, giving priority to companies with high gas consumption. Following the allocation procedures, the concessionaires will enter into long-term contracts with GSE for the purchase of gas rights for a period of five years at a price that reflects the cost of production.

c) Measures for the promotion of renewable energy

I. Measures to simplify authorization procedures for renewable plants (Article 9)

The Energy Decree includes several new measures to simplify the authorization procedures for renewable energy plants. In particular:

• the exemption from the Environmental Impact Assessment (“EIA”) and EIA screening procedures[8] is extended until 30 June 2025 for (i) new photovoltaic plants of up to 30 MW, (ii) renovated or repowered photovoltaic plants and repowered wind farms of up to 50 MW and (iii) offshore wind farms of up to 50 MW.[9]
• the thresholds for requiring photovoltaic plants to undergo EIA and EIA screening are increased (from 20 to 25 MW for state EIA, and from 10 to 12 MW for regional EIA screening) for certain projects;[10]
• the threshold for applying the simplified authorization procedure (procedura abilitativa semplificata) to the construction of photovoltaic plants is increased from 10 to 12 MW.

II. Promotion of renewable energy plants in agricultural areas (Article 4-ter)

One of the most significant changes made to the Energy Decree when it was passed into law is the possibility for photovoltaic plants with ground-mounted modules in agricultural areas to benefit from a wider range of incentives (e.g. those provided for by Legislative Decree 199/2021).

Priority access to incentives will be granted to those who carry out renovations of existing photovoltaic plants in agricultural areas, involving the construction of new plants or new plant sections, in the same area and with the same area of agricultural land originally occupied, with an increase in the total power.

III. Offshore wind farms (Article 8(1)-(2))

The Energy Decree provides that the MASE shall identify maritime areas suitable for the construction of offshore floating wind farms. These areas will be located in at least two ports in southern Italy, which will be identified as a national strategic hub for offshore wind energy.

IV. Measures regarding sustainable bioliquids (Article 5)

The Energy Decree introduces measures aimed at ensuring the full operation of biogas plants, most of which are nearing the end of the incentive period. In particular, the Energy Decree:

• establishes a mechanism for contracting production capacity fed by existing plants powered by sustainable bioliquids, with the aim of maintaining their production capacity under efficient operating conditions in the coming years;[11]
• provides that, until the date of entry into force of the above mechanism (and in any case no later than December 31, 2025), the remuneration of electricity produced by plants using sustainable bioliquids will be based on guaranteed minimum prices set by the Regulatory Authority for Energy, Networks and the Environment (ARERA);[12] and
• admits plants producing biogas through the anaerobic treatment of organic waste to participate in the competitive auctions under Ministerial Decree of 15 September 2022.

d) Measures concerning carbon capture and storage (Article 7)

The Energy Decree amends Legislative Decree No. 162 of September 14, 2011 (the “CCS Decree”)[13] in order to fill in some gaps in the regulatory framework for carbon capture and storage (“CCS”), in particular with regard to experimental storage programs and the issuance of permits and licenses for CO₂ storage. The Energy Decree:

• broadens the powers of the MASE with respect to the assessment of areas suitable for CO₂ storage, allowing the Ministry to issue authorizations for exploration, experimental programs and geological storage of CO₂ in off-shore depleted hydrocarbon reservoirs;[14]
• sets out fixed terms for the duration of the authorization to carry out experimental programs for CO₂ (a maximum period of 3 years, subject to extension)[15]; and
• provides that not only the holder of an exploration permit (as already provided in the older CCS Decree) but now also the holder of an experimental storage permit shall have priority in obtaining a CO₂ storage permit.

[1]           The list of energy-intensive companies is drawn up by the Cassa per i servizi energetici e ambientali (CSEA) and is available at this link.

[2]           The development of new energy capacity may also be achieved through aggregation of energy-intensive companies, or by third parties with whom those companies sign power purchase agreements (PPAs).

[3]           Renovated plants are plants that undergo replacement, reconstruction and improvement works of varying scope and nature on some of the main machines and works constituting the plant. Repowered plants are plants that undergo works aimed at increasing the power of the plant (See Article 2(c) and (d) and Annex II of Ministerial Decree of June 23, 2016).

[4]           Implementation rules will be laid down by the Ministry of Environment and Energy Security within 60 days after the entry into force of the Energy Decree (i.e. by February 8, 2024).

[5]           I.e, within 40 months of the signing of the contract with GSE.

[6]           A contract for difference entitles the beneficiary to a payment equal to the difference between a fixed strike price and a reference price, such as a market price, per unit of production. Contracts for difference may also provide for the beneficiary to be reimbursed for periods during which the reference price exceeds the strike price. For more on the subject of contracts for differences in the electricity market, see the article “Reform of the EU Electricity Market: Member States Reach an Agreement on Contracts for Difference” on the Cleary Gottlieb EU Energy Resource Centre, available at this link.

[7]           The Ministerial Decree of December 28, 2021 approves the Plan for sustainable energy transition for eligible areas (Piano per la transizione energetica sostenibile delle aree idonee - PiTESAI), available at this link.

[8]           See Article 47(1-bis) of Law Decree No. 13 of February 24, 2023.

[9]           The exemption applies only to photovoltaic plants and wind farms located in the areas referred to in Article 20 of Legislative Decree No. 199 of November 8, 2021 (“Decree 199/2021”) and included in plans or programmes that have already been positively assessed in a strategic environmental assessment.

[10]         In particular, for projects located (a) in eligible areas as defined in Article 20 of Decree 199/2021; (b) in areas intended for industrial, artisanal and commercial use, in landfills that have been closed and reclaimed or in quarries that cannot be further exploited; or (c) outside certain sensitive and vulnerable areas as defined by a Ministerial Decree of September 10, 2023.

[11]         The mechanism will only apply to plants already in operation on December 10, 2023 (i.e., the date of entry into force of the Energy Decree).

[12]         The guaranteed minimum prices are paid to cover operating costs in order to ensure the continuity and efficiency of the plant, differentiated according to the capacity of the plant, and updated annually, taking into account the cost values of the raw materials and the need to promote the progressive efficiency of the costs of the plants.

[13]         Legislative Decree No. 162 of  September 14, 2011 implements in Italy the provision of Directive 2009/31/EC of the European Parliament and of the Council of April 23, 2009 on the geological storage of carbon dioxide.

[14]         Prior to this amendment, Article 7 of the CCS Decree provided that the Ministry could authorise only the conduct of experimental programs, subject to an assessment of the compatibility of the storage activity with existing activities (e.g., mining concessions, existing mineral deposits, maritime traffic, protection of environmental assets, and fishing).

[15]         The holder of the authorization may request a maximum of three extensions of no more than two years each (i.e. a maximum of six years) before the expiry date of the authorisation, documenting the work carried out, the reasons why the experiment could not be completed within the prescribed period and the elements that lead to the expectation of a positive outcome of the experiment, as well as the additional time needed to complete the experiment.