Electricity law and regulation in Italy

1.1.1 Since the reforms of 1999, collectively known as the “Bersani Decree” 1 Legislative Decree No.79/1999. , which liberalised the production, import, export, purchase and sale of electricity, the Italian electricity market has been open to competition. The introduction of Law No. 239/2004 in 2004 separated the competencies of the state and regions of Italy regarding energy matters and aimed to balance state power and local authorities (e.g. regions, municipalities). The restructuring of administrative powers introduced by Law No. 239/2004 consisted of attributing to the state the elaboration and definition of energy policy objectives with implementation functions to be carried out by local authorities.

1.1.2 A key role for the correct functioning of the electricity sector is represented by the “Autorità per l’Energia Elettrica ed il Gas” (Italian Regulator or AEE), an independent body set up by Law No. 481/1995 to protect the interests of consumers and promote competition and efficiency in electricity services.

1.1.3 On 29 June 2011 Italy implemented, through Legislative Decree No. 93/2011 EC, the provisions of the Third Energy Package and EU Directive 2008/92. As a result of these measures, Italy has further accelerated the liberalisation process of its electricity market.

1.2.1 With regard to the transmission business, and in connection with the rolling out of the Third Energy Package, the implementation of unbundling requirements has been completed. The management of the national grid is currently carried out by an independent legal entity, Terna S.p.A. (Terna). Similarly, the generation, distribution and supply processes have been fully liberalised, enabling all end-users to freely choose their supplier.

1.2.2 The current electricity market in Italy can be represented as shown in table 1 below:

Table 1: Structure of Electricity Market

1.3.1 The major player, and formerly the holder of a total monopoly, in the electricity generation market, is Enel. Enel is controlled by the Italian government and held 28% of the market share in 2011. Edison, ENI and E.ON are also key market players, responsible for 31.6% of the generation in Italy in 2011. 2 EEG, Annual Report (Volume I), 31 March 2012 p54, figure 2.1

1.3.2 Due to a mandatory sale required by competition regulation, Enel’s share of generation significantly declined between 2003 and 2011 (see paragraph 2.1.1 below), from 49% to the current 28%; the largest reduction occurred between 2004 and 2006. In recent years, Enel’s share appears to have stabilised at around 28-30% of the market.

1.3.3 Enel’s market share reduction corresponded with an increase in the generation contribution of smaller operators. Enel’s top five competitors (Edison, Edipower, Eni, E.ON and Tirreno Power), increased their combined market share by 6% (between 2003 and 2011), totaling 38% of the whole market. Notwithstanding the increased number of participants in the electricity generation market, there remains a significant gap between Enel and its two major competitors, Edison and ENI – generating 11% and 9.7% respectively of the electricity produced in Italy in 2009.

1.3.4 The transmission of electricity is carried out by Terna, which owns 94% of the national grid.

1.3.5 Distribution activities are carried out by a few operators on the basis of government concessions. Enel Distribuzione is the main distribution network operator (DNO), with 86% of the distributed electricity volumes. Other DNOs, significant by market shares, are: A2A (3.9%), Acea Distribuzione (3.2%) and Aem Torino Distribuzione (1.4%). The remaining distributors hold units lower than 1%. 3 AEEG, Annual Report (Volume I), 31 March 2012, p68, figure 2.18
www.autorita.energia.it/allegati/relaz_ann/12/ra12_1.pdf

1.3.6 Enel is the primary supplier with about 37% of the overall sales of electricity. The other major suppliers by market share are: Edison group, with a market share of 8.2%, followed by Acea, with a share of 4.6%, and Eni, with a market share of almost 4.3%. 4 AEEG, Annual Report (Volume I), 31 March 2012, p84, figure 2.26
www.autorita.energia.it/allegati/relaz_ann/12/ra12_1.pdf

1.4.1 The Italian electricity market represents a substantial part of European demand; it is one of the largest in the European Union owing to its high share of consumption. However, the national consumption of electricity requires a high dependence on energy imports and supply to customers is affected by resultant higher prices. In response, the Italian government has strengthened its efforts to encourage investments and to achieve a higher level of security in electricity supplies by providing a clear and stable regulatory framework in the National Energy Strategy 5 National Energy Strategy for a more competitive and sustainable strategy published by the Ministry of Economic Development, March 2013
click here  plan. The current legal framework reflects the measures adopted in recent years for the purpose of reorganising the whole energy sector. This reorganisation included the liberalisation of supply, distribution and trading of electricity as well as the unbundling of transmission activities.

1.4.2 In an effort to increase the efficiency of the national electricity system, the Italian government has facilitated the merging of operational activities and ownership of the national grid into Terna, a company listed on the Italian Stock Exchange. In May 2005, Enel sold its entire participation in Terna to the 100% state-owned, Cassa Depositi e Prestiti. The sale made the Italian government the major shareholder in Terna, with a stake of 29.99%, with the remaining shareholdings broken up between numerous shareholders. Currently, Terna owns 94% of the national electricity transmission and distribution grid; the remaining 6% is owned mainly by local public utilities. Although Terna is the sole owner of the national electricity grid it only carries out transmission functions. Distribution activities are currently carried out by several market operators on the basis of a governmental concession as further described below.

1.4.3 Due to the pressures on the grid by the growing amount of energy from renewable sources, intensive work on the national electricity grid is currently underway. Terna, in summer 2012, announced investments amounting to EUR 3 b in construction works throughout the country.

1.4.4 Once completed, these grid works will produce 1,200 km of new high voltage transmission lines, in addition to 60 new generating stations. According to the latest information made public by Terna, about 70% of the total length of the new cables will be laid underground and/or under the sea.

Structure of generation sector

2.1.1 The generation (as well as trading and retailing) sector is fully liberalised. Generation activity must comply with the general public service obligations and the technical rules laid down by the Italian Regulator. To limit the dominance of generation operators in the electricity market, no electricity utility is allowed to generate or import, directly or indirectly, more than 50% of the aggregate electric energy generated by or imported by Italy as a whole. To comply with this threshold, Enel was required to sell three generation companies (Eurogen Spa, Elettrogen Spa and Interpower Spa) with an aggregate power capacity of approximately 15,000MW from 2003 onwards.

2.1.2 To encourage an increase in electricity generation to satisfy national demands, the Italian parliament set out an authorisation procedure for new power capacity under Law No. 239/2004. Pursuant to this law the Italian government adopted a simplified standard procedure for any generating stations with a power generating capacity exceeding 300MW. Under this procedure, the Ministry of Economic Development is obliged to make a decision regarding all authorisations necessary for the construction of new generating stations, including licences and environmental assessments, within a timeframe of six months. The Ministry’s decisions must be carried out in conjunction and agreement with the relevant regional or local authorities.

Energy mix

2.1.3 The majority of electricity generated in Italy is produced through the combustion of fossil fuels. This production represents a share equal to 77.4% of national generation, 70.7% of Italian electricity demand and 67.1% of national overall energy requirements.

2.1.4 According to the statistics provided by Terna, most Italian generating stations are fuelled by natural gas (65.1% of total power generated in 2009), coal (17.6%) and oil derivatives (7.1%). A smaller percentage (about 1.6%) is represented by gas derivatives such as gases derived from steel production, blast furnaces and coke. The remaining “other fuels”, accounting for about 8.6%, are derived from a mix of different “minor” fuel sources, including both fossil (for example petroleum coke, bitumen) and renewables such as biomass, waste, and others.

2.1.5 The use of traditional fuels has been decreasing over the last few decades, particularly between 1994 and 2007. With regard to gas and oil, such a decrease can mainly be attributed to high costs and price volatility, as well as the political instability of traditional export countries on which Italy depends.

2.1.6 Italy currently ranks fourth amongst the world’s largest importers of natural gas. The main sources of this are Russia and Algeria. Further, smaller suppliers are Libya, the Netherlands and Norway.

2.1.7 To reduce Italy’s dependence on energy imports, Italian energy policies are aimed at fostering the renewable energy sector. The majority of electricity generated from renewable sources in Italy comes from:

1. hydroelectric generating stations (mainly located in the Alps and Apennines), producing an amount equal to 18.5% of the national energy requirements;
2. geothermal generating stations (mainly located in Tuscany), producing 1.6% of the national energy requirements; and
3. the “new generation” renewable sources such as solar and wind (mainly located in the southern part of the country).

2.1.8 The amount of electricity generated by wind farms is small: in 2011 generation from renewables amounted to 2.88% of the electrical power required in Italy. Nevertheless, based on current wind power generation capacities, Italy has a high generation capacity from renewable technologies compared to other European countries and the rest of the world. For example, with respect to solar photovoltaic (PV) plants, Italy ranks third amongst European producers and fifth in the world.

2.1.9 In the last 10 years, the share of electricity generated from biomass, industrial waste or municipal waste has increased from virtually zero in 1992 to 4% of Italian electricity demand in 2012. 6 Legambiente Report: Common Sources 2013: mapping of renewable energy sources in the Italian territory, March 2013, p8

2.1.10 At the end of 2012, electricity produced from renewables amounted to about 32.2% 7 AEEG, Annual Report (Volume I), 31 March 2012, p56, figure 2.3  of overall generation. 8 Legambiente, p4

2.1.11 Italy’s current target 9 Ministry of Economic Development p71
www.mise.gov.it/images/stories/normativa/20130314_Strategia_Energetica_Nazionale.pdf , with respect to renewable energy generation, is that by 2020 at least 35-38% of the national consumption of electricity will come from renewable sources.

Structure of transmission sector

2.2.1 The transmission activities carried out by Terna must comply with the public utility service requirements governing the operation of the Italian national transmission grid. Terna undertakes to develop and maintain the national grid and has a general duty to connect all interested parties

1. without discrimination;
2. without jeopardising the continuity of the service;
3. in a manner that is compliant with the technical and economic requirements set by the Italian Regulator; and
4. to confirm the security, reliability, efficiency and cost-effectiveness of electricity transmission.

Cross border issues

2.2.2 Italy relies heavily on electricity imports (about 16-18% of demand), making cross-border trade and interconnection an important issue. Italy is interconnected with the grids of France, Switzerland, Austria, Slovenia and Greece. Therefore, specific attention is paid to the increase of interconnection capacity, transmission congestion issues and restrictions on trade. As at summer 2013, there are no cross-border interconnections outside the EU.

2.2.3 The main piece of Italian legislation regarding the import and export of electricity is included in Legislative Decree No. 79/1999. In addition, Regulation 714/2009 (which superseded Regulation 1228/2003), which came into force on 3 March 2011, sets out conditions for access to the grid for cross-border exchanges in electricity. The Ministry of Economic Development and the Italian Regulator implemented these provisions by issuing relevant secondary legislation on access to the grid as well as on interconnection capacity. Additional information, particularly in relation to interconnection, is also published in guidelines by Terna.

2.2.4 The total annual import and export capacity between Italy and its neighbours (France, Switzerland, Austria, Slovenia and Greece) is determined on an annual basis by the Ministry of Economic Development.

2.2.5 On a yearly basis, the Ministry of Economic Development and the Italian Regulator also establish the procedure, conditions and rates for the import and export of electricity. Every import or export company must participate in a tender procedure for access to transmission services. Once the tender procedure is closed, the selected operators become entitled to trade electricity cross-border through a licence and must enter into a use of system agreement with Terna for the transmission of the electricity in Italy.

Structure of distribution sector

2.3.1 The main policies for the electricity sector are outlined by the Italian state. Each region within Italy has a general authority over administrative issues and limited authority to set rules regulating financial support for the renewables sector.

2.3.2 All distribution activities are subject to a governmental concession, which is due to expire on 31 December 2030. After that date, the distribution market will be opened up on the basis of specific tender procedures. To comply with the public utility service requirements set for Terna, all distribution operators have a general obligation to supply all local customers without discrimination.

2.3.3 Pursuant to Law No. 125/07 (effective since 1 July 2007) companies carrying out electricity distribution activities serving at least 100,000 consumers must have their distribution activities distinct from their supply activities. From 30 June 2007, any such distribution companies who are supplying electricity in an integrated manner must transfer any assets and liabilities related to their supply activities into one or more separately incorporated companies limited by shares.

2.3.4 The relevant resolutions of the Italian Regulator (e.g. Resolution No.118/03; Resolution No. 105/06; Resolution No 111/06) set out the rules that allow for free access, with equal conditions, impartiality, and neutrality, to transmission and distribution services. The electricity rates applied by the local DNOs for household customers (all of whom have a choice of supplier) are fixed by the Italian Regulator according to a price-cap system which applies to the whole of Italy. The price cap tariffs are index-linked and also include targets for the productivity and efficiency of the services provided.

2.3.5 Notwithstanding these principles, the regulation also ensures some priority rights for environmental purposes, the further development of competition and guarantees for the efficiency of supply. For example, priority rights are granted to electricity produced by renewable sources, to electricity utilities which do not hold public transmission or distribution concessions, and to utilities that construct interconnections with neighbouring national grids.

Structure of supply sector

2.4.1 The Italian Regulator sets price caps applicable to electricity supply pursuant to article 2, paragraph 18 of Law No. 481/1995. The Italian Regulator determines rates every four years based on business costs and freight rates. These are periodically reviewed on the basis of:

• the operators’ proceeds from new investments;
• the price adjustment for inflation.

As at summer 2013 there are no plans to liberalise prices at supply level.

2.4.2 Market distribution tariffs are strongly influenced by the Italian Regulator which sets price caps for the transmission services applied by Terna to suppliers. These transmission costs, which are borne by the supplier, are included in the relevant distribution tariffs. The guidelines of the Italian Regulator also set out specific quality standards (such as timely response to complaints, installation and repairs and information requirements) as well as others for various technical aspects of the service, which must be reflected in all relevant contracts.

2.4.3 On 1 July 2007, in compliance with EU laws (Directive 2003/54), Italy implemented a full market opening to allow all household customers to freely choose their supplier.

2.4.4 With respect to the supply of electricity, the Gestore Servizi Energetici SpA (GSE), in accordance with the guidelines provided in Legislative Decree No. 79/1999, has incorporated two limited liability companies controlled by the Ministry of Finance: the Acquirente Unico SpA (Single Buyer) and the Gestore dei Mercati Energetici S.p.A. (GME), (whose role and activities are detailed in paragraph 2.5.1).

2.4.5 The Single Buyer’s role is to ensure the availability and supply of electricity to customers, and to enter into supply contracts with the local distribution utilities. The Single Buyer has been operational since 1 February 2004.

2.4.6 Through Resolution No. 105/06, the Italian Regulator approved the Code of Business Conduct (The Code) for the protection of eligible customers (i.e. those connected to the low voltage network), enabling them to choose effectively between the various offers of electricity supply in the free market. The Code, which every supply company is required to adopt, also protects the right of choice of supplier for all end-users.

Competition

2.4.7 The Italian Regulator has a duty to report potential competition issues on the energy market to the Autorità Garante della Concorrenza e del Maercato (AGCM), which will then assess whether there is any anticompetitive behaviour that constitutes an infringement of the Italian Competition Act (Law No. 287/1990) 10 Norme Sulle Intese, Sull’abuso di Posizione Dominante e Sulle Operazioni di Concentrazione, 10 ottobre 1990, Legge n. 287. .

2.4.8 One example of a recent competition case referred to the ACGM is from August 2009. The Italian Regulator reported some suspicious behaviour in the electricity wholesale market that had occurred between late 2008 and early 2009. According to the Italian Regulator, the extremely high prices applied in Sicily in that period were not related to any problem with availability of electricity, or to any significant increase in the cost of fuel generally applied throughout the country. The Italian Regulator alleged that the two major players in Sicily - Enel SpA and Edipower SpA - had put in place a cartel to affect the determination of the electricity price in the region.

2.4.9 Following the AGCM’s investigations, Enel SpA and Edipower SpA were bound to restore the full efficiency of generating stations and therefore, no further penalties were levied against the said companies 11 See AGCM decisions no. 20708, 27 January 2010 and no. 21962, 22 December 2010. .

Structure of trading market

2.5.1 GME is the company that was set up by Gestore della Rete di Trasmissione Nazionale S.p.A. (now GSE) 12 Pursuant to Law No. 99/2009.  to organise and manage the electricity market, according to the principles of neutrality, transparency, fairness and competition. GME is responsible for both managing electrical capacity and for granting energy reserves.

2.5.2 Establishing a trading market was to achieve two specific objectives:

1. to encourage, through the creation of a “marketplace”, competition in the activities of electricity generation and sale;
2. to encourage efficiency in the management of the dispatching of electricity, through the creation of a market for the purchase of resources and for dispatching services.

The Italian Electricity Exchange Market (IEEM)

2.5.3 The IEEM has been trading since 31 March 2004. As a general rule, all electricity must be sold and purchased on this market. In exceptional circumstances, a supplier and an eligible customer may enter into a direct bilateral agreement, provided they have previously obtained due authorisation from the Italian Regulator.

2.5.4 The IEEM enables producers, consumers and wholesale customers to enter into hourly electricity purchase and sale contracts. Market participants connect to an electronic platform over the internet and enter into on-line contracts under secure-access procedures.

2.5.5 The most relevant part of the electricity market consists of the Spot Electricity Market (MPE) which includes:

• the Day-Ahead Market (Mercato del Giorno Prima (MGP)), where generators, wholesalers and eligible final customers may sell and purchase electricity for the next day: GME is the central counterparty to the transactions concluded on the MGP;
• the Intra-Day Market (Mercato Infragiornaliero (MI)), where generators, wholesalers and final customers may modify the export/withdrawal schedules that they have defined in the MGP: GME is the central counterparty to the transactions concluded on the MI; and
• the Ancillary Services Market (Mercato per il Servizio di Dispacciamento (MSD)), where Terna procures the dispatching services needed to manage, operate, monitor and control the power system. The MSD consists of the scheduling stage (ex-ante MSD) and of the Balancing Market (MB). Terna is the central counterparty to the transactions concluded on the MSD.

2.5.6 The performance of power purchase agreements does not only rest with the parties to the agreement. In addition, the parties enter into a supplemental agreement with Terna for the import, export, transmission and dispatching of electricity on the national grid.

2.5.7 Other trading arrangements, such as tolling agreements (where a wholesaler provides energy sources to the generating station with respect to its electricity capacity), generally do not qualify as sale and purchase agreements and are not subject to trading on the IEEM or by means of bilateral agreements.

Price differentials

2.5.8 The prices of electricity traded on the IEEM appear to be higher, and therefore less competitive, than those of other European energy exchanges. The comparative price differentials are likely to be due to the different technology mix. Unlike other countries, Italian generating stations are mainly fuelled by natural gas, which is generally an expensive and volatile fuel source. This reliance also impacts on the price of natural gas, which is generally higher than the European average.

Cooperation with other exchanges

2.5.9 Since 1 January 2011, a market coupling mechanism has been operational on the border between Italy and Slovenia. This allows the import and export of electricity between the two countries. In this context, GME and the correspondent Slovenian authority, BSP Southpool Regional Energy Exchange (BSP) are both provided with a common matching algorithm that reproduces the matching rules of the respective markets and takes into account a network model representation of the Italian and the Slovenian electricity grid.

2.5.10 The start of the project marks the culmination of the initiative launched in 2008 by GME, Terna, Eles, Borzen (market operators in Slovenia) and BSP. This collaboration has benefited from institutional support from the Italian Ministry of Economic Development and the Slovenian Ministry of the Economy, as well as from the respective national regulators (AEE and the Energy Agency of the Republic of Slovenia). The project complies with and implements the provisions laid down in Regulation 714/2009 and, in particular, article 12, which provides for the promotion of, “...the coordinated allocation of cross-border capacity through non-discriminatory market-based solutions”.

3.1.1 The electricity sector is regulated and controlled by the Italian Regulator, which is independent from any state or governmental authority. The jurisdiction and competence of the Italian Regulator are set out in Law No. 481 of 14 November 1995.

3.1.2 The independence of the Italian Regulator is protected in a number of ways. Firstly, the influence of the Italian government on the Italian Regulator is limited to the remit of a three year economic and financial plan. This is submitted to the government by the Italian Regulator, and includes the main guidelines and references relating to policy to which the Italian Regulator should adhere. Secondly, any appointment to the board of directors of the Italian Regulator must follow a specific procedure involving both government and parliament. Thirdly, to safeguard the Italian Regulator’s independence, elected officials are prohibited from having any direct or indirect professional relations, including giving professional advice or holding office, with any company operating in the regulated sector. The prohibition applies during their term of office and also for four years following their departure from office.

3.1.3 At a European level, the Italian Regulator is part of the regulatory board of the Agency for the Cooperation of Energy Regulators (ACER).

3.1.4 Tasks relating to setting competition policy and market supervision are carried out by the Italian competition authority AGCM. Italian regulation is modeled on all applicable EU regulations and AGCM commonly applies the same guidelines as the EU Commission.
3.1.5 To coordinate the action of the Italian Regulator and AGCM (on 12 September 2012) the two authorities entered into a memorandum of understandings. Pursuant to this memorandum, the Italian Regulator and AGCM may undertake joint initiatives for the purpose of supervising the electricity market and exchanging information on administrative proceedings in relation to competition aspects and alleged unfair commercial practices.

3.2.1 As referred to at paragraph 3.1.1 above, the jurisdiction and competence of the Italian Regulator is set out in Law No. 481 of 14 November 1995.

3.2.2 Law No. 239/2004, provided for the overall reorganisation of the energy sector from 2005. The main objective of this law is to regulate and streamline the process of liberalisation in accordance with the principles of ensuring the protection of competition and public safety.

3.2.3 The intention was to focus on three main aspects:

1. the final separation of powers between the state and regions;
2. the implementation of the liberalisation of the electricity market; and
3. the reorganisation of the internal market to ensure a more efficient relationship between the Italian Regulator and the government.

3.2.4 Legislative Decree No. 93/2011 implemented the Third Energy Package and aimed mainly at:

1. enhancing security of supply in the electricity market; and
2. protecting consumers and in particular those with low incomes (in terms of security of supply and stability of supply prices).

3.3.1 The main regulatory functions of the Italian Regulator include:

• setting tariffs and quality standards;
• monitoring electricity supply activities and the technical and economic conditions governing access, interconnection and protection of users and consumers; and
• the release of guidelines for the accounting and administrative unbundling of integrated electricity utilities.

Furthermore, the Italian Regulator has a duty to make recommendations on electricity market reforms, governmental concessions and authorisations. The Italian Regulator also settles disputes between users, consumers and the electricity operators and, as set out in Legislative Decree No. 93/2011, it may impose penalties on companies to compensate affected users and consumers.

3.3.2 The Italian Regulator does not directly release any licences or concessions, but sets the legal, technical and financial requirements which other authorities (for example, the state and regions) must apply when issuing any such licence or concession. These local authorities (e.g. regions and municipalities) are responsible for issuing the specific licences and have powers to adopt their own specific laws. The scope and objectives of such laws vary to take into account the characteristics of a particular region. The powers of the local authorities have been assigned by Legislative Decree No. 112/1998 as amended by Legislative Decree No. 443/1999. This legislation, amongst others, attributed to the local authorities the construction and operation of thermoelectric generating stations with a nominal power of less than 300MW, as well as transmission networks with a voltage of less than 150kV. Local authorities are also responsible for issuing licenses regarding the construction of plants which generate electricity from renewable sources.

Merger control

3.3.3 Law No. 287/1990 regulates mergers and acquisitions. A transaction is subject to the merger control procedure if it meets one of the following thresholds during the preceding financial year:

• the combined domestic (Italian) aggregate turnover of all the undertakings concerned exceeds EUR 474m; or
• the domestic (Italian) aggregate turnover of the target exceeds EUR 47m.

Most of the activities of the AGCM concern merger and acquisition transactions within the electricity sector. In its evaluations, the AGCM has generally adopted a constructive approach towards the entry into the electricity market of new players. It has accepted that to liberalise the energy market effectively, a restructuring of the activities of the existing players and a diversification of the core business of the Italian incumbent is necessary. Therefore, the AGCM has tended to clear transactions; though in some cases, this has been done by enforcing some specific conditions and remedy measures.

3.4.1 The support schemes for renewable energy sources in Italy are based on Green Certificates (GCs) and, for solar PV generation, Feed-in Tariff (FiT) incentives.

3.4.2 The GCs, which are economic premiums in favour of electricity market operators in the generation sector, are issued by the GSE. To qualify for GCs, the generator must prove to the GSE that production is from renewable energy sources other than solar PV, and that it amounts to at least 1MWh. FiTs are payable on the electricity produced by solar PV plants, calculated on the amount of electricity exported into the grid.

3.4.3 In line with the framework produced by Directive 2009/28 (RED), Legislative Decree No. 28/2011 (which implemented RED) introduced these support measures (GCs and FiTs).

3.4.4 The general principles outlined in Legislative Decree No. 28/2011 were implemented through two Ministerial decrees (D.M.) of the Ministry of Economic Development (i.e. D.M. 5 July 2012 and D.M. 6 July 2012). D.M. 5 July 2012, sets out the incentive schemes for electricity generated by solar PV energy (the Fifth Conto Energia). D.M. 6 July 2012, regulates incentive schemes for electricity generated by renewable sources other than solar PV power (hydroelectric, geothermal, wind, biomass and biogas).

3.4.5 The two new D.M. mentioned above introduced a system to regulate and monitor the volumes of electricity installed and the total costs related thereto.

3.4.6 The new system became effective on 27 August 2012 for solar PV generation and on 1 January 2013 for the other types of non-PV renewable energy technologies included within the scheme.

3.4.7 In particular, as concerns incentives for non-PV projects, the system recently introduced provisions for:

• fostering investments on non-PV renewable energy technologies (i.e. wind; hydroelectric; geothermal; biomass; biogas);
• amending the unit value of the incentives in line with the technological progress developed in recent years;
• defining the overall amount of incentives for each source, in order to control the development of the market in future years. For this purpose, D.M. 6 July 2012 fixed as the annual maximum limit spending to stimulate non-PV projects, the threshold of EUR 5.8b.

3.4.8 Access to the incentive mechanism (through registration procedures in special registers) is reserved to new, fully rebuilt, re-activated or restructured plants with a minimum output of 1 kW and which came into operation after 31 December 2012. In particular, the following two separate support schemes are provided:

1. an all-inclusive feed-in tariff for plants with a capacity of up to 1 MW. This capacity is given by the sum of a base feed-in tariff and of premiums, if any (e.g. high-efficiency, emission reductions, etc.);
2. an incentive for plants with a capacity of above 1MW and for those with a capacity of up to 1MW not opting for the all inclusive feed-in tariff. This incentive is given by the difference between the base feed-in tariff (increased by the premiums, if any, for which the plant is eligible) and the hourly zonal electricity price (in the zone where the electricity generated by the plant is exported to the grid). The electricity generated by plants benefiting from the incentive remains the property of the generator.

3.5.1 Following the recent reforms to the support schemes for renewable energy outlined above, on 6 June 2013 the AEEG published a resolution acknowledging the achievement of the target of EUR 6.7b spending originally provided to incentivise solar PV energy generation. Therefore, pursuant to such resolution, D.M. 5 July 2012 (the “Fifth Conto Energia”) has now ceased to apply and currently no other incentives schemes are envisaged for PV energy projects.

4.1.1 Figure 2 below represents the consumption of electricity in Italy compared to demand in other European Union countries in 2010.

Figure 2 Overall consumption volumes of electricity in 2010 13 AEEG, final electricity consumption, December 2011

4.2.1 Figure 3 outlines the growth of each specific source of energy and its share of the gross national generation of electricity over the period from 1997 to 2008.

Figure 3: electricity production by source in Italy and other EU countries

• GME: www.mercatoelettrico.org/En/Default.aspx
• Terna – S.p.A.: www.terna.it
• AEE: www.autorita.energia.it/it/index.htm
• AGCM: www.agcm.it