Renewable energy in Italy

With the aim of preventing climate change, the European Union (“EU”) has set ambitious targets for reducing greenhouse gas emissions. The EUs main goals are to achieve climate neutrality by 2050, as provided in the European Climate Act, and to reduce CO2 emissions by 55% by 2030. With this in mind, the EU has launched several initiatives to achieve these goals.  

On 14 March 2023, the European Union updated the targets to be achieved by each member state. With specific reference to Italy, the new emissions reduction target has been set at -43.7% by 2030 (the previous target was set at -33%). 

These goals cannot be achieved without the implementation of suitable national policies aimed at incentivising: (a) the development and installation of new renewable plants, (b) the pairing of green power generation plants with energy storage systems in order to improve energy efficiency, and (c) the resilience of the national electricity grid for the purpose of ensuring a steady and reliable supply of clean energy throughout the national territory.  

This contribution outlines the following key recent developments in the Italian renewables market that should contribute to achieve the goals set at the European level: (i) the simplification of the authorisation procedures for renewable plants; (ii) the recent trends in Battery Energy Storage Systems; (iii) and the recent updates to self-consumption legislation.

During recent years, the Italian Parliament has passed a significant number of material changes to the national energy legislation with the aim of simplifying the authorisation procedures for the construction and operation of renewable plants, as well as accelerating the achievement of the energy targets set by the EU and the National Recovery and Resilience Plan (“PNRR”). 

The latest set of changes has been introduced by means of the Law Decree No. 13 of 24 February 2023 (the “PNRR ter Decree”), published on the same date in the national Official Gazette no. 47 and converted into law on 21 April 2023 by Law no. 41/2023.  

PNRR ter Decree is expected to have a significant impact on the renewables regulatory landscape, the following changes have been introduced: 

1. Extension of the so-called “ex-lege suitable areas” 

The suitable areas (“aree idonee”) are specific portions of land qualified as suitable for the construction and operation of renewable plants. Therefore, the permitting procedures required for the installation of renewable plants on these areas are simplified. According to the Legislative Decree no. 199/2021, each region is required to identify the suitable areas falling within its territory based on specific guidelines being issued by the Ministry of Environment and Energy Security (“MASE”). A draft of such guidelines has been recently issued by MASE and is currently under evaluation of the regions. 

Notwithstanding the above, the Italian Parliament, with a view of speeding-up the race for the decarbonisation targets set by the EU, has nevertheless identified some areas to be qualified as “suitable by operation of law” (“idonee ex lege”), set out in Article 20, paragraph 8 of the Legislative Decree no. 199/2021. 

The PNRR ter Decree provided for the extension of the ex-lege suitable areas for the instalment of renewable plants through the reduction of those areas included in the buffer zone of assets subject to landscape protection pursuant to Legislative Decree no. 42/2004. More precisely:  

• as regards wind power plants, the buffer area is reduced from 7 to 3 Km; 
• as regards photovoltaic plants, the buffer area is reduced from 1 Km to 500 meters. 

2. Amendments to the Single Authorisation procedure 

The PNRR ter Decree makes significant changes to the Single Authorisation procedure (“AU”) set out in Article 12 of Legislative Decree No. 387/2003. This is the main administrative procedure required for the construction and operation of renewable plants that takes place through the Conference of Services, which is a steering committee in which all public entities involved shall participate. Following successful completion of such procedure, the region (or the delegated public authorities) then issues the single authorisation, which includes all required permits and clearances to build and operate the RES plant and the relevant connection facilities.  

With the aim of simplifying the authorisation process for renewable energy plants, the PNRR ter Decree provided that: 

1. The issuance of the AU now also includes any environmental assessments set out under Title III, Part II of Legislative Decree No. 152 of 3 April 2006 (the Environment Code), where needed. Consequently, the maximum duration of the AU procedure has been set at: 

• 90 days, in case of projects located in areas subject to cultural or landscape constraints under Legislative Decree No. 42/2004 and not subject to environmental assessments. 
• 60 days, in all other cases. This deadline shall be calculated net of the time required to complete the environmental assessments. 

Energy storage systems play a crucial role in Italy’s decarbonisation and energy security. On 21 January 2020, the Ministry of Economic Development published the Integrated National Energy and Climate Plan, setting targets for energy efficiency, development of renewable sources, and CO2 emissions reduction. These targets cannot be achieved without implementing an efficient energy storage system in Italy.  

Italy’s growing need for storage systems is particularly evident in Central and Southern Italy, where a number of renewable energy plants have been installed. The integration of storage systems with renewable plants would make energy production from renewable sources more efficient and, at the same time, the transmission and distribution systems would see an increase in stability and security.  

According to the report for year 2023 published by Terna (the Italian TSO), most Italian energy storage facilities have been built in connection with small-scale solar power plants, while medium to large-scale storage systems are less common. Storage systems combined with thermoelectric power plants, fuel cells and wind power plants are still very rare. 

Although today the most vibrant market segment concerns small-scale storage facilities, the same growing demand is expected in the future for the installation and development of large-scale storage systems. Although the Government recently implemented new legislative framework regulating procedures for energy storage systems with the aim of simplifying and fostering their development, the regulatory framework concerning energy storage facilities is still relatively fragmented, given the high number of laws governing different aspects of energy storage facilities. 

The Italian Regulatory Authority for Energy, Networks and Environment (“ARERA”) in resolution no. 574/2014/R/eel defines “storage system” as a set of devices and equipment, whose function is to absorb and release electrical energy, and is designed to operate in the electricity grid in order to feed into or withdraw electricity from the grid. Moreover, the resolution specifies that storage systems: (i) may be connected to an electricity power production plant, including renewable energy sources plants or (ii) may be “stand alone” battery storage systems. 

The ARERA also states that storage systems shall be regarded in the same way as electricity production plants, given their ability to exchange electricity with the grid. Therefore, as a general rule, the same provisions that apply to energy production plants on construction, connection and operation, apply to storage facilities too. More specifically, the installation of storage systems and their integration with the electricity grid must be carried out in compliance with various rules on metering, transmissions, dispatching and distribution services. These are: specific ARERA resolutions, the Italian Unified Text for Active Connections, and other regional and national laws regulating storage facilities. One of the most important laws regarding the storage facilities has been Law-Decree 7 February 2002, n. 7 (the “Decree”), which was brought into effect by Law 9 April 2002, n. 55, and has been amended and supplemented over time. This Law-Decree specifically regulates the authorisation procedures for the installation and operation of storage system facilities.  

Moreover, it is worth mentioning that, in order to foster the installation of battery storage systems, an electricity storage capacity market is currently under implementation in Italy, as provided under article 18 of Legislative Decree No. 210 of 8 November 2021. Recently ARERA, by resolution No. 247/2023/R/eel of 06 June 2023, has defined the criteria and conditions for the operation of the storage capacity market.  

On 15 November 2022, ARERA updated the “Integrated Text on Simple Production and Consumption Systems” (the “TISSPC”) originally enacted by ARERA on 12 December 2013 by resolution no. 578/2013/R/eel.   

The TISSPC is the reference text for setting up self-consumption systems and any system where the electricity produced by plants powered by renewable sources is directly fed into the final consumer’s facility without entering the national grid. Through recent regulatory changes, ARERA extended the scope of the TISSPC by providing for the first time the scenario of 'remote' electricity self-consumption. According to the new rules, in order to be compliant with the TISSPC, the production plants and the consumer's facilities are no longer required to be located on the same site and can be located on different parcels of land and connected via a private electricity cable which does not run through the national grid.  

The renewable plant installed on or near the consumer’s facility may also be owned and/or operated by a third party. If such third party builds and operates the plant, they shall be qualified as owner of the said plant as well as energy producer. This means that all the electricity generated by the energy system remains the property of the third-party owner until it is sold (in whole or in part) to the end-consumer. The contract structure normally adopted in this case is known as “on-site PPA”. This is basically a physical PPA where all or part of the electricity produced by the renewable system is fed straight to the facility via a private electrical connection. The electricity sale price is normally fixed and not indexed by the electricity market price.   

Different from the scenario described above is the case where the third party builds the plant but does not operate it. In such case, the third party is the owner of the plant but cannot be qualified as the energy producer (such status is held by the consumer). This means that all the electricity produced by the renewable system is owned by the consumer who can either self-consume it or sell it to third parties, if in excess. The contract structure that is usually adopted in this scenario is known as operative lease.  

On 27 December 2022, ARERA issued the new "Integrated Text on distributed self-consumption" (“TIAD”). Through the TIAD, ARERA laid down the rules for the building of self-consumption systems using the national grid to deliver electricity from producers to consumers. In this context, ARERA provided for six different self-consumption schemes which vary, depending on the number of producers/consumers involved and the distance between the production unit and the consumption facility. The self-consumption structure expected to be most appealing is the so-called “Renewable Energy Community”. 

Moreover, a specific Decree to be issued by MASE will regulate the incentive schemes applicable to the above self-consumption schemes. A draft of the Decree has already been circulated by MASE in February 2023 and is currently under review by the European Commission with regard to the state aid regulation. The TIAD will become effective simultaneously with the final approval of the Decree by the European Commission.