New italian Decree Sostegni Ter introduces a new compensation mechanism for certain renewable plants

Following the spike in power prices, on 27 January 2022 the Italian government published in the Official Gazette Law Decree no. 4/2022 regarding support for companies affected by Covid as well as by power price increases (the so-called Decreto Sostegni-Ter) (the "Decree").

The Decree, which entered into force on 27 January 2022, must be converted into law by the Italian Parliament within 60 days of its publication (otherwise it ceases to have any effect) and is subject to amendments during this phase.

According to Article 16, paragraph 1 of the Decree, from 1 February 2022 to 31 December 2022 a two-way energy price compensation mechanism will be applied to:

1. electricity fed into the grid by photovoltaic plants with a capacity higher than 0.02 MW and which benefit from fixed premiums deriving from the Conto Energia incentive mechanism (which is fixed/unrelated to market prices), and
2. electricity fed into the grid by solar, hydroelectric, geothermal and wind power plants with a capacity higher than 0.02 MW and which do not benefit from incentive mechanisms.

To this end, the Gestore dei Servizi Energetici - GSE S.p.A. (the "GSE") will calculate the difference between the following values for each plant (the "Delta"):

1. an average reference price equal to the average of the hourly zonal prices recorded from the date on which that plant entered into operation until 31 December 2020 (indexed on the basis of the FOI ISTAT index)¹; and
2. the hourly zonal market price of electricity applicable to that plant or, if a PPA has been entered into in relation to that plant which does not meet the requirements described in detail in the last paragraph below, the average price indicated in such PPA.

The two-way compensation mechanism works as follows:

• if the Delta is positive, the GSE shall pay the Delta to the producer;

• if the Delta is negative, the GSE adjusts or requests from the producer the Delta (by way of set off with the tariff or other incentive payable to the producer).

Within 26 February 2022, ARERA (the Regulatory Authority for Energy, Networks and the Environment) will be required to regulate the manner in which the two-way compensation mechanism is implemented, as well as the manner in which the related proceeds are paid into a special fund set up at the Cassa per i Servizi Energetici e Ambientali.

The above provisions shall not apply to plants for which a PPA which meets the following conditions (i) it was entered into prior to 27 January 2022, (ii) it is not linked to the spot energy markets (i.e. it is fixed price) and (iii) in any event, the PPA price, calculated as an average over the term of the PPA, does not exceed by more than 10% the value referred to in point (a) above.

Authors: Carloandrea Meacci, Elena Giuffre and Gianluca Di Stefano

1 If the plant entered into operation prior to 1 January 2010, this value shall be equal to the average of the hourly zonal prices recorded from 1 January 2010 to 31 December 2020 (indexed according to the same methodology)