On February 25, 2022, the Italian Government enacted law-decree no. 23 (Decree), which entirely repeals and replaces article 16 of law-decree no. 4 of January 27, 2022 (known in Italian as the Decreto Sostegni-ter), which had introduced an obligation for renewable energy producers to transfer extra profits generated from the exceptionally high electricity prices to the Gestore dei Servizi Energetici (GSE) to help fund the reduction in the cost of electricity (see our previous post here).

The new Decree responds in part to proposals raised by the Italian Regulatory Authority for Energy, Networks and Environment (ARERA) in its statement of February 18, 2022, regarding art. 16 of the Decreto Sostegni-Ter, by reducing the scope of application of the measure and by providing simplified rules for the calculation of the extra profits.

Indeed, under the new Decree, the mandatory transfer of extra profits generated from electricity sales between February 1, 2022 and December 31, 2022, now applies to:

1. photovoltaic plants with a capacity of more than 20 kW and that benefit from the Conto Energia fixed-tariff mechanism, as well as to
2. solar, hydroelectric, geothermal and wind power plants with a capacity of more than 20 kW that started production before January 1, 2010 and do not receive incentives.

In other words:

Among the subsidized plants, only photovoltaic plants receiving Conto Energia feed-in tariffs are affected by the measure.

Among the unsubsidized plants, only those commissioned before January 1, 2010 are affected. It appears that this hits not only geothermal and hydropower plants, but also PV and wind plants whose incentives were revoked by the GSE.

The “reference price” for calculation of the extra-profits is now determined by the Decree itself and differs according to the plant’s geographical location:

Based on the production data submitted to the GSE, the GSE will calculate the delta between:

1. the applicable reference price and
2. the current zonal hourly prices or, in the case of PPAs concluded before January 27, 2022, the agreed PPA price, provided that it is not linked to spot market prices and does not exceed the reference price by 10 percent or more.

If the delta b) minus a) is positive, the GSE will either request payment of that amount from the producer or offset it with payments due to the producer. In the presumably only hypothetical case of a negative difference, the GSE would have to pay such difference to the producer.

Again, this new Decree has been enacted without parliamentary approval; thus, the parliament will have to convert it into law within 60 days from its entry into force, i.e. by April 27, 2022.

In the meantime, the Italian Regulatory Authority for Energy, Networks and Environment (ARERA) must still issue a regulation to implement the Decree’s provisions.