On Monday, June 8, the European Commission approved a €23 billion aid scheme for Italy to support the production of electricity from renewable sources. These funds will support the construction of solar, hydroelectric, onshore wind plants, and gas from waste, which in turn should promote both the decarbonization of the electricity mix (currently based on natural gas) and the reduction of electricity prices (among the highest in Europe, especially for businesses).
EUROPEAN RULES ON STATE AID
The Commission deemed the Italian measure compliant with the state aid rules adopted last June to support the energy transition of the EU economy.
NEW RENEWABLE PLANTS FOR OVER 37 GW
The incentivized plants should provide Italy with a new 37.1 gigawatts of renewable capacity, approximately 48 percent of the current capacity. As of December 31, according to Terna data, the installed renewable capacity in our country was 83.5 GW: the solar share was over 40 GW, hydroelectric around 20 GW, wind 13 GW, while the contribution of bioenergy is about 4 GW.
ITALY’S DECARBONIZATION GOALS
The aid scheme – reads the European Commission statement – “will significantly contribute to Italy’s decarbonization goal of reaching 39.4% of gross final electricity consumption from renewable sources by 2030.” In 2025, renewables covered 41 percent of electricity demand, which however represents only a part of total energy consumption.
“The scheme will also help Italy reduce its dependence on fossil fuel imports,” said Teresa Ribera, Vice-President of the European Commission for the Clean Transition. Italy imports a lot of energy from abroad – thus it is particularly exposed to supply and price crises – and depends on natural gas for electricity generation: the share of this fuel is over 40 percent, compared to a European average of 17 percent.
THE FORM OF THE AID
The aid will be granted in the form of variable payments within twenty-year two-way contracts for difference. The economic incentive will consist of a “bonus” for each kilowatt-hour of electricity produced and fed into the grid, calculated based on the so-called strike price: in short, if the market price of electricity is lower than the established strike price, the state will pay the difference to producers; if the market price is higher than the established price, companies will reimburse the difference.
To access the aid, companies will have to participate in a tender, submitting an offer on the strike price necessary for the realization of their plant. Small renewable plants, with a capacity below 1 megawatt, are exempt and can benefit directly from the aid without participating in the tender: in their case, however, the strike price will be set by Arera, the energy and networks regulatory authority.
