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Seu and self-consuption
The definition of Efficient User System (or SEU) is laid down by Article 2(1)(t) of Legislative Decree No. 115/08, whereby SEU is a «system with an electricity production plant fuelled by renewable sources or operating in high-efficiency cogeneration, even owned by a party other than the end customer, which is directly connected, through a private connection with no obligation to connect third parties, to the consumption plant of a single end customer and is built within the area owned or fully available to such customer».
Thus, SEUs are self-supply energy systems made up of:
(i) a production unit, i.e. an electricity production plant fuelled by renewable sources or operating in High Efficiency Cogeneration pursuant to Ministerial Decree of 4 August 2011
(ii) a consumption unit, i.e. the set of plants for the consumption of electric power that normally correspond to the individual real estate unit (but exceptions apply[1]) and that is directly connected to the production unit by means of a private connection;
(iii) a connection to the public grid
and where
(iv) the owner of the production unit may or not be the final customer consuming the energy produced; and
(v) the production unit is built entirely within the area owned by, or fully available to, the final customer and is, partly, made available by the final customer to the producer or the owner of the production unit (if different from the final customer).
The advantage of setting up a SEU is first and foremost the exemption from the obligation to pay general system charges applied to the energy withdrawn (see below). Such exemption is justified by the fact that the electricity so produced and self-consumed does not pass through the national electricity grid but reaches the consumption unit via a direct, private connection.
Energy produced by the production unit and exceeding the consumption of the consumption unit can be fed into the grid in order to be sold to the market or, if the necessary requirements are met, transferred to the GSE (National Grid Operator):
(i) in accordance with the “Dedicated Withdrawal” (Ritiro Dedicato) scheme, i.e. through a simplified form of sale to the grid of all the energy that is fed into the grid, in return for the payment by the GSE of a set price for each kWh fed into the grid;
or, as an alternative,
(ii) in accordance with the “Net Metering” (Scambio sul Posto) scheme, i.e. by accessing a specific mechanism whereby, for energy produced by plants powered by renewable sources with a capacity not exceeding 500 kW, the electricity fed into the grid at a given time can be offset against the electricity withdrawn and consumed at a time other than the time of production.
The relationships between the producer who owns the production unit and the final customer, concerning the electricity produced and consumed that does not transit through the public network, are not regulated by the Authority and are left to free negotiation between the parties. However, for the purpose of feeding energy into the grid (i.e. the energy not consumed on-site) and drawing energy from the grid (which the presence of the on-site production unit may not totally exclude), the provisions of the Consolidated Text for the provision of transmission and distribution services, or TIT (ARERA Resolution 568/2019/R/eel of 27 December 2019) shall apply, and when connecting a SEU to the public grid, or in the case of modification to the existing connection, the provisions contained in the Consolidated Text of the economic conditions for the provision of connection services or TIC (ARERA Resolution 568/2019/R/EEL 27 December 2019,) and in the Consolidated Text of active connections or TICA (Annex A to ARERA Resolution ARG/elt 99/08) shall apply.
General System Charges
The term “general system charges” refers to those tariff components included in the electricity bill, alongside the cost of sales services (raw materials, marketing and sale), the cost of network services (transport, distribution, meter management) and taxes, which have been introduced over time by specific regulatory measures in order to cover the costs of activities of general interest for the national electricity system.
Such charges, which in recent years have accounted for an increasingly significant share of the total annual electricity expenditure of end users, are applied as a surcharge on the distribution tariff, hence as part of the cost for network services, and vary depending on the type of user.
Since 2018, general charges rates to be applied to all types of contracts are divided into (a) general charges relating to the support of renewable energies and cogeneration (“ASOS”) and (b) remaining general charges (“ARIM”).
Between 2021 and 2022, in order to reduce the effects of price increases in the electricity sector, subsequent regulatory reviews have reduced system charges to zero for specific periods of time.
In particular:
(i) Article 1, paragraph 504 of Law No. 234/2021 (Budget Law 2022) provided that ARERA was to cancel, for the first quarter of 2022, rates relating to general system charges applied to household customers and to low voltage non-household customers, for other uses, with available power up to 16.5 kW. ARERA implemented such provision by Resolution 635/2021/R/com of 30 December 2021;
(ii) Article 14 of Decree-Law No. 4/ 2022 (the so-called “Sostegni ter” Decree) provided that ARERA was to cancel, for the first quarter of 2022, rates relating to general system charges applied to customers with available power equal to or greater than 16.5 kW, including those connected at medium and high/very high voltage or for public lighting or electric vehicle charging in places accessible to the public. ARERA implemented such provision by Resolution 35/2022/R/EEL of 31 January 2022;
(iii) Article 1 of Law Decree 17/2022 (the so-called “Bollette” Decree) provided that ARERA was to cancel, for the second quarter of 2022, rates relating to general system charges applied to household customers and low voltage non-household customers, for other uses, with available power up to 16.5 kW (paragraph 1) as well as rates relating to general system charges applied to customers with available power equal to or greater than 16.5 kW, including those connected at medium and high/very high voltage or for public lighting or electric vehicle charging in places accessible to the public (paragraph 2). ARERA implemented such provision by Resolution No. 141/2022/R/com of 30 March 2022.
Energy Service Contracts or Energy Performance Contract (or EPC)
The creation of a SEU in which producer and end customer do not coincide is often a prerequisite for the so-called energy services contracts or Energy Performance Contracts (EPCs), which are very common in current practice.
Through such contracts, the owner of an industrial plant (the “Customer”) appoints an energy operator, often an Energy Service Company or ESCo (the “Producer”) for the provision of a complex service including, inter alia:
(i) the creation of an energy production plant (e.g. a photovoltaic or cogeneration plant) at the site of the Customer, who, to that end, grants the Producer a personal or proprietary right to use a certain portion of the site, such as, for example, the solar panel of the facility; and
(ii) its subsequent management, operation and maintenance, for the purpose of supplying the energy produced to the Customer, at a lower cost than that which the Customer should pay to take energy from the national electricity grid.
The Producer shall bear the cost of the investment (using its own capital or obtaining the financial means from third parties) and, therefore, as a rule, shall retain ownership of the plant until the expiry of the contract. Thereafter, ownership may be transferred to the Customer.
Hence, an EPC allows the Customer to obtain energy savings and the Producer to repay the work over time by virtue of the cash flow generated by the fee paid by the Customer for the service, as well as by any benefits provided for the type of work carried out.
Such a solution is undoubtedly appealing to those customers who, rather than taking on the investment necessary for the creation of the plant and its development, operation and maintenance, prefer to entrust a third party with the implementation of the entire project, which should generate direct savings on utility bills and - where foreseen - further benefits.
Alternatively, the Customer may create the plant on its own also making recourse to bank loans: (i) by entering into with leasing companies agreements having as their object the purchase by the bank of the area (leasing) or of the plant (sale&lease back) and the simultaneous granting of the use of the plant to the Customer, as user, or (ii) by entering into loan agreements with the issue of guarantees (pledge, lien, mortgage) having as their object the solar panels or the photovoltaic system as a whole.
Other benefits
The savings resulting from the creation of a SEU, whether or not as part of an energy services contract, are to be added to those foreseen for the specific type of plant developed as a production unit.
4.1 Tax deductions and tax credits
With particular reference to photovoltaic systems, several building bonuses are currently in force, in particular the so-called “Bonus Ristrutturazioni” (Renovation Bonus) and the so-called “Superbonus 110%”.
The Renovation Bonus provides for a 50% IRPEF (Personal Income Tax) tax deduction for those who install photovoltaic panels as part of ordinary and extraordinary maintenance works or separately and independently pursuant to Article 16-bis, paragraph 1, letter h) of the TUIR (Consolidated Law on Income Tax). To obtain said deduction, expenses incurred from 26 June 2012 to 31 December 2024 are taken into account. For such expenses, the 50% deduction shall be divided into ten equal annual instalments. The maximum expenditure limit is 96,000 euros and covers various items of expenditure (labour, installation, design, stamp duty, VAT, expert’s reports, etc.).
On the other hand, the Superbonus 110% provides for a 110% IRPEF tax deduction, to be divided over five years, for a series of energy efficiency works and projects on the property. Such measure does not cover directly the photovoltaic system, which, pursuant to Article 119.5 of Decree-Law No. 34/2020, can only be covered by the incentive when installed together with other so-called “driving” works, such as, by way of example, the thermal insulation of vertical, inclined and horizontal surfaces amounting to 25% of the entire building, or the installation of a condensation boiler or heat pump. In addition, to qualify for the deduction, it will be necessary to improve the building’s energy performance certification (APE) by at least two energy classes.
In addition to the above, recent Decree-Law No. 17/2022 (the so-called “Bollette Decree”), converted into law, with amendments, by Article 1, paragraph 1, of Law No. 34/2022, and Decree-Law No. 21/2022 containing urgent measures to counter the economic and humanitarian effects of the Ukrainian crisis, provided for the simplification of the authorisation process for the installation of plants for the production of energy from renewable sources, inter alia, by amending Legislative Decree No. 28/2011 and establishing, among other things, (i) that the installation of photovoltaic and thermal solar power plants on buildings, as well as the implementation of works functional to the connection of such buildings to the electricity grid, is to be considered as an ordinary maintenance work and is not subject to the acquisition of permits, authorisations or administrative consents, however named, as well as (ii) procedural simplifications for certain specific categories of photovoltaic systems, for which a sworn works commencement notice will suffice (pursuant to Article 6-bis of Legislative Decree 28/2011), or a simplified authorisation procedure (pursuant to Article 6 of Legislative Decree 28/2011).
In particular, Article 4 of Legislative Decree 28/2011, as amended by Article 12.1-bis of Legislative Decree 17/2022, now provides that in the eligible areas to be identified pursuant to Article 20 of Legislative Decree 199/2021, the authorisation procedures for the construction and operation of new photovoltaic systems and connected works as well as, without altering the area concerned, for the upgrading, renovation and complete reconstruction of existing photovoltaic systems and connected works shall be governed as follows:
(i) for plants with a capacity of up to 1 MW: the sworn works commencement notice shall apply for all works to be carried out in the areas available to the applicant;
(ii) for plants with a capacity exceeding 1 MW and up to 10 MW: the simplified authorisation procedure shall apply;
(iii) for plants above 10 MW: the unified authorisation procedure shall apply[2].
Moreover, the Bollette Decree also provided for a contribution for energy efficiency in the southern regions (Article 14), which will however be better defined by special decrees, to be adopted within sixty days from the date of entry into force of the Bollette Decree. At present, a tax credit has been provided for investments made by 30 November 2023 in the regions of Abruzzo, Basilicata, Calabria, Campania, Molise, Puglia, Sardinia and Sicily, with the aim of achieving a higher level of energy efficiency and the self-production of energy from renewable sources within production facilities. Finally, Decree-Law 50/2022, the so-called Aid Decree introduced further simplifications in the authorisation procedures for plants producing electricity from renewable sources.
4.2 Collective self-consumption and energy communities
When the necessary requirements are met, electricity-consuming end-customers can now associate to produce locally, through renewable sources, the electricity necessary for their needs, “sharing” it among themselves. Indeed, Decree-Law 162/2019 (Article 42 bis) converted, with amendments, by Law No. 8 of 28 February 2020, and the relevant implementing measures, such as ARERA’s Resolution 318/2020/R/eel and Ministerial Decree of 16 September 2020 of the MiSE (Ministry of Economic Development), have provided for an incentive tariff (alternative to net metering) for the remuneration of energy produced by renewable energy plants that are part of (i) “collective self-consumption systems”, i.e. pools of at least two self-consumers of renewable energy acting collectively and located in the same condominium or building or of (ii) “renewable energy communities”, i.e. autonomous legal entities, owned by natural persons, SMEs, regional or local authorities that are located in the vicinity of the production facilities owned by the relevant renewable energy community.
4.3 Incentives
With Legislative Decree 199/2021 (the so-called “Incentives Decree”), which came into force on 15 December 2021, the Italian legislator implemented EU Directive 2018/2001 on renewable energy sources, known as Red II (Renewable Energy Directive) and established, among other things, “support schemes and promotion instruments” for the production of energy from renewable sources.
In particular, making a significant drift with regard to energy from renewable sources, Article 5 of Legislative Decree 199/2021 provides that:for large plants with a capacity exceeding 1 MW, the incentive shall be awarded through low-bid auction competitive procedures carried out with reference to power quotas (Article 5.2);
(iv) for small plants with a capacity of less than 1 MW, the incentive shall be awarded according to the following mechanisms (Article 5.3):
(v) for plants with generation costs closer to market competitiveness, through an application to be submitted directly on the date of commissioning, subject to compliance with technical and environmental protection requirements;
(vi) for innovative plants and plants with higher generation costs, in order to control expenditure, the incentive shall be awarded through calls for tenders whereby power quotas are made available and selection criteria are set based on compliance with technical, environmental and land protection and cost-efficiency requirements;
(vii) plants with a capacity equal to or less than 1 MW that are part of “renewable energy communities” or of “collective self-consumption systems” (see paragraph 3.2 above), are eligible for a direct incentive, as an alternative to the one indicated above, which rewards, through a specific tariff, scalable also on the basis of the capacity of the plants, energy that is self-consumed instantaneously. The incentive shall be awarded directly, through and application to be submitted on the date of commissioning (Article 5.4).
The modalities for the implementation of the aforementioned incentive systems, for large plants and small plants, will be defined by one or more decrees of the Minister for the Ecological Transition within 180 days from the entry into force of Legislative Decree 199/2021 (Articles 6 and 7).[3]
A new measure is to be published based on a similar timeline, which will update the incentive mechanisms for renewable energy plants that are part of collective self-consumption systems or renewable energy communities with a capacity of no more than 1 MW. Said measure will also establish the modalities of transition and connection between the old and the new scheme, in order to guarantee protection of the investments undertaken. In the meantime, pending the adoption of such measure, the Ministerial Decree adopted in implementation of Article 42-bis, paragraph 9, of Decree-Law 162/2019 (see paragraph 3.2 above) shall continue to apply.
In addition, it should be noted that Article 9.2 of Legislative Decree 199/2021 provides that, after 90 days from the date of entry into force of the aforesaid measures, net metering schemes will be abolished, with the consequence that plants commissioned after such date will only be entitled to access the schemes governed by Legislative Decree 199/2021 (Article 9).
Finally, Article 9.4 of Legislative Decree 199/2021 provides that, in order to ensure greater efficiency in the bidding dynamics pursuant to Ministerial Decree of 4 July 2019, on “Incentives for electricity produced by on-shore wind, photovoltaic solar, hydroelectric and sewage treatment plants”, following the seventh procedure, whose call for tenders closed on 30 October 2021, and until the entry into force of the decrees referred to in Articles 6 (i.e. decree implementing incentive system for large plants) and 7 (i.e. decree implementing incentive system for small plants), the GSE shall organise further procedures making available the unallocated residual power, until it is exhausted, in the ways set out in Article 20 of Ministerial Decree of 4 July 2019 (i.e. power reallocation mechanisms).
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The content of this article is for information purposes only and is not, and cannot be intended as, professional advice on the matters dealt with. For further information please contact your counsel or send an email to the following address: corporate.commercial@advant-nctm.com.
[1] Normally, the consumption unit corresponds to the individual real estate unit, but it is possible to aggregate several real estate units into a single consumption unit when: (i) the real estate units, fully available to the same natural or legal person, are linked to each other by appurtenance and are in the same cadastral parcel or in contiguous parcels; (ii) the appurtenant real estate units (slabs, garages, basements), even if available to different natural or legal persons, belong to a single condominium; (iii) the real estate units, fully available to the same legal person, may be made available by said legal person to third parties, are in contiguous cadastral parcels, within a single site and used for the production of goods and/or services mainly intended for the provision, on that same site, of a single final product and/or service.
[2] It should further be noted that, pursuant to Article 6, paragraph 9-bis of said Legislative Decree 28/2011, which was also amended by Article 12.1-bis of Decree-Law No. 17/2022, the simplified authorisation procedure also applies to (i) photovoltaic systems with a capacity of up to 20 MW and related works to connect them to the high and medium voltage electricity grid located in industrial, productive or commercial areas, as well as in landfills or closed and restored landfill lots or quarries or quarry lots that cannot be further exploited, and (ii) agrivoltaic systems adopting innovative solutions that are no more than 3 kilometres away from industrial, light-industry and commercial areas.
Finally, pursuant to Article 9 of Law Decree 17/2022, photovoltaic systems with ground-mounted modules and an electrical power output lower than 1 MW, as well as the connected works and infrastructures that are essential for the construction and operation of such systems located in suitable areas, not subject to cultural and landscape protection regulations, outside protected urban centres, and for which no expropriation procedures are envisaged, can be realised by means of a simple sworn works commencement notice.
[3] In this regard, it should be noted that on 24 March 2022, Resolution No. 122/2022/R/eel of 22 March 2022 was published on the ARERA website (www.arera.it), concerning the commencement of the procedure aimed at implementing the provisions of Legislative Decree No. 199/2021 other than those relating to self-consumption and those relating to tariff measures for electric vehicle recharging infrastructures. The resolution in question provides for 6 separate procedures, each of which is composed of a plurality of measures, concerning, inter alia, “renewable sources for electricity production, to be completed by 31 December 2022 (with the exception of activities tied to ministerial decrees that have not yet been issued or to be carried out as necessary)”.
