Italy’s proposed carbon costs reimbursement for gas-fired power producers may become more defensible before the European Commission if it is tightly calibrated to limit cross-border distortions, though the measure remains “legally fragile” due to state aid concerns, legal experts told ICIS.
“A ‘flow-constrained’ approach may improve the presentation of the measure in the dialogue with Brussels; it does not, however, transform a legally fragile measure into one that is automatically authorizable,” Piero Vigano and Francesco Mazzocchi, partners at law firm ADVANT Nctm, told ICIS.
Vigano and Mazzocchi said the resolution makes preserving Italy’s net import position and minimizing impacts on crossborder electricity flows “a central operational constraint” of the reimbursement scheme. The lawyers suggested that “the Commission could look more favourably on a mechanism in which the impact on flows is controlled, transparent and verifiable ex ante, rather than on a mechanism in which the cross-border effect is measured only ex post.”
The regulator’s resolution states that the value and frequency of the reimbursement will be calculated by Italian TSO Terna on the basis of rules defined by ARERA, while taking into account the expected price differential between electricity prices in Italy and neighboring EU countries.
“However, even a ‘flow-constrained’ design would not automatically eliminate compatibility issues, because the selective advantage bestowed on gas-fired generators, the effect on trade between member states, the distortion of competition and the effect on the ETS signal would still need to be assessed”, they added.
