Discounted energy price will be offered to Energy Intensive Companies under the MASE Energy Release Decree

On 23 July 2024, the Ministry of the Environment and Energy Security (“MASE”) approved the Energy Release Decree (“DM Energy Release”), which identifies the modalities and criteria for the access to the Energy Release, a mechanism for the development of new electricity generation capacity from renewable energy sources by energy-intensive companies (“Energy Intensive Companies”) provided for in Article 1 of Decree-Law No. 11 of 9 December 2023, converted, with amendments, by Law No. 11 of 2 February 2024 (“Energy Decree”).

Thanks to the Energy Release mechanism, Energy Intensive Companies will have the right to request from the Gestore dei Servizi Energetici - G.S.E. S.p.A. (“GSE”) an advance 50% of the volume of energy and related guarantees of origin (“GO”) to be produced by plants from additional renewable sources (“Plants”) against payment to the GSE of a fixed price for a duration of three years. 

These favourable conditions shall be applied against the commitment to generate (or, as better specified below, to purchase from third parties) electricity produced by the aforesaid Plants. The volume advanced by the GSE will be returned - together with the relevant GOs - by the Energy Intensive Companies once the relevant Plant will be entered into operation, within a set term, during the 20 (twenty) years following the entry into operation. In addition to the above, it should be noted that public administrations, when granting public areas in their disposal, should prefer to allocate them to projects of RES production facilities to be built to meet the energy needs of energy-intensive enterprises.

In particular, Article 1 of the aforementioned Energy Decree provides that:

• the advance is governed by a two-way contract for difference with respect to a price fixed in advance by the GSE itself (“Advance Contract”); 

• return takes place over twenty years under a further two-way contract for difference on the basis of the same price set by the GSE (“Return Contract”).

As an alternative to the construction of the Plants by the Energy Intensive Companies, the same may undertake to have the Plants built by third parties. In this case, such third parties and the Energy Intensive Company shall sign - even indirectly - purchase agreements for the renewable energy produced by the Plants (Long Term Corporate PPA or On Site PPA) (“PPA”), for a total volume equal to at least twice the amount to be returned. In this second case, the Energy Intensive Company also undertakes on behalf of the third party producers towards the GSE for the future restitution of the electricity advanced.

New generation capacity can be realized alternatively through:

• installation of new photovoltaic, wind and hydroelectric plants with a minimum rated power of 200 kW each;

• photovoltaic, wind power and hydroelectric plants that are being upgraded or refurbished, resulting in an increase in power of at least 200 kW.

Modalities and Criteria for Access to the Energy Release Mechanism

Within sixty days from the entry into force of the DM Energy Release, the MASE will approve the operating rules proposed by the GSE (“Operating Rules”) and within fifteen days from the date of entry into force of the approval decree, the GSE will publish the notice for the allocation of the electricity in its availabilty. 

Pursuant to Art. 3(1) of the DM Energy Release, such notice must contain at least the following information:

• volume of energy available to the GSE;

• transfer price, determined by taking into account the efficient unit cost of producing renewable energy from plants of efficient scale using competitive technologies (“Transfer Price”);

• criteria for determining the new generation capacity from renewable sources to be realized;

• outline of the Advance and Return Contract and the related guarantees.

Within sixty days from the date of opening of the notice for the allocation, Energy Intensive Companies must submit an expression of interest in participating in the procedure for the allocation of the electricity available to the GSE.

Such expression of interest must meet the following requirements:

• the volume of energy requested in advance may not exceed the average annual consumption relevant for inclusion in the energy-intensive list;

• The Energy Intensive Company, as customer, undertakes to

  • to build or have built by a third party a Plant, which shall come into operation within 40 (forty) months from the conclusion of the Advances Contract, except in the event of force majeure or delays in the authorisation procedures not attributable to the company;

  • sign, or have the third party sign, the Repayment Agreement within 40 months of the signature of the Advances Agreement;

  • provide an appropriate guarantee within the terms and in the manner defined by the GSE in the Operating Rules. 

The Energy Intensive Company shall also have to provide an appropriate security to confirm its willingness to take part in the allocation procedure; this security shall be returned upon signature of the Advance Contract or upon declaration of waiver, if any.

Preliminary conclusions

Excluding in this context a full description and analysis of the complexities emerging from the DM Energy Release and of the content of the Advance Contract and of the Return Contract, their nature and relationship with the PPA and, perhaps, with the virtual PPA, there are certainly several points to be clarified, which can hopefully be defined in the Operating Rules by the GSE, in order to fully understand the access modalities as well as the functioning of the Energy Release mechanism. 

The Operating Rules may in fact be useful in order to identify, the reference price for the operation of the Energy Release mechanism, the amount of the deposit to be paid in order to participate in the call for tenders, the system of guarantees required of Energy Intensive Company for the signing of the Advance Contract and the Restitution Contract, the Transfer Price - which shall be determined on the basis of the “average efficient cost of producing renewable energy from plants of efficient scale using competitive mature technologies” - and the relationship between access to the incentive and the subject matter of the supply contract entered into with the third party producer of additional electricity if the same is not produced directly by the Energy Intensive Company.

Written by Piero Viganò, Ernesto Rossi Scarpa Gregorj and Valentina Castelli.