Incentives for innovative renewable plants

Incentives for renewable innovative technologies: Decree Fer 2

On 13 August 2024, the Ministerial Decree of 19 June 2024 came into force. It's titled "Incen-tivisation of renewable source plants that are innovative or have high generation costs and a low impact on the environment and the territory" (Decree FER 2 or the Decree). It will apply until 31 December 2028.

Innovative plants are defined as plants powered by biogas and biomass, thermodynamic solar, geothermal, offshore wind, floating photovoltaic both offshore and on internal waters, and plants powered by wave, sea and other forms of marine energy, which present characteristics of innova-tion and reduced impacts on the environment and territory.

The objective, as indicated in Article 1 of the Decree, is to help achieve the decarbonisation objectives to 2030 set forth in the Integrated National Energy and Climate Plan (PNIEC) by sup-porting the electricity production costs of innovative renewable energy plants, through incentives that stimulate their competitiveness.

The technical rules of the GSE S.p.A, which should have been published within 30 days of the Decree entering into force, are essential for the application of the incentives.

We're still waiting for the technical rules to be issued.

 

Requirements for admission to incentives

Decree FER 2 provides significant incentives for a set of renewable technologies, character-ised by limited deployment and operating costs that are often higher than those of traditional sources.

 

The incentivable technologies are listed below, with their eligibility requirements:

• they have to be equipped with a thermal storage system with a nominal storage capacity of not less than: 1.5 thermal kWh per m2 of collecting surface if the collecting surface is greater than 50,000 m2; 0.4 thermal kWh per m2 of collect-ing surface if the collecting surface is between 10,000 and 50,000 m2;
• they must not use substances and prepa-rations classified as very toxic, toxic and harmful in accordance with Direc-tives 67/548/CEE and 1999/45/CE and their subsequent amendments as heat transfer fluid or storage medium.

Incentivable tech-nologies	General admission re-quirements	Specific admission requirements
Biomass and bio-gas plants	Access to the competitive procedures set out in the De-cree is open to plants that: hold a permit for the con-struction and operation of the plant or, at the request of the producer, hold the positive environmental impact assessment, if ap-plicable; have had an estimate for the connection to the grid definitively accepted; comply with the mini-mum environmental and performance requirements for specific technologies (see the column on the right); the works for which have not started before the publication of the ranking list. The works are deemed to have started when the first obligation is taken on, making an investment as irreversible as the purchase of the equipment. In this regard, the purchase of the land and the preparatory works are not to be considered as the start of work.	Biogas plants must comply with the following requirements: nominal power capacity not higher than 300 kWe;the plant's digestate tanks, with a volume equal to the production of at least 30 days, as specified in the relevant permit, are equipped with a gas-tight cover and gas recovery systems to be reused for electricity or biomethane production; the thermal energy produced is recovered and is primarily self-consumed on site, serving the company's processes, or fed into an efficient district heating system; the plants use at least 80% of the by-products listed in Table 1, Part 1 annexed to the Decree and for any residual portion products listed in Table 1, Part B of the Decree; products and by-products used, at least 51% of which derive from the production cycle of the farms setting up the power plant. Biomass plants must comply with the following requirements: nominal power capacity not higher than 1,000 kWe; the thermal energy produced is recov-ered and is primarily self-consumed on site, to serve the company's processes, or fed into an efficient district heating system, and compliance with the dust emission limit of 50 mg/Nm3 (6% oxy-gen content) is guaranteed; the plants use by-products as per Table 2, Part A, annexed to the Decree for at least 80% and for any residual portion products defined by Table 2, Part B an-nexed to the Decree, in both cases with-out transformation into pellets; the by-products referred to in Table 2, Part A, and the products referred to in Table 2, Part B annexed to the Decree, are procured by the companies building the plants by means of agreements iden-tifying the geographical areas and sites of origin of the same products and by-products; the by-products and products used will guarantee, with respect to the fossil fuel of reference, greenhouse gas emission savings of at least 70% as deducible from the applicable standard values for the production of electricity set forth in Annex VII, Part A1, of Legislative De-cree no. 199 of 2021, taking as a refer-ence parameter the geographic distance as the crow flies between the plant and the sites of origin; for by-products and products not expressly indicated in An-nex VII, the greenhouse gas emission saving is deemed to be met when the geographic distance is less than 500 km.
Solar thermody-namic plants		Thermodynamic solar plants must meet the following requirements: they have to be equipped with a thermal storage system with a nominal storage capacity of not less than: 1.5 thermal kWh per m2 of collecting surface if the collecting surface is greater than 50,000 m2; 0.4 thermal kWh per m2 of collect-ing surface if the collecting surface is between 10,000 and 50,000 m2; they must not use substances and prepa-rations classified as very toxic, toxic and harmful in accordance with Direc-tives 67/548/CEE and 1999/45/CE and their subsequent amendments as heat transfer fluid or storage medium.
Geothermal pow-er plants		Traditional geothermal plants are allowed provided they meet the fol-lowing requirements: for Mercury and Hydrogen Sulphide Abatement (AMIS) plant output values, compliance with the emission limits for H2S and Hg indicated in Annex B to the Regional Law of Tuscany no. 7 of 5 Feb-ruary 2019; for emissions at the plant output, the limits are 70% of those indi-cated in Annex B; abatement of NH3 emissions equal to at least 75% with respect to the NH3 con-tent of the fluid entering the plant; compliance with the minimum operating requirements as defined in Annex A to Regional Law of Tuscany no. 7 of 5 Feb-ruary 2019. For refurbishment, for the purposes of the application of Annex 2 of the Ministerial Decree of 6 July 2012, an average refer-ence cost for new plants of EUR4,600/kW is assumed. Zero-emission geothermal plants that meet the criteria of total re-injection of the geo-thermal fluid into the same formations of origin, and in any case zero process emis-sions, as provided for by Legislative De-cree no. 22 of 11 February 2010.
Offshore wind farms		Offshore floating wind farms are allowed. These offshore wind farms on fixed foun-dations must be located with a minimum distance from the coast of 12 nautical miles.
Floating photovol-taic plants		Offshore floating photovoltaic plants and internal water floating photovoltaic plants are allowed. For floating photovoltaic plants, the pho-tovoltaic modules must be placed on the market by manufacturers of Electrical and Electronic Equipment who are members of individual or collective management systems as provided for in Articles 9 and 10 of Legislative Decree No. 49 of 14 March 2014, as amended.
Sea-motive power plants

 

Access mechanisms and quotas

Article 4 of the Decree FER 2 provides that the incentives are to be assigned through public competitive procedures called by the GSE, at regular periods, over the five-year period 2024-2028. In the context of these public procedures, the GSE will make available power quotas for each technology, in which the applicants will have to submit, with regard to plants with a power exceed-ing 300 kW, an offer for a tariff reduction equal to at least 2% with respect to the base tariff.

The Decree FER 2 indicates the total power quotas made available in the competitive proce-dures below:

Procedure	Type of plant	Category	Power capacity (kW)	Total quotas available 2024-2028 (MW)
Procedure A	Biogas	New plants	P≤300	150
	Biomass		P≤1.000
Procedure B	Small-scale thermo-dynamic solar	New plants	P≤300	5
Procedure B-1	Medium-large thermodynamic solar	New plants	P>300	75
Procedure C	Traditional geothermal with innovations	New plants	Any power capacity	100
Procedure C-1	Zero-emissions geothermal	New plants	Any power capacity	60
Procedure D	Floating photovoltaic in internal waters	New plants	Any power capacity	50
Procedure E	Offshore floating photovoltaic	New plants	Any power capacity	200
	Tidal, wave and other forms of marine energy
Procedure E-1	Offshore wind	New plants	Any power capacity	3,800
Procedure F	Traditional geothermal with innovations	Renovation	Any power capacity	150

 

The procedures will be carried out electronically. The applications to participate in the proce-dures for access to the incentives must be submitted to the GSE through its website within 60 days. Each request must be accompanied by the reference tariff reduction offer and the documentation required to verify the compliance with the requirements for participation in the competitive proce-dures listed in Article 3 of the Decree FER 2.

If the applications for participation, taken as a whole, result in exceeding the quota made available for the individual procedure, the GSE will apply the following additional priority crite-ria, where the percentage reduction offered is equal:

• plants built in the areas identified as "suitable areas" pursuant to of Articles 20 and 23 of Leg-islative Decree no. 199 of 2021;
• anteriority of the final date of completion of the application for participation in the procedure.

Once the documentation has been received, the GSE will verify the completeness of each ap-plication and rank the participants, taking into account the percentage reduction offered with re-spect to the reference tariff within the following 90 days. The ranking of the selected plants will be published by the GSE on the official website, highlighting any priority criteria applied.

In addition, for plants with a capacity higher than 10 MW, the operators will be able to benefit from the accelerated project evaluation procedure pursuant to Article 6 of the Decree FER 2. This procedure provides that the applicant must make a specific request to this effect, to be forwarded to the GSE with the application for the issuance of the single authorisation. Within 30 days from the date of issuance of the single authorization, the GSE issues the applicant a qualification of eli-gibility to apply for incentives.

Article 11 of the 2 FER Decree provides for specific procedures for the participation of plants located on the territory of other EU member states in the auction procedures. Plants located on the territory of EU member states or third countries bordering Italy and with which the EU has entered into a free trade agreement (which physically export their production to Italy) will be able to par-ticipate in the procedures of the Decree FER 2 under the conditions and according to the modali-ties set forth in paragraphs 2 et seq. of Article 11 of the Decree.

 

Incentive tariffs

With regard to the modalities for the disbursement of the incentive tariffs, Article 9 of the De-cree provides that the GSE will proceed to pay the incentives in different ways depending on the power of the plants. In particular:

• for plants with a power capacity not exceeding 300 kW (as of 1 January 2026, the threshold is reduced to 200 kW), the GSE will directly provide for the withdrawal and sale of the electricity, disbursing, on the net production fed into the grid, the tariff due in the form of an all-inclusive tariff;¹
• for plants with a power capacity higher than 300 kW (as of 1 January 2026, the threshold will be reduced to 200 kW), the electricity produced will remain at the disposal of the producer, who will have to independently provide for its valorisation on the market. In this case, the GSE will calculate the difference between the applicable tariff and the hourly zonal electricity price. Where the difference is positive, it will provide the incentives by applying a premium tariff, equal to the aforementioned difference, net of the production fed into the grid. And where it's negative, it will make an adjustment or request the corresponding amounts from the holder.

The GSE will disburse the incentives for a period equal to the conventional useful life indicat-ed in Annex 1 of the Decree (also in this case, net of any stops due to force majeure or due to the realisation of modernisation and upgrading work that is not incentivised).

The disbursement of incentives is suspended during the hours in which market prices are zero, or during the hours in which prices are negative, where provided for in the Italian electricity mar-ket regulation.

The table below shows the value of the incentive tariff for each technology admitted to the in-centive system and its duration.

Fonte rinnovabile	Type	Power capacity (kW)	Incentive duration (years)	Tariff (EUR/MWh)
Geothermic	Traditional with innovations	Any power capacity	25	100
	Zero-emissions			200
Wind	Offshore	Any power capacity	25	185
Photovoltaic	Offshore floating	Any power capacity	20	105
	Floating on internal waters	1<P≤1000		90
		P>1.000		75
Biogas	Using specific products and by-products	1<P≤300	20	233
Biomass	Using specific products and by-products	1<P≤300	20	246
		300<P≤1.000		185
Tidal, wave and other forms of marine energy		Any power capacity	20	180
Thermodynamic solar		1<P≤300	25	300
		300<P≤5.000	25	240
		P>5000	25	200

 

The incentives under the Decree may only be cumulated with aid mechanisms falling into the following categories:

• exclusively for newly built facilities, capital grants not exceeding 40% of the investment cost;
• guarantee funds and revolving funds;
• tax concessions in the form of tax credits or deductions from business income for investments in machinery and equipment.

In case of cumulation, the incentive tariff is reduced as follows.

For plants to which a capital contribution has been granted or recognised, the incentive tariff is calculated by applying the percentage factor (1-F), where F is a parameter that varies linearly be-tween 0 (no capital contribution) and the following values referring to the case of a capital contri-bution equal to 40% of the investment:

• 12% for plants fuelled by biogas and biomass;
• 26% for all other plants.

Tempi per la realizzazione degli interventi e comunicazione di entrata in esercizio degli impianti

Article 7 of the Decree FER 2 provides that, as the GSE publishes the ranking list, the plants ranking in the relevant lists must enter into operation within the timeframe indicated in the list² and set forth below:

Type of plant	Category	Months
Biogas	New plants	31
Biomass
Traditional geothermic with innovations	New plants	51
Traditional geothermic with innovations	Renovation	36
Zero-emissions geothermic	New plants	60
Photovoltaic floating on internal waters	New plants	36
Offshore wind	New plants	60
Offshore floating photovoltaic	New plants	43
Tidal, wave and other forms of marine energy	New plants	36
Thermodynamic solar	New plants	55
For plants owned by the Public Administration the terms are increased of 6 months.

 

Failure to comply with the deadlines will result in reducing the applicable tariff equal to 0.5% for each month of delay, up to a maximum limit of nine months. Once this further deadline has ex-pired, the GSE will declare the forfeiture of the incentives and, if the plant is subsequently read-mitted to the incentive mechanisms, a 20% reduction of the applicable reference tariff will be applied to it.³

Pursuant to Article 8 of the Decree, operators will have to notify the GSE of the date of entry into operation of the plants within 30 days following the start of operation. Failure to communicate within this deadline will result in the loss of the right to receive the tariff due for the period be-tween the date of entry into operation of the plant and the first day of the month following the date of the late communication. Following the entry into operation of the plant, the operator will also have the opportunity to carry out a startup and testing phase of the plant, in accordance with the timeframe and procedures to be indicated in the operating rules, at the end of which it has to notify the GSE of the date of entry into commercial operation. By the last day of the third month follow-ing the communication, the GSE will proceed with disbursing the incentives.

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¹The operators may request, as an alternative, that the incentives be disbursed in the manner set forth in the paragraph below.
²The timeframes indicated are to be considered net of any downtime in the construction of the plant and related works resulting from force majeure.
³Please note, however, that this provision won't apply if, within 12 months from the date of publication of the ranking list, the applicant communicates to the GSE the withdrawal of the realization of the intervention.