Greenlight for €35.3bn Italian scheme of 4.6GW renewable capacity

The European Commission has approved, under EU State aid rules, a €35.3 billion ($38.4 billion) Italian state aid scheme to support a total of 4,590MW of new renewables capacity for electricity production from renewable energy sources.

The scheme will support the construction of new plants running on innovative and not yet mature technologies, including geothermal energy, offshore wind power, thermodynamic solar, floating solar, tidal, wave and other marine energy as well as on biogas and biomass.

The measure, which will run until 31 December 2028, will be financed through a levy included in the electricity bills of final consumers.

The plants are expected to add a total of 4,590MW of renewables capacity to the Italian electricity system. Depending on the technology, the deadline for successful plants to enter operation varies between 31 to 60 months.

Under the scheme, the aid will take the form of a two-way contract for difference for each kWh of electricity produced and fed into the grid and will be paid for a duration equal to the useful life of the plants.

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The projects will be selected through a transparent and non-discriminatory bidding process, where beneficiaries will bid on the incentive tariff (the strike price) needed to carry out each individual project.

The reference price for electricity will be calculated as the hourly zonal price, which is the electricity price at the time the energy is fed into the grid and in the market area where the plant is located.

When the reference price is below the strike price, the beneficiaries will be entitled to receive payments equal to the difference between the two prices.

However, when the reference price is above the strike price, the beneficiaries will have to pay the difference to the Italian authorities.

Commenting on the announcement was Margrethe Vestager, the European Commission’s executive vice-president in charge of competition policy, said:

“This scheme enables Italy to support the production of renewable electricity from various technologies, including innovative ones. The measure helps Italy meet its emission reduction and electricity production targets. It will also contribute to achieving the European Green Deal objectives, while limiting possible distortions of competition.

According to the Commission in a release, the scheme will ensure long-term price stability for renewable energy producers by guaranteeing a minimum level of return, while at the same time ensuring that the beneficiaries will not be overcompensated for periods when the reference price is higher than the strike price.

The Commission adds that the scheme contributes to the EU's strategic objectives relating to the European Green Deal, while helping to end dependence on Russian fossil fuels and fast forward the green transition.