EU Commission approves Italian aid for renewable electricity production

Brussels – The European Commission approved the Italian measure to support the production of 4,590 MW of new electricity capacity from renewable sources. According to the EU executive, which assessed the instrument under EU state aid rules, the scheme contributes to the achievement of the EU’s strategic goals related to the European Green Deal while helping to end dependence on Russian fossil fuels and accelerate the green transition.

The measure, which will remain in effect until Dec. 31, 2028, will be financed through a levy on end-consumer electricity bills and includes a “maximum amount” of 35.3 billion euros. “There will be an open competition where different parties can bid for these resources. So, you can say that” the €35.3 billion figure is “a wrapper, a maximum amount of the scheme,” explained European Commission competition spokeswoman Lea Zuber at today’s (June 4) EU executive press conference.

The scheme will support the construction of new power plants using innovative and not yet mature technologies, such as geothermal energy, offshore wind energy (floating or fixed), thermodynamic solar energy, floating solar energy, tidal, wave, and other marine energies in addition to biogas and biomass. The power plants are expected to feed 4,590 MW of renewable electricity into the Italian power system. Depending on the technology, the timeframe for commissioning the power plants varies from 31 to 60 months.

The Commission specified that the aid would take the form of a two-way contract for difference per kWh of electricity produced and fed into the grid and would be paid for a duration equal to the useful life of the power plants. “Projects will be selected through a transparent and non-discriminatory bidding process, in which beneficiaries will bid for the incentive tariff (the operating price) required to implement each project. The reference price for electricity will be calculated as the hourly zonal price, i.e., the price of electricity when the energy is fed into the grid and in the market area where the power plant is located,” the EU executive described. “When the reference price is lower than the strike price, beneficiaries will receive payments equal to the difference between the two prices. When the reference price exceeds the strike price, beneficiaries will have to pay the difference to the Italian authorities. The scheme will ensure long-term price stability for renewable energy producers by guaranteeing a minimum level of return; at the same time, beneficiaries will not be overcompensated for periods when the reference price is higher than the strike price,” he further pointed out.

The European Commission, after assessing the measure, concluded that the scheme “facilitates the development of an economic activity,” namely the production of electricity from renewable sources using innovative or not yet mature technologies, in addition to biogas and biomass, and “supports the EU’s strategic objectives“; it is “necessary and appropriate for Italy to meet European and national climate goals” and is “proportionate in that the aid is limited to the minimum necessary to stimulate investment”; “has an incentive effect” because without public support, beneficiaries would not make the same amount of investment in renewable energy plants; and, finally, “produces positive effects that outweigh any potential distortion of competition and trade in the EU.”

On this basis, the European Commission said yes.