The Energy Regulation and Markets Review: Italy
The process of liberalising the European energy market started more than 20 years ago, with one of its main purposes being to provide and organise the supply of electricity and gas more efficiently by implementing competitive principles where possible and providing proper regulation where needed.
Since 1996, the European Commission has vigorously promoted the idea of a European single market in the energy sector.2
This represented the start of a long process of opening national wholesale and retail electricity and gas markets to trade and competition across the European market area. As a result, the requirement of adhering to a single market strategy has deeply changed Member States' national energy systems and policies, and has considerably altered the institutional, organisational and managerial structure of the sector and its regulations.
Since then, the Italian energy market has undergone an extensive liberalisation trend, which is still under way now.
The first step towards the substantial liberalisation of the electricity market in Italy was taken in 1999 when the national Parliament implemented European Directive 96/92/EC through Legislative Decree No. 793 (also called the Bersani Decree) as the relevant transposing act, which has profoundly revolutionised the entire organisation of the Italian electrical supply chain.4
The next step in this long-term process is likely to be the long-awaited complete deregulation of gas and electricity retail prices, which is expected to come into force, after several postponements,5 in January 2022.
i The regulators
The main competent authorities that currently determine regulatory policies with respect to the energy sector are the Italian Regulatory Authority for Energy, Networks and the Environment (ARERA,6 formerly AEEGSI),7 the Energy Services Manager (GSE),8 as the parent company of the relative GSE group, the Fund for Energy and Environmental Services (CSEA), the Ministry of Economic Development (MISE) and the Ministry of the Environment, Land and Sea (MATTM).
ARERA is an independent regulatory body for energy markets and integrated water services. Established in 1995,9 it was entrusted with the task of protecting the interests of users and consumers, promoting competition principles and ensuring efficient, cost-effective and profitable nationwide services in the electricity and gas sectors with satisfactory quality levels through regulatory and control activities.
ARERA's core regulatory competences include defining and maintaining a reliable and transparent tariff system, reconciling the economic goals of operators with general social objectives, promoting environmental protection and the efficient use of resources, setting the standards for quality of service and defining a framework aimed at protecting and empowering consumers in competitive markets. It also provides a specialist advisory and reporting service to the government and Parliament on the regulated sectors with the possibility of formulating proposals, observations and recommendations for further policy actions.
The effectiveness of ARERA's regulatory and supervisory measures is ensured by the power to impose administrative sanctions on market operators that do not comply with energy laws or regulations.
Initially limited to electricity and natural gas, the authority's scope of action has been extended by some regulatory interventions,10 which allocated regulatory and control functions over water services, district heating and cooling, and waste cycle, including sorted, urban and related waste.
At the international level, ARERA plays an active part11 in creating a standardised system of energy regulation and integrating the national electricity and gas markets into a single European market.
Another fundamental energy authority in Italy is the GSE,12 founded in 1999 as a state-owned company that promotes and supports the use and the efficient management of renewable energy sources (RES) in Italy by means of economic incentives and information campaigns aimed at spreading a culture of environmental protection through energy field operators. Specifically, the GSE fosters sustainable development by providing support for renewable electricity generation – it manages more than 10 incentive mechanisms – and by taking action to build awareness of environmentally efficient energy use. In particular, it uses a series of market tools and mechanisms, such as white certificates and renewable energy for heating and cooling support schemes. In addition, the GSE carries out sector studies, processes statistics on sustainable development and supports public administrations in their energy paths.
The GSE is the parent company of the respective GSE group and, therefore, it guides and coordinates the organisational and operational activities of the other special purpose subsidiaries competent in specific segments of the energy market, such as the Single Buyer (AU),13 the Energy Market Manager (GME),14 the Energy Research Body (RSE)15 and all public interest companies operating in the energy sector.
In particular, the AU's main purpose is to guarantee the availability of electricity by purchasing the required electrical capacity and reselling it to distributors on non-discriminatory terms. Furthermore, the AU has been appointed as the central oil stockholding entity.16
The GME, on the other hand, organises and manages the electricity, natural gas and environmental17 markets, in addition to the market for trading daily products, the day ahead auction and intraday auction markets, in compliance with the principles of neutrality, transparency, objectivity and competition. The GME also establishes the conditions for admission and the proper rules for the organisation and functioning of these markets.
The RSE carries out publicly funded national and international programmes in the fields of electrical power, energy and the environment.
The CSEA operates in the electricity, gas and water sectors by collecting the system surcharges paid by the end users from market operators.18 It also manages the funds through dedicated accounts and subsequently uses them to grant subsidies to businesses based on the criteria set forth by the ARERA.19
Last, fundamental functions have been assigned to the MISE and the MATTM. The MISE oversees Italy's energy policy by defining the strategy and setting out general principles for the organisation and functioning of the renewable energy market. In addition, it has regulatory powers to implement any relevant legislation passed by Parliament from time to time.20 The MATTM is responsible for climate policy and it co-signs MISE policy measures promoting renewable energy and energy efficiency.
ii Regulated activities
As stated in Section I, when the Bersani Decree came into force, the electricity sector liberalisation process started, which for the first time provided the network's legal unbundling and provided that the generation, importation, exportation, purchase and sale of electricity were free market activities21 and therefore not subject to any licence or permit regime. Electricity transmission and dispatching phases, being of national interest, have remained under state control.
The aforementioned activities are managed through a concession scheme by the National Transmission Grid Operator (Terna),22 which handles the national transmission system in a non-discriminatory way, makes decisions on grid development and maintenance actions, and at the same time guarantees the security and continuity of supply to any and all companies requesting it against the payment of an energy transmission tariff. In addition, Terna is entrusted with the management of power flows, interconnections and other ancillary services.
With reference to the gas market, Legislative Decree No. 164 of 23 May 2000 (also called the Letta Decree) implementing European Directive 98/30/CE,23 established that the activities of importation, exportation, transportation, dispatching, distribution and the sale of natural gas, in whatever form and for whatever use, are free.24
Thereafter, a comprehensive common regulatory framework was provided by Law No. 239 of 23 August 2004,25 which ultimately clarified that the production, importation, exportation, dispatch, purchase, transformation and sale of energy is free, although these activities should be carried out in accordance with public service obligations. Further, it specified that both the transportation and dispatch of natural gas, in addition to the management of energy supply networks, are activities of public interest and, therefore, are subject to public service obligations. Finally, Law No. 239 stated that the distribution of electricity and natural gas, the exploration and production of hydrocarbons and the transmission and dispatch of electricity are all subject to concessions by the competent authorities.
With regard to the development and construction of new facilities and infrastructure (e.g., transmission lines, power plants and gas storage facilities), it has been provided that prior authorisation under state and regional legislation is required to ensure compliance with, among other things, health and safety standards, environmental protection and existing infrastructure.26
iii Ownership and market access restrictions
The Italian energy market is open to foreign investors who are subject to the non-discrimination general principle. In particular, the European Energy Charter27 provides for the general obligation of all Member States to comply with the most favoured nation clause and the national treatment principle28 with reference to national foreign investments.
Hence, as a general principle, there are no foreign ownership or market access restrictions in Italy. Nonetheless, it should be underlined that in some specific cases – and in particular with reference to mergers and acquisitions deals – national and European antitrust authorities may impose certain limitations or prescriptions to comply with and enforce competition rules.
iv Transfers of control and assignments
To safeguard the assets of companies operating in areas deemed 'strategic' and 'of national interest', Law Decree No. 21 of 15 March 2012 (converted into Law No. 56 of 11 May 2012 and now amended by Law Decree No. 23 of 8 April 202029 – known as the Liquidità Decree) regulates the special powers30 that can be exercised by the Italian government in the context of corporate transactions involving strategic sectors such as energy, transport, communications and critical infrastructures, among others.31
Specifically, the exercise by the government of special powers in the energy sector is subject to the existence of a 'threat of serious harm' to public interests, related to the security and functioning of networks and installations and to the continuity of energy supply.
In particular, the Liquidità Decree establishes that market operators holding strategic assets in the aforementioned sectors should notify the government within 10 days of any relevant corporate decision, resolution, act or transaction.32
Within 15 days of notification,33 the government has the right to exercise its 'golden powers' in the form of vetoes or conditions whenever the notified operation is assessed to represent an exceptional threat to national interests.
Transmission/transportation and distribution services
i Vertical integration and unbundling
To ensure impartiality, competitiveness, transparency and to avoid a concentration of activities in the management and development of the energy infrastructure network, the European Union adopted34 – as one of its main regulatory instruments – a new unbundling regime on vertically integrated energy network operators.35 In particular, new rules were introduced on unbundling for transmission system operators (TSOs)36 and for distribution service operators (DSOs).37
The unbundling regime for TSOs has been implemented in national law by means of Legislative Decree No. 93 of 1 June 2011, which first adopted the independent transmission operator model and imposed the independence of the electricity TSO (Terna) from companies operating in the generation, distribution and sale of energy, and Law Decree No. 1 of 24 January 2012 converted into Law No. 27 of 24 March 2012, in which the ownership unbundling model was adopted to enact the functional separation between ENI S.p.A. and SNAM S.p.A. with reference to the natural gas market.38
Since electricity and gas distribution is an activity reserved by the state and regulated as a natural monopoly, it is granted to eligible companies only under concession.39
While the first section of the electricity grid (i.e., long-distance transmission at high voltage as stated above) is now managed by a single operator (Terna), a public tender for the concession of the distribution service to a single DSO in each minimum geographical area of the Italian territory is to be held in turn.
ii Transmission/transportation and distribution access
In the sphere of energy, when dealing with energy transmission and distribution access, the third-party access (TPA)40 concept applies. Indeed, it refers to the right granted to gas and electricity producers, energy suppliers and their customers, allowing them to make use of, and have their energy traded and transported through, electricity grids and gas pipelines that are owned or controlled by other network operators, providing that TPA does not affect the continuity and safety of the transmission and distribution service.41
The TPA principle was first implemented in the national electricity system by ARERA, which adopted the Consolidated Text of Active Connections,42 in which the detailed technical and economic conditions for TPA to transmission and distribution networks were set forth.43 Second, non-discriminatory TPA rules are to be found in the Italian Grid Code,44 introduced by Terna with reference to the National Transmission Grid.
The pricing mechanism covering rates relating to the transmission and distribution of electricity and gas is established and updated annually by ARERA.47
The electricity transport tariff covers the costs for electricity transmission on the National Transmission Grid, while the distribution tariff is related to the costs for electricity transportation over the distribution network; both tariffs are applied to all end customers with the exception of low-voltage households.50
With regard to the gas market, in March 2019, ARERA outlined the pricing criteria for the rates of transportation and dispatching of natural gas for the period 2020–2023.51 In addition, a separate tariff regulation for gas distribution and metering was issued in 2020 for the period 2020–2025,52 differentiated between six tariff areas.
iv Security and technology restrictions
One of the most important quality factors in the security of the electricity supply is the continuity of service (i.e., the lack of interruptions).53 For this reason, before 31 March each year, companies must provide ARERA with continuity of service data for the previous year (i.e., information on the number of interruptions and their duration).54
Regulation of the quality of the natural gas transportation service in terms of security, continuity and commercial quality for the period 2020–2023 is governed by Resolution No. 554/2019/R/gas of December 2019.
In addition, other additional security measures will be taken in accordance with provisions set forth in the European Programme for Critical Infrastructure Protection.55 To face the new challenges arising from smart grid infrastructure and cyberattacks, in 2018, Italy transposed into national law the Network and Information Security Directive.56
i Development and regulation of energy markets
The GME operates the power, gas and environmental markets.57 It runs the Italian Power Exchange (IPEX), the venue for transactions involving the wholesale sale and purchase of electricity, gas and energy efficiency certificates, in a neutral, transparent, objective, competitive and non-discriminatory way.
The electricity market was set up in Italy in 199958 and it is managed on the basis of a specific discipline59 governing market functioning, trading and settlement rules, operator participation and disciplinary procedures in the event of misconduct. This regulatory framework was updated by the Ministerial Decree of 12 December 2019.
With the enforcement of Law No. 99 of 23 July 2009 on the development and internationalisation of companies and energy matters, the GME was exclusively entrusted with the organisation and economic management of natural gas markets and associated services.62
GME gas markets include the gas trading platform (also known as P-GAS),63 the wholesale gas market (also known as MGAS),64 where the GME acts as the central counterparty to the transactions concluded by operators, and the platform for the allocation of regasification capacity (also known as PAR).
The GME is directly involved in the implementation of environmental policies by organising and managing environmental markets consisting of the energy efficiency certificates (also called white certificates) market and the guarantee-of-origin market.
Moreover, Legislative Decree No. 249 of 31 December 2012 tasked the GME with developing, organising and managing a market platform for the trading of mineral oil logistic services, as well as collecting mineral oil storage capacity data.65
ii Contracts for the sale of energy and market developments
At the wholesale level, energy transactions may be carried out either in the context of organised markets managed by the GME or over the counter.66
At the retail level, since 2003 (gas)67 and 2007 (electricity),68 consumers are free to choose their own energy provider. Nonetheless, if they do not choose, by 1 January 2022 the free market will be the only available option and they will be subject to the contractual and economic conditions defined by ARERA.
Renewable energy and conservation
i Development of renewable energy
In line with the global trend of using RES as the basis for power generation, Italy has experienced and is currently experiencing a substantial increasing trend in renewable energy development projects.69
One of the most notable improvements in the renewable energy industry is the development of the National Energy Strategy (NES)70 presented by the MISE and the MATTM in 2017, which sets clear and ambitious goals: reduce energy costs, meet environmental targets, strengthen the security of energy supply and foster sustainable economic growth.71
Moreover, among the main operative documents of the NES is the Integrated National Energy and Climate Plan for 2021–2030 (NECP),72 a comprehensive environmental action plan presented by the Italian government to the European Commission on 31 December 2019, in which Italy sets new ambitious targets to further increase the share of renewable energy.
With regard to RES promotion, the government has strongly supported renewable energy projects with a range of economic incentive schemes that have not only favoured RES plants over traditional thermoelectric plants in many contexts (such as priority dispatch), but also have simplified administrative procedures for the construction and operation of RES plants.73
At the current stage of the market, the incentives are no longer in place and the operators are targeting grid parity. To achieve this, producers and offtakers (and eventually banks financing grid parity initiatives) are evaluating a workable scheme of long-term power purchase agreements (PPAs).
In this regard, the RES Decree (as defined below) has expressly opened a consultation phase to implement PPAs in Italy, as is further explained below (see 'Economic incentives').
Simplified administrative procedures
Unique regional authorisation procedure
To pursue the aim of speeding up renewable energy development projects, Legislative Decree No. 104 of 16 June 201774 has provided the unique regional authorisation procedure (PAUR), which should be initiated when projects are subject to an environmental impact assessment (EIA) under regional competence.
The PAUR allows an applicant to obtain in the context of a comprehensive single procedure all the authorisations, concessions, licences, opinions, clearances and assents needed to implement and execute the project (including the EIA and the single authorisation, as described below – see 'Single authorisation'), that are therefore 'absorbed' and encompassed therein.
Thus, the applicant will submit the PAUR request by attaching the relevant project description and documentation with a list of all authorisations needed75 to proceed with the project's execution.
A significant issue related to the PAUR concerns the identification of the competent authority, with some conflict of competence involving regions and provinces.76
As stated above, PAUR encompasses the single authorisation.77
Nonetheless, these authorisations are generally issued by the region concerned (or by the MISE for power plants with capacity equal to or greater than 300MW), pursuant to a unified proceeding of all the authorities involved in the project.78
If the project has nominal power greater than 1MW, it is subject to an EIA or a pre-screening procedure, in which case single authorisation cannot be issued until this procedure has been completed.
Simplified authorisation procedure
Another simplified administrative procedure provided to accomplish the easier and faster development of RES project objectives is the simplified authorisation procedure.
This latter applies to the construction of small plants with low generation capacity (such as photovoltaic plants on building roofs). The procedure is managed by the competent municipality, which should be notified by the building owner with a declaration and a detailed technical description of the project at issue.79
Free construction – simple communication regime
The construction of certain small-scale installations generating energy from RES is exempt from building permit obligations and is thus subject to a simple notification to the municipality, which should contain the works commencement notification and a detailed project report.80
Another significant development in the promotion of renewable energy is represented by a series of legislative acts providing economic incentives for developers of RES projects.
The Ministerial Decree dated 4 July 2019 concerning the 'Incentives for the electricity produced by onshore wind, solar photovoltaic, hydroelectric and gas plants', which became effective on 10 August 2019 and intended to cover the following three-year period (the RES Decree), is an important contribution.
The RES Decree provides for the promotion of electricity production from plants powered by renewable sources through the promotion of effectiveness, efficiency and sustainability.
The RES Decree divides the plants that can access the incentives into four groups based on their type, their renewable energy source and the size of the projects – Groups A, A-2, B and C – and provides two operative ways to access the incentives depending on the power of the plant and the group to which it belongs: application to the registers or to the auction procedures.81
The RES Decree established that the incentives82 are to be paid on the net electricity produced and fed into the grid by the plant.
An important aspect to be underlined when dealing with the RES Decree is its contribution to the development of PPAs.83 Indeed, the RES Decree provides that the GME must enact a regulatory framework for the creation of a market platform for long-term trading to be set up within 180 days of its entry into force; the GME will begin a public consultation aimed at collecting input for the implementation of the platform.84
The aim is to promote the trading of production by newly constructed renewable energy plants that are entirely reconstructed or reactivated, upgraded or refurbished, which started operating after 1 January 2017 and have not benefited from energy production incentives. Non-economic forms of support are provided for, such as the classification of the plants (by the GSE), the removal (by ARERA) of any regulatory barriers and an update of the guarantee of origin regulations, to enable its direct cancellation by end users.
The operators will be able to use the platform (and any sample agreement eventually adopted by Italian regulators) on a voluntary basis.
ii Energy efficiency and conservation
Within the framework provided by the European Union,85 Italy has established its own energy efficiency strategy, which is based, among other things, on the following.
Energy efficiency certificates
Projects with the aim of increasing energy efficiency may be eligible to obtain energy efficiency certificates (also known as white certificates).
White certificates are tradable instruments that give proof-of-end-use energy savings that electricity and gas distributors with more than 50,000 customers are required to achieve. The scheme aims to support the production of thermal energy from renewables and high-performance cogeneration units, as well as small-scale interventions of energy efficiency for private persons and public administrations. They are issued by the GME under an authorisation granted by the GSE and they may be sold or bought in the energy efficiency certificates market or bilaterally.
A white certificate scheme has been provided in Italy by the Ministerial Decree dated 20 July 2004, subsequently amended by the Ministerial Decrees of 21 December 2007, 28 December 2012 and 11 January 2017, with the latter determining the national quantitative targets for increasing energy efficiency for the period 2017–2020.
Notably, a new incentive scheme covering the forthcoming three-year period has not yet been adopted. We expect to see further legislative development in the following months clarifying how white certificate mechanisms will be dealt with from 2021.
Thermal energy account
The thermal energy account86 encourages projects with the aim of increasing energy efficiency and related to the production of thermal energy from renewable sources for small plants. The beneficiaries are mainly public administrations, but also include companies and individuals, who have access to funds of €900 million per year.
The National Fund for Energy Efficiency
The National Fund for Energy Efficiency87 supports energy efficiency measures carried out by companies, including energy service companies, and the public administration on buildings, plants and production processes. it also promotes the involvement of national and EU financial institutions and private investors on the basis of adequate risk sharing.
iii Technological developments
One of the main objectives pursued by environmental bodies and authorities is to create a resilient energy system that remains reliable through short-term and mid-term climate situations and that is able to continually evolve, even in long-term situations.
To accomplish this aim of smarter energy infrastructure, it is vital to promote the development of micro grids and smart grids88 to encourage high-efficiency self-generation in urban communities and industrial districts, with due regard to the security of the system.
Following this path, the MISE has established a state aid programme dedicated to investments for the construction of intelligent electricity distribution networks,89 which is valid until 31 December 2020.
Nonetheless, other technological developments, which are still under way in Italy and are related to the evolution of smarter energy networks, are connected to the electric vehicles charging infrastructure system.
To ensure the security of energy supply, promote smarter and renewed energy infrastructures and foster the use of a wide variety of primary energy sources, the Italian government, implementing the Alternative Fuels Infrastructure Directive (AFID)90 by means of Law Decree No. 257 of 16 December 2016, has set forth minimum requirements for the construction of a charging infrastructure for the development of alternative fuels and the establishment of charging stations for electric vehicles and for vehicles that use natural gas, hydrogen and liquefied petroleum gas.
In particular, the decree mandates the establishment of a National Strategic Framework for the development of an alternative fuels market in the transportation sector and the creation of related infrastructures.
With regard to the supply of electricity for transportation, in particular, the Law Decree establishes that, before 31 December 2020, an adequate number of charging stations accessible to the public will be created throughout the country to facilitate urban and suburban transportation services in highly populated areas. Furthermore, specific incentives are established for the installation of charging stations for electric vehicles for the supply of hydrogen used for road transportation and the supply of natural gas and liquefied petroleum gas. These incentives allow individuals, companies and condominiums to access a new tax deduction of 50 per cent on a maximum of €3,000, in 10 equal annual instalments, for the purchase and installation costs of electric vehicle chargers from 1 March 2019 to 31 December 2021.
The year in review
Conclusions and outlook
During the past decade, Italy has experienced an impressive increase in renewable energy projects and has proven itself to be one of the leading EU Member States in integrating large volumes of variable renewable generation, even overcoming the target set by the European Union and the Italian legislature for 2020.
As has been stated, with the submission of the NECP to the European Commission, more challenging and ambitious goals have been set, by increasing the 2030 target figures for renewable energy and energy efficiency.91 However, the adoption of the NES and the NECP is only a first step towards achieving the ambitions of the national government, which must carefully monitor future implementation and maintain momentum.
Nonetheless, in the following months, further and new developments are expected to be seen following the final transposition of the 2018 Energy Efficiency Directive,92 providing measures that will accelerate the rate of building renovation towards more energy-efficient systems and strengthen the energy performance of new buildings, making them smarter.
1 Giorgio Telarico is a counsel, Mario Cigno is a senior associate and Amalia Serena Scimè is a legal trainee at Baker McKenzie.
2 The primary legislative means through which the EU has brought about its purposes related to the single market are mainly the three electricity market directives. The First Energy Package was adopted in 1996 (Directive 96/92/EC) and the Second and Third Energy Packages were adopted in 2003 (Directive 03/54/EC) and 2009 (Directive 09/72/EC) respectively. These directives required Member States to meet a number of specific requirements in their national legislations, and to set out a pan-European policy.
3 Legislative Decree No. 79 of 16 March 1999 'Implementation of Directive 96/92/EC concerning common rules for the internal market in electricity'. Directive 96/92/EC is no longer in force, as it was subsequently repealed by Directive 2003/54/EC, which was in turn repealed by Directive 2009/72/EC.
4 Thereafter, the national energy sector was affected by several other legislative acts of the EU targeting, specifically, all energy market-related elements, such as generation, transmission and distribution services, the identification of retail suppliers and customers, the degree of unbundling and cross-border trading over interconnectors.
5 In particular, Law No. 124 of 4 August 2017 provided the end of the protection services (i.e., the supply services of electricity and natural gas) with contractual and economic conditions defined by the Regulatory Authority for Energy, Networks and the Environment [ARERA] for small end customers (such as households and small businesses) who have not yet chosen a seller in the free market. Initially, the date to enforce the gas sector's full deregularisation was 30 June 2015. Instead, with reference to the electricity sector, the date was 30 June 2016. Subsequently, a series of postponements – the second-to-last postponement established July 2020 as the date for both sectors – have slowed down the process, with the final decision of December 2019 again deferring the date to 1 January 2022, as provided in Law Decree No. 162 of 30 December 2019.
6 Autorità di Regolazione per Energia Reti e Ambiente.
7 The Authority for Electricity, Gas and Water System (AEEGSI) was renamed ARERA by Law No. 205 of 27 December 2017 as a result of the regulatory and control functions in the waste cycle attributed to the latter.
8 Gestore dei Servizi Energetici.
9 Created under Italian Law No. 481 of 14 November 1995.
10 See Italian Legislative Decree No. 201/11 converted into Law No. 214/11, Legislative Decree No. 102 of 4 July 2014 transposing the Energy Efficiency Directive 2012/27/EU into national law, and Italian Law No. 205 of 27 December 2017.
11 More specifically, it participates in the work of the Agency for the Cooperation of Energy Regulators and it is a founding member of the Council of European Energy Regulators. It is the main promoter of the Association of Mediterranean Energy Regulators, of which it holds the permanent vice presidency, and it has a prominent role in the Energy Community Regulatory Board. It also supports the International Confederation of Energy Regulators and, in April 2014, it promoted the launch of the European Water Regulators, a network for cooperation between water sector regulators, of which it has held the presidency since 2015.
12 The Energy Services Manager [GSE] was founded by Legislative Decree No. 79 of 16 March 1999 and it has a central role in the promotion, support and development of renewable energy sources in Italy. In particular, it has been identified by the state to pursue and achieve environmental sustainability through the two pillars of renewable sources and energy efficiency. The Ministry of Economy and Finance owns 100 per cent of its share capital and the Ministry of Economic Development [MISE] sets down the strategic and operational guidelines. Originally, its main competence was the management of the electricity transmission grid. However, in 2005, this function was transferred to Terna S.p.A.; the GSE now specialises in renewable energy and public incentives.
13 Acquirente Unico S.p.A.
14 Gestore Mercati Energetici.
15 Ricerca sul Sistema energetico.
16 See Legislative Decree No. 249 of 31 December 2012 and EU Directive 2009/119/CE.
17 The environmental markets consist of the energy efficiency certificates market and the market of the guarantees of origin.
18 The Interministerial Prices Committee established the Equalization Fund in 1961 with the mandate to compensate losses due to the unification of electricity prices. The current structure of the Fund for Energy and Environmental Services is the result of the reform enacted by Law No. 208 of 28 December 2015.
19 See, for example, ARERA Resolution No. 921/2017/R/eel of 28 December 2017, as amended by Resolution No. 644/2018/R/eel of 11 December 2018, concerning contributions in favour of energy-hungry enterprises (c.d. imprese energivore).
20 The MISE's main areas of competence include the national energy budget and strategy, transport networks, energy infrastructures and security of supply, the single market for electricity, promotion of renewable energy and energy efficiency and savings, technology for the reduction of greenhouse gas emissions, peaceful uses of nuclear energy, demolition of dismantled nuclear facilities, the national gas system and market, the downstream oil system and its market (refining, logistics, stocks and fuel distribution), national mining policy, issuing permits for exploration and cultivation of subsoil resources (in particular, hydrocarbons on mainland and under the sea), storage of natural gas and methanisation of southern Italy.
21 Before the Bersani Decree, the activities were mainly in the hands of Ente Nazionale per l'Energia Elettrica [ENEL], which manages the energy sector as a domestic monopolist. Municipal companies operate in those geographical areas not served by the ENEL. At that time, however, horizontal bundling was the norm, with no competition in any segment of the sector. Practically, this meant that customers could not choose their energy supplier in any case.
22 The concession of transmission and dispatching activities initially entrusted to the National Transmission Grid Operator was subsequently transferred to Terna – Rete Elettrica Nazionale S.p.A. [Terna] as a result of the Prime Ministerial Decree of 11 May 2004. Terna is currently 29.85 per cent owned by Cassa Depositi e Prestiti, which is in turn directly owned by the state. In particular, Terna performs the role if transmission system operator [TSO], while Terna Rete Italia owns and manages most of the transmission assets (99.7 per cent). Furthermore, Terna runs long-distance and high-voltage transmissions (380 kilovolts, 220 kilovolts and 150 kilovolts), while different distribution service operators [DSOs] are responsible for providing and operating low, medium and high-voltage networks for the regional distribution of electricity, as well as the supply of lower-level distribution systems and directly connected customers. Electricity is transmitted by transferring the power produced in plants to consumer areas. For this to occur, power lines – of which Terna owns and manages more than 72,000km – and transformers are necessary.
23 Directive 98/30/EC of 22 June 1998 concerning common rules for the internal market in natural gas, repealed by Directive 2003/55/EC of 26 June 2003, which was in turn repealed by Directive 2009/73/EC.
24 Before the Letta Decree came into force, the majority of gas system activities were subject to the legal monopoly of SNAM S.p.A. (owned by ENI S.p.A. ), which controlled 97 per cent of gas production, importation, storage, transport, dispatching and distribution.
25 Law No. 239 of 23 August 2004 'Reorganisation of energy sector and delegation to the government for the reorganisation of provisions applicable to the energy sector'.
26 See Legislative Decree No. 164 of 23 May 2000.
27 The 1991 Energy Charter, also known as the European Energy Charter, provides the political foundation for the Energy Charter process. The Charter is a concise expression of the principles that should underpin international energy cooperation, based on a shared interest in a secure energy supply and sustainable economic development.
28 In particular, according to Article 10 of the European Energy Charter, each contracting party should afford the investors of other contracting states treatment no less favourable than that afforded to national or foreign investors already present in the territory.
29 On 6 April 2020, the Italian government approved Law Decree No. 23 (known as the Liquidità Decree) concerning several measures aimed at, among other things, granting liquidity to businesses to face the covid-19 emergency. The Decree was published on 8 April 2020 and new provisions apply from 9 April 2020. More specifically, Articles 15, 16 and 17 of the Decree provide some amendments to the Italian government special powers discipline.
30 The powers of intervention granted to the government, which differ from case to case and have to be exercised on the basis of objective and non-discriminatory criteria, consist of the opposition to the purchase of shareholdings, the veto, the adoption of corporate resolutions and the imposition of specific requirements and conditions.
31 Indeed, the Liquidità Decree has established that the 'golden powers' of the Italian government are immediately applicable for transactions concerning companies that are engaged in the following industry sectors: (1) critical infrastructure; (2) critical technologies and dual use items; (3) supply of critical inputs; (4) access to sensitive information, including personal data, or the ability to control such information; (5) the freedom and pluralism of the media; and (6) the banking, finance and insurance sectors.
32 Pursuant to Article 1 of Presidential Decree No. 85 of 25 March 2014, the national electricity and gas network infrastructure is considered to be of strategic importance for the purposes of the 'golden power' rules. Note that the Liquidità Decree provides an additional notice obligation in case of: (1) resolutions, acts, deeds or transactions of a company that owns assets or relationships in the new sectors listed therein (or in other sectors as may be determined by a decree of the prime minister), if such resolutions, acts, deeds or transactions imply a change of the ownership, change of control, change in the availability of such assets or change of their purpose; and (2) acquisitions of stakes in companies engaged in the new sectors listed therein (or in other sectors as may be determined by a decree of the prime minister) carried out by intra-EU companies (including state-owned) or extra-EU companies if such transactions imply the acquisition of the control of the target company.
33 Should no special power be exercised within the said term, the operation is to be deemed tacitly authorised.
34 With the adoption of Directive 2009/72/EC on electricity [Electricity Directive] and Directive 2009/73/EC [Gas Directive].
35 The regime comprises legal, accounting, information, functional and even ownership unbundling obligations.
36 With reference to TSOs, the Electricity and Gas Directives provide for a new unbundling regime with the following three models: (1) the ownership unbundling model, which requires a full separation of electricity transport activities (including both the ownership and management of electricity transportation infrastructures) from the production and sale of electricity; (2) the independent system operator; and (3) the independent transmission operator. Member States are free to opt for one of the three models, which are on an equal footing in the Directives.
37 The Electricity and Gas Directives provide that where the DSO is part of a vertically integrated undertaking the basic elements of the unbundling regime are as follows: (1) legal unbundling of the DSO from other activities of the vertically integrated undertaking not related to distribution; (2) functional unbundling of the DSO to ensure its independence from other activities of the vertically integrated undertaking; (3) accounting unbundling: requirement to keep separate accounts for DSO activities; and (4) possibility of exemptions from the requirement of legal and functional unbundling for certain DSOs.
38 In addition, in 2015, ARERA set out detailed obligations of vertically integrated companies in terms of unbundling (functional ownership separation) and debranding (brand and communication separation) between distribution and sale or other lines of business: see ARERA Resolution No. 296/2015/R/com of 22 June 2015.
39 In the electricity sector, tenders should start no earlier than 2030 because the concessions issued on 31 March 2001 will remain in force until 31 December 2030. In the gas sector, in most geographical areas, public tenders have not been launched or have been delayed.
40 The third-party access [TPA] right, as provided under Directive 2003/54/EC, is deemed a crucial element of organisation for access to the energy infrastructure system in Europe and the main instrument for opening the internal energy market to competition.
41 In addition, exemptions from TPA obligations can also be provided by the MISE (upon consultation with the ARERA) with regard to network operators that invest in the development of new interconnections with EU Member States or in the expansion of the transport capacity of pre-existing infrastructure.
42 'Testo integrato delle condizioni tecniche ed economiche per la connessione alle reti elettriche con obbligo di connessione di terzi degli impianti di produzione di energia elettrica.'
43 See Article 1.4 of the Decree of the President of the Council of Ministers of 11 May 2004 and ARERA Resolution No. 99/2008, as amended by Resolution 592/2018/R/eel.
44 The Grid Code, valid from 1 November 2005, was prepared in compliance with the provisions of the Italian Prime Ministerial Decree of 11 May 2004 on the unification of ownership and the management of the grid, on the basis of directives of the ARERA pursuant to Resolution No. 250/04. The Grid Code, approved by the authority with Resolution Nos. 79/05 and 49/06, and by the Ministry of Productive Activities, is subject to continual updating according to the procedures defined within the document. See ARERA Resolution No. 79/2005, as amended by Resolution 83/2019/R/eel.
45 Codice di Rete tipo per il servizio di distribuzione gas [CRDG]. The CRDG is an act of fundamental importance for the development of the national gas market because it is the contractual instrument by which the relationships between the companies managing distribution facilities and the retailers and wholesalers using the facility are regulated and deeply clarified. By adopting this Code, distribution companies are required to offer distribution services to retailers and wholesalers in a neutral and non-discriminatory manner. See ARERA Resolution No. 108/2006, as amended by Resolution Nos. 247/2007 and 324/2007.
46 SNAM, Codice di Rete. See Article 24.5 of Legislative Decree No. 164 of 23 May 2000 and ARERA Resolution No. 75/2003.
47 The mechanism is based on a balance between the interests at stake (network maintenance, promotion of investments, safety and efficiency of the network, environmental protection and accessible costs for customers).
48 See ARERA Resolution No. 654/2015/R/eel of 23 December 2015, as amended by Resolution No. 673/2018/R/eel of 18 December 2018.
49 Price cap regulations set a cap on the price that the utility provider can charge. The cap is set according to several economic factors, such as the price cap index, expected efficiency savings and inflation.
50 The electricity transport tariff consists of a component expressed in euro cents/kilowatt-hours and a component expressed in euro cents/kilowatts of committed power. The latter applies only to high-voltage or very high-voltage consumers, while the distribution tariff has a trinomial structure and is expressed in euro cents per pickup point per year (fixed fee), euro cents per kilowatt per year (power fee) and euro cents per kilowatt-hour consumed (energy fee).
51 See ARERA Resolution No. 114/2019/R/gas of 28 March 2019.
52 See ARERA Resolution No. 570/2019/R/gas.
53 See ARERA Resolution No. 653/2015/R/eel of 23 December 2015, concerning the quality of electricity transmission in the regulatory period 2016-2023. Distribution companies must ensure the continuous running of the service and/or they must restore it in a reasonable time when there is a problem. To ensure the smooth running of the service, distribution companies must carry out regular maintenance of the relevant network components.
54 See Article 2.20 of Law No. 481 of 14 November 1995 and ARERA Resolution No. 646/2015/R/eel of 22 December 2015.
55 'European critical infrastructure' means critical infrastructure located in EU Member States, the disruption or destruction of which would have a significant impact on at least two EU Member States. To reduce the vulnerabilities of critical infrastructures, the European Commission has launched the European Programme for Critical Infrastructure Protection. This is a package of measures aimed at improving the protection of critical infrastructure in Europe, across all EU Member States and in all relevant sectors of economic activity.
56 See Legislative Decree No. 65 of 18 May 2018 and EU Directive No. 1148 of 6 July 2016. In the gas and electricity sectors, all supply, distribution, transmission and storage operators are considered operators of essential services and are therefore subject to the obligations established by the Network and Information Security Directive.
57 As part of the liberalisation process of the electricity sector, the Energy Market Manager [GME] was initially vested with the organisation and economic management of the wholesale power market. It was also tasked with a specific role in market monitoring and setting up specific provisions to monitor the power market in Italy, reinforced by the provision included in Regulation (EU) No. 1227/2011 on wholesale energy market integrity and transparency.
58 As a result of the aforementioned Bersani Decree.
59 On 19 December 2003, the MISE approved the Integrated Text of the Electricity Market Rules. This discipline was drawn up by the GME and approved by the MISE, after consultation with the ARERA.
60 The spot electricity market consists of a day-ahead hourly auction market, a daily products market, the venue for trading daily products with delivery obligations, and an intraday auction market based on seven sessions. It also operates on behalf of the Italian TSO Terna a platform for ancillary services, through which it collects the bids and communicates the results, and a platform for the registration of over-the-counter [OTC] transactions (OTC Registration Platform or PCE).
61 Where forward electricity contracts with delivery and withdrawal obligations are traded.
62 On 6 March 2013, the MISE approved the Integrated Text of the Gas Market Rules. See the Ministerial Decree dated 6 March 2013, as amended by the GME on 8 February 2019, following ARERA Resolution No. 612/2018/R/gas.
63 When gas quotas of parties subject to the obligations of Article 11 of Law Decree No. 7/2007 are bid, and when investors participating in virtual gas storage may fulfil their obligation to bid the gas quantities made available by the virtual storage operators associated with them.
64 When parties authorised to carry out transactions at the virtual trading point may make forward and spot purchases and sales of volumes of natural gas.
65 With a view to fostering the development of competition in the sector, the same Legislative Decree also established that the GME should set up, organise and operate a platform for the wholesale trading of liquid oil products for the transport sector.
66 In this case, the transaction is to be registered on the PCE, where it will be checked for consistency with the transmission constraints on the National Transmission Grid.
67 See Legislative Decree No. 164 of 23 May 2000.
68 See Law No. 239 of 23 August 2004.
69 Italy, which already produces more than 35 per cent of its electricity from renewable sources, is one of the leading countries in the transition toward renewable power systems.
70 The main objective of the National Energy Strategy [NES] is to evolve Italy's national energy system to make it more competitive, more sustainable and more secure.
71 The targets of the NES' latest edition (2017) include: (1) reducing final energy consumption by a total of 10 MtoAe by 2030; (2) reaching a 28 per cent share of renewables in total energy consumption by 2030, and a 55 per cent share of renewables in electricity consumption by 2030; (3) strengthening supply security; (4) narrowing the energy price gap; (5) furthering sustainable public mobility and eco-friendly fuels; and (5) phasing out the use of coal in electricity generation by 2025.
72 According to the Governance of the Energy Union and Climate Action Rules, which entered into force on 24 December 2018, Italy, alongside all EU Member States, was required to develop integrated national energy and climate plans that cover the five dimensions of the energy union for the period 2021–2030 (and every subsequent 10-year period) and submit it by 31 December 2019 to the European Commission. The Integrated National Energy and Climate Plan [NECP] was created by a team of policymakers and technicians drawn from the Ministry of the Environment, Land and Sea [MATTM], the GSE, the MISE, ENEA (National Agency for New Technologies, Energy and Sustainable Economic Development), the Ministry of Infrastructure and Transport, the Energy Research Body, the ARERA, ISPRA (Higher Institute for Environmental Protection and Research) and Polytechnic University of Milan.
73 Indeed, the authorisation, certification and licensing procedures applicable to plants and associated transmission and distribution network infrastructures are simplified and proportionate.
74 See Legislative Decree No. 104 of 16 June 2017, which introduced Article 27-bis into Legislative Decree No. 152 of 3 April 2006 concerning the unique regional authorisation procedure [provvedimento autorizzatorio unico regionale – PAUR].
75 Within 15 days of submission of the application, the competent authority will notify the administrations and bodies concerned that the documentation has been published on the website. Within 30 days of publication of the documentation, the competent authority, as well as the administrations and bodies concerned, will verify the adequacy and completeness of the documentation. Following this verification, the notice to the public is published on the website. The 60-day period for public consultation begins once the notice is published.
76 For example, in certain Italian regions, such as Puglia, a regional law implementing PAUR national discipline has not yet been adopted, causing uncertainty with regard to the identification of the authority (i.e., the region or the province) competent to deal with the PAUR.
77 Provided by Legislative Decree No. 28/2011.
78 The period to complete the single authorisation procedure will not exceed 90 days. In any case, the latter 90-day period is extended if an environmental impact assessment is needed. Essentially, the single authorisation procedure brings together all stakeholders, enabling the economic operator to obtain all necessary authori2ations, permits and clearances through a single procedure, thus saving time and, consequently, speeding up investments. See Legislative Decree No. 387/2003.
79 The declaration should be submitted at least 30 days before starting construction activities. The application is authorised via tacit acceptance. Work can commence 30 days after submission if the municipality has issued no replies or notices.
80 There is no requirement to wait 30 days before starting work. Construction activities can start immediately after the communication has been submitted.
81 Auctions are typically held on the last day of March, June and October each year.
82 There are two different incentive mechanisms, depending on the power of the plant: the all-inclusive tariff, consisting of a single tariff corresponding to the due tariff, which also remunerates the electricity drawn by the GSE; and an incentive, calculated as the difference between the due tariff and the regional hourly price of the energy, as the generated energy remains at the operator's disposal.
83 A power purchase agreement [PPA] is a long-term electricity supply agreement between two parties. Usually, the PPA is executed between an electricity producer (seller) and an electricity consumer or distributor (buyer). PPAs set out in detail all the terms and conditions for the sale and purchase of electricity, including the volume of electricity to be supplied, the prices negotiated, the balance between production, consumption and penalties for breach of contract. As a bilateral agreement, the PPA may take various forms and may be adapted to the parties.
84 Preliminarily, PPAs are expected to contribute at least an additional 0.5 terawatt-hours of renewable energy per year.
85 See EU Directive No. 2012/27 of 25 October 2012, as supplemented by Directive No. 2018/844 of 30 May 2018. At the national level, the main rules on energy efficiency can be found in Legislative Decrees No. 102 of 4 July 2014 and No. 115 of 30 May 2008.
86 See the Decree issued on 16 February 2016 by the MISE in agreement with the MATTM and the Ministry of Agriculture.
87 See Article 15 of Legislative Decree No. 102/2014 and Ministerial Decree dated 22 December 2017.
88 Essentially, smart grids are energy networks that can automatically monitor energy flows and adjust to changes in supply and demand accordingly.
89 See the Ministerial Decree dated 19 October 2016.
90 Directive 2014/94/EU of the European Parliament and of the Council of 22 October 2014 on the deployment of alternative fuels infrastructure [AFID]. The AFID recommends introducing a minimum level of infrastructure for charging electric vehicles across the European Union (approximately one public recharging point for every 10 vehicles) and giving consideration to wireless charging and battery swapping. Furthermore, the AFID aims to make information about the location of recharging points more easily available and to help standardise their technical specifications. It also recommends that recharging points use intelligent metering systems that recharge batteries from the electrical network at times of low general electricity demand and that, in the long term, recharging points also allow vehicles to feed power from the batteries back into the network.
91 The full NECP document is available at https://ec.europa.eu/energy/sites/ener/files/documents/it_final_necp_main_en.pdf.
92 See EU Directive No. 2018/844/EU of 30 May 2018. Note that the transposition deadline was set for 10 March 2020 but, because of the covid-19 emergency, the transposition process has been slowed down.