European Commission Approves $39B Italian Renewable Energy Aid Scheme

The European Commission has approved, under EU State aid rules, a EUR 35.3 billion (USD 38.5 billion) Italian aid scheme to increase electricity production from renewable sources by 4,590 megawatts.

The Italian scheme aligns with European Green Deal objectives and will run until December 21, 2028. The aid is a levy included in consumers’ electricity bills.

The European Commission said in a press release that the scheme will support the construction of new plants running on innovative and not yet mature technologies, namely geothermal energy, offshore wind power (floating or fixed), thermodynamic solar, floating solar, tidal, wave and other marine energy as well as on biogas and biomass. Depending on the technology, projects could enter into operation within 31 to 60 months.

The measure is necessary for Italy to meet European and national climate targets. Moreover, it is proportionate as the aid is limited to the minimum required to trigger investments, the Commission said.

In addition, necessary safeguards are in place, including a competitive bidding process for awarding the aid and a two-way contract for difference mechanism that limits profitability in case of energy price increases, since the guaranteed remuneration cannot exceed the incentive tariff that the applicant initially bids for, the Commission said.

In the two-way contract power producers will receive payments when electricity prices are low and make payments to the authorities when prices are high, ensuring long-term price stability, the Commission said.

The aid has an incentive effect, as the beneficiaries would not carry out the investments in renewable plants to the same extent without public support, the Commission added.

“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”, Margrethe Vestager, executive vice president in charge of competition policy, said. 

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