The Energy Release Decree

Ministerial Decree no. 268/2024 (the Energy Release Decree) introduced the “Energy Release 2.0” mechanism to encourage the development of new renewable generation capacity by energy-intensive companies (either individually or in aggregate) that are registered, or are in the process of being registered, in the Cassa per i Servizi Energetici e Ambientali (CSEA).

The implementing rules (Implementing Rules) adopted by the Energy Services Manager (GSE) in application of the Energy Release Decree provide for the regulatory framework to take part in this mechanism and have been approved by Directorial Decree No. 11/2024 of the Ministry of Environment and Energy Security (MASE).

The aim is to reduce energy costs for approximately 4,000 energy-intensive companies in Italy and enhance the country’s renewable generation capacity by up to 5GW.

The Energy Release 2.0 incentive mechanism

Energy-intensive companies are eligible to obtain an advance of electricity from the GSE for three years at a fixed price (not subject to indexation or inflation), in exchange for the commitment to construct new renewable generation plants with a capacity at least twice the capacity received through the advance contract, by (i) building new photovoltaic, wind or hydroelectric plants with a minimum capacity of 200 kW each, or (ii) revamping photovoltaic, wind or hydroelectric plants with an increase of power capacity of at least 200 kW. 

The GSE will not physically deliver the allocated amount of electricity to the energy-intensive company; instead, it will deliver the corresponding guarantees of origin (GoOs) for three years.

As an alternative to directly constructing new generation capacity, energy-intensive companies can appoint third parties by means of procurement contracts. In the absence of any further guidance in the Implementing Rules, it is reasonable to assume that third parties may have different roles, e.g. they may only obtain the required authorisations of the plant, commission the plant and/or make the plant authorised and commissioned by them available to the energy-intensive companies by means of specific agreements. Energy-intensive companies may also undertake to purchase renewable energy from third parties through long-term corporate power purchase agreements (PPAs).

The GSE will provide 23 TWh of energy annually for the duration of the three-year advance contract. This energy comes from renewable plants that benefit from all-inclusive tariffs, dedicated withdrawal (ritiro dedicato) and onsite exchange mechanisms (scambio sul posto). 

The procedure for the allocation of capacity

Interested companies have until 14 February 2025 to submit their applications.

The application must be submitted jointly with a deposit of Euro 10,000 and must indicate the volume of advance electricity requested. (expressed in MWh/year). The capacity requested cannot exceed, on an annual basis, the average annual consumption of the company as per the register of electricity-intensive companies kept by the CSEA (for entities participating in aggregate form, this requirement applies to each applicant). The applicant can also indicate a minimum threshold below which the relevant allocation is waived.

The offtake contract

Upon receipt of the applications, the GSE will verify the applicants’ requirements and allocate the volume of energy in its availability. The offtake contract will be signed by the GSE 30 days after the results of the allocation procedure are published.

The offtake contract is a two-way contract for difference and enables the companies declared eligible to be admitted to the mechanism and receive the advance of electricity, and related guarantees of origin GoOs for three years, regardless of the date on which the renewable plant is commissioned. 

Under the offtake arrangement, the GSE will pay to the eligible companies the difference, between Euro 65/MWh and the average monthly sale price on the electricity market (should the sale price be lower that Euro 65/MWh. Or, if the average monthly sale price exceeds Euro 65/MWh, the GSE will be paid the difference. This amount has been established by the GSE taking into account the average production costs of efficient and large-scale plants using mature technologies (i.e. wind and solar).  

The offtake contract provides for a mixed system of guarantees in favour of the GSE, namely:

• an autonomous guarantee subject to further increase for the period of validity of the offtake contract, to be updated annually (by June 30 of each year) on the basis of the energy advanced; and
• a collective guarantee in the form of a retention of the fee paid by the GSE to secure the construction of the minimum new generation capacity.

Pursuant to Regulation (EU) No. 2831/2023, eligible companies may receive a contribution to cover the costs of the guarantees required by the GSE, up to 50% of the guarantee itself and up to a maximum amount of Euro 300,000 for each company within the overall cap of Euro 100,000,000.

The amount of electricity advanced may be reduced and if so, the new generation capacity to be commissioned will be updated accordingly.

The return contract (contratto di restituzione)

The energy-intensive company/aggregator/third party plant operator must sign the return contract (contratto di restituzione) with the GSE within 40 months from the signing of the offtake contract - this being the deadline for the commissioning of the plant - and no later than 31 December 2030. This contract provides for the obligation to return to the GSE the electricity advanced and the equivalent value of the corresponding GoO. This repayment is made by means of a contract for difference over a period of 20 years from the commissioning of the plant at a price equal to the sale price of Euro 65/MWh, not subject to indexation or inflation.

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We would be happy to assist you in the submission of the applications or address any query you may have.