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ITALY: INCENTIVISED RENEWABLES
Following Directive 2001/77/CE and the proposal for a new directive, this year Italy has simplified the permitting procedures for the construction and operation of electrical power plants fuelled by renewable sources and has introduced incentive schemes that have made investing in this sector particularly attractive to Italian and foreign investors. This process started in 2003 and is continuing (the latest piece of legislation, Law 115, is dated May 30 2008) to enhance the path to simplification, at least for renewable sources of energy. The chronic illness of the country has always been its slow and cumbersome permitting process.In Italy, renewable sources are defined from the legal perspective as non-fossil sources such as those generated by the wind, the sun, waves or tide, the flow of water, geothermic phenomena or biomass and dump gas. Article 229 of Law 152 of 2006 also includes among renewable sources fuel made from high quality wastes to the extent of their biodegradable portion.
Construction and operation
Simplified permitting procedures for the construction and operation of plants for production from renewable sources were first introduced in 2003 by Law 387 and were supplemented in 2007 by Law 244/07.
Article 12 of Law 387/03 provides that "the construction and the operation of plants for the production of electricity fuelled by renewable sources, their modification, upgrading, partial or total revamping and the restarting of their commercial operation, as well as any connected facility and infrastructures necessary for their construction and operation are subject to a single permit to be released by the Region or by the provincial authorities delegated to do so by the Region".
The "single permit" is all that is required to build and operate medium and large power plants in conformity with their approved project. It is therefore an important simplification as it imposes on all public administrations involved (region, province, municipality) the duty to participate in a single proceeding and allows the applicant to obtain a single decision at the end of the proceeding, within a maximum of 180 days from the application.
In actual fact, the implementation of the law is not yet completely satisfactory as far as timing is concerned. Experience to date, particularly with respect to wind farms but also with respect to photovoltaic and biomass, has shown timing well in excess of 180 days, due in some cases to the complexity of the project and, in others, to the presence of building or zoning constraints in the area. There are examples, though, of local decisions based on political considerations such as the position taken by Calabria and Basilicata, two regions that have chosen to suspend the issuing of any permit (for wind farms in Calabria and photovoltaic plants in Basilicata) until the approval of their respective "Piano Energetico Ambientale Regionale"Regional Energy and Environmental Plan). A similar position was taken by two other regions (Puglia and Sardinia) but was overruled by the Constitutional Court, as is likely to happen with Calabria and Basilicata.
Municipalities, too, have in some way attempted to play a role neither contemplated by the said law nor aligned to it. Those in the territory for which the plant was intended have tried to impose the execution of concession agreements providing for compensation and environmental rebalancing fees proportional to the amount of energy produced. Here again the initiative is gradually losing momentum because of the decisions of the administrative courts, which have decided on the illegality of those forms of compensation in contrast to the purpose of the law: to give an incentive for the production of electricity from renewable resources.
The efforts made by the public authorities regarding adhering to the intention of the legislator and the guidelines of the EU are undoubtedly still significant but, even so, one cannot doubt the fact that the recent enactment of new laws as mentioned above and the parallel legislation to the same effect by the regions is producing a general trend in local authorities for a tendency not to create (or indeed remove) obstacles to the issue of a single permit for renewable sources of energy.
Emblematic is the case of Puglia, a region that took a conservative view in the past and where now one may see a real surge of applications for new permits, from large plants to small ones. The region itself has issued legislation in favour of the use of renewable sources, anticipating the national legislation by allowing the construction and operation of plants not exceeding 1 MW, on the basis of a unilateral communication to the relevant authority (the DIA), without requiring even the single permit otherwise necessary, with an obvious reduction of costs and time.
National law has progressed further, with the recent Law 115/2008, published in the "Official Gazette" on July 3 2008, permitting the construction and operation of so-called mini plants (wind generators with a diameter no larger than 1 metre and a not higher than 1.5 metres and photovoltaic installations that fit to the roof without adding to the dimensions of the building) only on the basis of a simple communication to the municipality.
The complexity of the legal framework is still such that the role of legal counsel requires a high degree of specialisation, from the delicate phase of due diligence over the status of the land and its conformity to use to the evaluation of the proceedings to be followed (or, as often happens, already followed) in the specific circumstances, taking into account both national and regional laws, and the resulting permits (DIA).
Many small or not so small developers have come from nowhere, often leveraging their activity merely on their knowledge of the local environment, putting together land and permits to build and operate (normally a series of small) renewable resource-based plants and offer these projects to professional investors or industrial concerns. It is not rare to find cases in which crucial peculiarities that may have a serious impact on the project (such as tax status or flaws in the permitting), as well as on elements that might undermine their bankability, have been underestimated.
Financial aid mechanisms
Several methods of providing incentives for the use of renewable sources have been adopted by the Italian legislator over the years and apply to date.
CIP 6 (feed-in tariff)
The feed-in tariff is a pre-determined price for every unit of electricity produced for a given period of time and introduced into the grid. Its purchase, having priority over conventionally produced energy, is purchased by the State Agency for Electrical Services (GSE) at a subsidised price and re-sold to the market at market price. This system of subsidy, known as CIP6, only applies to plants built during the period in which the system was in force, but is no longer applicable to new plants, although a new version of the feed-in tariff system is now applicable to photovoltaic plants, as follows.