Red II Directive: The News on The Energy Communities Contained in the Transposition

The process of transposition of the RED II Directive began with the Decreto Milleproroghe (so-called “Thousand-extension” Decree-Law) which came into force at the end of February 2020 and introduced in the Italian legislation the definitions of:

• Renewable Energy Communities;
• Renewable energy self-consumers acting collectively.

Specifically, RECs are legal entities made up of groups of subjects (such as natural persons, local authorities, companies) located in the vicinity of renewable energy production plants that group on a voluntary basis to produce and consume clean electricity, according to the principles of self-consumption and energy self-sufficiency.

Self-consumers of renewable energy, on the other hand, are end customers who, by operating in own sites located within defined borders, produce renewable electricity for their own consumption and can store or sell self-produced renewable electricity provided that, for a renewable energy self-consumer other than a household, such activities do not constitute the main commercial or professional activity. We speak of a group of self-consumers when a group of at least two self-consumers acts collectively by virtue of a private agreement and who are located in the same condominium or building.

These two configurations are very important tools to encourage the active involvement of citizens in the country’s energy transition process, and to counteract the phenomenon of rising energy prices for families and businesses.

However, the Thousand-extension Decree-Law also introduced some limitations that are important for the development of RECs, such as: the concept of physical proximity for the aggregations, limiting the creation of energy communities to users with the same secondary substation, and the total power limit for systems that cannot exceed 200 kW.

The next step was the ARERA Resolution no. 318/2020 of August 2020, which contains the Authority’s provisions on the regulation of economic entries relating to electricity that is the object of collective self-consumption or of sharing as part of a renewable energy community.

Subsequently, the Implementation Decree of the MiSE of September 15, 2020 whose article 3 sets the incentive tariff, recognised for 20 years, for the remuneration of the energy produced by renewable energy plants included in the aforementioned configurations:

• 100 €/MWh if the production plant is part of a collective self-consumption configuration;
• 110 €/MWh if the production plant is part of a renewable energy community.

To date, this measure has not undergone any changes and it is possible to carry out simulations on the generation of incentives with the ROSE Energy Community Designer.

Other important measures, in the context of the ecological transition, are those contained in the National Recovery and Resilience Plan (NRRP), approved on 13 July 2021, which allocates approximately 60 billion in investments to the “Green Revolution and Ecological Transition”. Of these, 23.78 billion are devoted overall to renewable energies and specifically 2.2 billion for the development of energy communities. The objectives to be achieved are to increase the quota of energy produced from renewable energy sources (RES), to strengthen and digitise the network infrastructures in order to accommodate the increase in production from RES.

About a month later, on 5th August, the Council of Ministers preliminarily approved the implementing decree of various European directives, including the RED II and IEM, and published the draft.

As regards the shared energy incentive mechanisms, Article 5 confirms the provisions of the draft, and provides that the electricity produced by plants powered by renewable energy sources can access tariff incentive instruments, and that the incentive is assigned through a tariff established by Gestore dei Servizi Energetici (GSE S.p.A.) on the portion of energy that is self-consumed, from the date of entry into operation of the plant.

As regards the large plants (those with power at least equal to or greater than 1 MW), the incentive is attributed through competitive procedures of downwards bids carried out in reference to power quotas.

For small-sized plants (power below 1 MW), the incentive is awarded according to the following mechanisms:

• for plants with generation costs closest to market competitiveness, by means of an application to be made directly upon entry into operation of the plant, without prejudice to compliance with technical and environmental protection requirements;
• for innovative plants and for plants with higher generation costs, through calls for tenders in which power quotas are made available and selection criteria are set based on compliance with technical, environmental and territorial protection and cost efficiency requirements;
• these plants belonging to energy communities or self-consumption groups have the possibility of accessing an alternative direct incentive to the one mentioned above, which rewards the self-consumed energy instantly through a specific tariff.

The combination of renewable energy sources with energy storage systems is also promoted, in order to allow a greater programmability of sources.

The conditions for cumulation with the tax concessions envisaged for the construction of the plants and storage systems as well as with other support schemes, including those of the NRRP, are established, taking into account the different subjective characteristics and those of the plants, maintaining the principle according to which an overall fair remuneration of the interventions is guaranteed.

Article 7 deals with the issue of the Regulation of tariffs for plants with a power below 1 MW, defining the methods for implementing the incentive systems whilst respecting certain criteria.

For plants with generation costs closest to market competitiveness:

• the application for access to the incentives must be submitted on the date of entry into operation and no prior registration to calls for tenders or registers is required;
• the access to the incentive is guaranteed up to the achievement of established power ceilings, on a five-year basis;
• the incentive favours self-consumption and the combination of non-programmable renewable energy plants with storage systems, in order to allow greater programmability of sources.

For innovative plants and for plants with higher generation costs:

• calls for selection are foreseen, within the limits of power quotas;
• firstly, compliance with environmental and territorial protection requirements are used as priority criteria, followed by the offer of a percentage reduction of the basic rate, in order to select the most meritorious initiatives from the point of view of the impact on the environment, as well as more virtuous in terms of cost reduction;
• calls take place on a regular basis and provide for mechanisms to guarantee the construction of authorised plants, including by setting deadlines for their entry into operation.