The regulatory framework for solar photovoltaic plants in Italy is constantly evolving. Plant owners, asset managers and investors need to stay informed in order to adapt to developments in this sector and avoid adverse outcomes. The following highlights the key updates in this market in the last 12 months.
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Italy is reported to have given formal notice to withdraw from the Energy Charter Treaty (ECT).
Rumours of Italy’s intention to leave the ECT had been circulating since last autumn. IAReporter now revealed that Italy has delivered its official notice of withdrawal in January 2015.
According to the journal, Italy’s decision to withdraw, is to save on costs associated with its membership. This is certainly an unusual justification for a developed country’s withdrawal from a multilateral investment protection treaty.
Pursuant to article 47 of the ECT, Italy’s withdrawal will take effect upon the expiry of one year after the date of notification, thus in January 2016. However, the provisions of the Treaty will continue to apply to investments made in Italy before such date for a period of further 20 years.
As a consequence:
- With respect to past energy investments, investors can continue to bring their claims against Italy until January 2036. In particular, Italy’s withdrawal from the ECT does not prevent PV investors from bringing a claim for last year’s feed-in tariff cuts.
- With respect to future energy investments, investors should (i) either ensure the investment is made before January 2016 or (ii) consider to structure the investment so as to obtain protection under a suitable bi-lateral investment treaty (BIT).
Owners of early generation Conto Energia I photovoltaic (PV) plants are currently receiving letters from the Gestore dei Servizi Energetici (GSE) announcing that it will adjust the Feed-in Tariff (FiT) downwards and claim reimbursement of, or set-off with, the excess payments it made in past years. An example of one of these letters is attached here.
The Ministerial Decree of 28 July 2005 (the original version of the Conto Energia I) provided for an annual adjustment of the FiT to account for inflation. The Ministerial Decree of 6 February 2006 removed this adjustment for inflation with retrospective effect. This even applied to PV plants that had already qualified for the FiT under the original version of the Conto Energia I.
At first instance, in 2008, the Administrative Court of Milan and the Highest Administrative Court (Consiglio di Stato) ruled the Ministerial Decree of 6 February 2006 null and void, stating that it violated not only the general principle of legal acts not being retroactive (Article 11 of the preliminary provisions of Civil Code), but also the general principles of certainty of laws and legitimate expectation of the citizens (Regional Administrative Court of Milan, Sez. IV, 10 November 2006 n. 2125, as confirmed by Cons. Stato, Sez. VI, 4 April 2008 no. 1435). Based on these rulings, the GSE continued to publish the inflation-adjusted FiT rates for early generation Conto Energia I plants year by year until 2012.
In a parallel proceeding, however, the Consiglio di Stato decided not to follow its own 2008 decision and submitted the question to the Plenary Chamber. In May 2012, the Chamber ruled the opposite of the Consiglio di Stato’s 2008 decision and confirmed the legitimacy of the retrospective abolition of the inflation adjustment relating to early generation Conto Energia I plants. The Consiglio di Stato argued that the Ministerial Decree of 6 February 2006 did not actually modify a previous legal provision but only interpreted it in a different, and acceptable, manner (Cons. Stato, A.P., 4 May 2012, no. 9).
It took until 26 March 2013 for the GSE to react to the Plenary Chamber’s reversal of the Consiglio di Stato’s decision. On that date, it released the news bulletin, in which it stated it would no longer adjust the Conto Energia I FiT rates in line with inflation. The GSE did, however, continue to pay the increased rates that had already been generated by the inflation adjustments.
The GSE has now sent out the letters referred to above, informing early generation Conto Energia I plant owners that the GSE will i) readjust the FiT to its original amount, prior to any adjustment for inflation, and ii) claim reimbursement of, or set-off with, all excess payments made until now. The GSE also invites recipients of these letters to submit comments and observations within 10 days.
There are a number of questions that can be legitimately raised with respect to the GSE’s latest move:
- Could PV plant owners have legitimately relied on the inflation adjustment after the 2008 decision, at least until the second decision of the Consiglio di Stato in 2012 – meaning it might be illegal for the GSE to claim back the excess amounts paid until 2012?
- Could PV plant owners have also legitimately relied on the fact that the GSE would not claim back the excess amounts, after it only declared in 2013 that it would stop any further inflation adjustment and did not mention the prospect of PV plant owners having to reimburse the GSE?
- PV plant owners have paid taxes on the excess amounts that should now be reimbursed in full. How will these taxes be reimbursed to them?
In our opinion, PV plant owners who have received these letters from the GSE should respond to the GSE and should also consider whether or not to file an appeal before the Regional Administrative Court.
The introduction of retrospective tariff cuts to photovoltaic (PV) plants and the abolition of the Robin Tax by the Italian Constitutional Court, combined with simplified regulation and taxation of new forms of debt financing, have turned the attention of foreign investors from PV assets to other renewable energy sources (RES) assets.
Italian plants producing energy from RES other than PV have been supported by public incentive schemes since 1999, and have not been hit by the tariff cuts introduced by legislative decree 91/2014 (the so-called “spalma incentivi”). It is, however, easy for foreign investors to become confused by the complex set of rules governing the incentives granted to RES plants.
This Special Report provides a complete and updated overview on the Italian regulation of incentives given to RES plants. It will help investors find their way through the jungle of rules and identify and understand the incentives that apply to a potential investment.