The European Commission has approved, under EU State aid rules, a €5.7 billion Italian scheme made available in part through the Recovery and Resilience Facility (‘RRF’) to support the production and self-consumption of renewable electricity. The scheme contributes to the EU’s strategic objectives relating to the European Green Deal.
The Italian scheme
The scheme will be partly funded by the RRF, following the Commission’s positive assessment of Italy’s Recovery and Resilience Plan and its adoption by the Council. The part of the scheme financed by the RRF will run until 31 December 2025, while the remaining part of the scheme will run until 31 December 2027.
The scheme supports the construction of renewable power generation installations, as well as the expansion of existing ones. Beneficiaries are small projects, with capacity of up to 1 MW. Beneficiaries can access the scheme on a first come, first served basis. The scheme is composed of two aid measures:
A premium tariff on the quantity of electricity consumed by self-consumers (final customers who generate renewable electricity for their own consumption) and renewable energy communities (legal entities empowering citizens, small businesses and local authorities to produce, manage and consume their own electricity), paid over a 20-year period. This measure, with a total budget of €3.5 billion, will be financed through a levy on the electricity bill of all consumers.
An investment grant of up to 40% of eligible costs, for a total budget of €2.2 billion financed through the RRF. Eligible projects must become operational before 30 June 2026 to benefit from funding through the RRF and should be located in municipalities with less than 5.000 inhabitants.
While the two measures can be combined, the total amount of State aid cannot exceed the funding gap of the projects, so that the aid is limited to the minimum needed for carrying out the projects.
The Commission’s assessment
The Commission assessed the scheme under EU State aid rules, in particular Article 107 (3)(c) of the Treaty on the Functioning of the European Union (‘TFEU’), which enables Member States to support the development of certain economic activities subject to certain conditions, and the 2022 Guidelines on State aid for climate, environmental protection and energy.
The Commission found that:
- The scheme facilitates the development of certain economic activities, in particular the production of renewable electricity.
- The measure is necessary and appropriate for Italy to meet the European and national environmental targets. In addition, the measure is proportionate, as it is limited to the minimum necessary. In particular, the aid is granted to small installations and does not exceed the funding gap.
- The aid has an incentive effect, as the supported renewable installations would not be financially viable without the public support.
- The aid brings about positive effects, in particular on the environment, in line with the European Green Deal, that outweigh any possible negative effects in terms of distortions to competition.
On this basis, the Commission approved the Italian scheme under EU State aid rules.
All investments and reforms entailing State aid, also those included in national resilience and recovery plans presented in the context of the RRF, must be notified to the Commission for prior approval, unless covered by one of the State aid block-exemption rules.
The Commission assesses measures entailing State aid contained in national recovery plans presented in the context of the RRF as a matter of priority and has provided guidance and support to Member States in the preparatory phases of the national plans, to facilitate the rapid deployment of the RRF. At the same time, the Commission makes sure in its decision that the applicable State aid rules are complied with, in order to preserve the level playing field in the Single Market and ensure that the RRF funds are used in a way that minimizes competition distortions and do not crowd out private investments.
The Commission’s 2022 Guidelines on State aid for climate, environmental protection and energy provide guidance on how the Commission will assess the compatibility of environmental protection, including climate protection, and energy aid measures which are subject to the notification requirement under Article 107(3)(c) TFEU. The new guidelines, applicable as of January 2022, create a flexible, fit-for-purpose enabling framework to help Member States provide the necessary support to reach the Green Deal objectives in a targeted and cost-effective manner. The rules involve an alignment with the important EU’s objectives and targets set out in the European Green Deal and with other recent regulatory changes in the energy and environmental areas and will cater for the increased importance of climate protection.
The Energy Efficiency Directive of 2018 established an EU-wide binding energy efficiency target of at least 32.5% by 2030. With the European Green Deal Communication in 2019, the Commission reinforced its climate ambitions, setting an objective of no net emissions of greenhouse gases in 2050. The recently adopted European Climate Law, which enshrines the 2050 climate neutrality objective and introduces the intermediate target of reducing net greenhouse gas emissions by at least 55% by 2030, set the ground for the ‘fit for 55′ legislative proposals adopted by the Commission on 14 July 2021. Among these proposals, the Commission has presented an amendment of the Energy efficiency directive to develop a more ambitious binding annual target for reducing energy use at EU level.
Energy communities are legal entities that empower citizens, small businesses and local authorities to produce, manage and consume their own energy. They can cover various parts of the energy value chain, including production, distribution, supply, consumption, and aggregation. Energy communities may vary depending on their location, the actors they involve and the energy services they provide.
In energy communities, citizens can access low-cost renewable energy by taking ownership of production installations, as well as access information on how to increase energy efficiency in their households, which can help them to better control their energy bills, while keeping individual investments affordable. At local level, these communities contribute to the creation of jobs opportunities and enhance social cohesion through annual general assemblies and local activities.
The non-confidential version of the decision will be made available under the case number SA.106777 in the State aid register on the Commission’s Competition website once any confidentiality issues have been resolved. New publications of State aid decisions on the internet and in the Official Journal are listed in the Competition Weekly e-News.