Italy: Revamping, The GSE Publishes The New Rules And Creates New Opportunities For Repowering: Preliminary Considerations

Last Updated: 10 March 2017
Article by Carlo Montella, Cristina Martorana, Pina Lombardi, Daria Buonfiglio and Alberto Tedeschi

Most Popular Article in Italy, March 2017

The GSE has finally published the new framework on maintenance and renovation of the photovoltaic plants benefiting from Conto Energia support regime (the "New DTR") 1 . The set of rules provided by the New DTR further elaborates and confirms the principles and guidelines, previously set out under Ministerial Decree 23 June 2016, which served as "temporary regulation" while the new regulation was being prepared 2.

Please find below a summary of the rules provided by the New DTR, which we have organized in the following sections:

  1. scope of application and general principles;
  2. revamping and repowering, what is and what is not allowed;
  3. applicable procedures to the interventions envisaged under the New DTR;
  4. preliminary considerations. 

1. SCOPE OF APPLICATION AND GENERAL PRINCIPLES

The New DTR applies to ordinary and extraordinary maintenance activities aimed at preserving or restoring the functionality and efficiency of solar facilities. Accordingly, the New DTR provides regulation for all such activities aimed at guaranteeing the expected plant performances (functionality) as well as safety, reliability, environmental and efficiency standards (efficiency).
Ordinary maintenance includes all the activities (i) that do not alter the plant core structure and (ii) that are aimed at (a) preserving standard levels of performance of the plant and/or (b) remedying to accidents.

By way of example, ordinary maintenance consists in:

  1. planned maintenance, i.e. periodical activities to be carried out at least annually, such as on-site inspections and plants main components condition checks; reinforcement of photovoltaic panels supporting structures; cleaning; interventions on inverters, parallel switchboard and other electrical components; measurement devices periodical setting.
  2. unplanned maintenance activities, such as, for instance, replacement of electronic components or photovoltaic panels (subsequent to malfunctioning caused by wear and tear and other events like accidents), with other components having equivalent specifications.

Extraordinary maintenance consists in the replacement of a component with a new one having different features. Therefore, it can entail an upgrade of the plant (e.g. replacement of an inverter with another one more efficient or enjoying higher technical features). Any other activity implying changes to the electric layout of the facility, and the issue of a new electrical system conformity declaration, falls, similarly, within this category.

With reference to maintenance (ordinary and extraordinary) and technological upgrading activities, please note the New DTR also applies to substantial and non-substantial interventions.

Substantial maintenance and upgrading interventions include those works altering the plants' features thanks to which the relevant plant first qualified to benefit from the feed-in tariff under the relevant Conto Energia (i.e. structure, layout and settings).

Examples:

  1. within the relevant plant's site, moving, even partially, the photovoltaic panels;
  2. replacement, removal, new installation of the plants main components (i.e. panels and inverters)
  3. in certain cases, energy sale regime variations;
  4. changes to the grid connection point ID number.

Non-substantial maintenance and upgrading interventions include those works, which do not alter the requirements and the features thanks to which the relevant plant first qualified to benefit from the feed-in tariff under the relevant Conto Energia (i.e. structure, layout and settings).

Examples:

  1. moving secondary inverters or other minor electrical components;
  2. replacement, removal, installation of minor electric components when no changes to the energy sale regime occur (off-take regime or net metering);
  3. works carried out on panels or plant supporting structures not entailing modifications of the requirements on which basis the feed-in tariff has been awarded.

2. REVAMPING AND REPOWERING: WHAT IS AND WHAT IS NOT ALLOWED.

The scope of application of the New DTR is relevant with reference to revamping and repowering.

Revamping involves intervention and/or upgrading of already existing facilities in order to improve efficiency and/or restore original performance.

Repowering involves changes to the existing modules and/or inverters, including electric layout, in order to increase the installed capacity and the annual production.

Both processes can be carried out through ordinary and extraordinary maintenance activities.

Common provisions on revamping and repowering

  1. Except for cases of force majeure, unforeseeable events or circumstances not dependent on the producer, moving the plant from its original site is forbidden.
  2. Single or group of components, being them main or minor ones, can be moved when necessary in order to optimize the plant performance (such as in case of shading issues) and to improve the value of the assets holding the plant (e.g. building raising or space use reorganization), provided that the relevant framework under the relevant Conto Energia decree, on building authorizations or technical settings is complied with.
  3. Main plant components (i.e. panels and inverters) as well as minor ones (all the others) can be replaced with technologically more advanced parts. In this respect, photovoltaic panels must be new or regenerated (which is an addition, since the previous framework was not allowing the use of regenerated components) and consistent with the requirements set forth under Fifth Conto Energia. Inverters must respect the applicable technical regulations and Italian Energy Authority (AEEG) resolutions.
  4. Spare parts can be used for replacement, but they must at least comply with the features provided under the relevant Conto Energia applying to the relevant plant. Additionally, spare parts (muletti) can be installed to promptly restore those plants affected by extended malfunctioning or damaged by fire. However, in this case, they cannot be used for more than six months, must comply with the same technical requirements of the temporarily replaced components and cannot cause a plant's power increase. If spare parts are used for replacement, the interested party has the duty to prove the relevant date of acquisition by providing relevant written documentation; if the spare parts have been acquired by a third party (EPC, asset manager), the interested party has to prove – even by the O&M agreement - that the relevant spare parts have been specifically acquired for the relevant solar plant.
  5. Works, involving a variation of the grid connection point, identified with (and thus a variation of) the ID code, are allowed. They may include the following scenarios such as:
    1. grid connection voltage variations;
    2. energy sale regime (off-take regime or net metering) modifications;
    3. connection point material relocation;
    4. changing from provisional to final connection point.

In the above scenarios (from a. to d.), the connection point shall remain unique to the relevant plant, otherwise all plants connected to the same connection point will lose the right to benefit from the relevant feed-in tariff previously awarded under the relevant Conto Energia.

Repowering: new opportunities

The GSE confirmed that interventions causing a capacity increase up to 5%, for plants below 20 kW, and up to 1%, for plants with a capacity higher than 20 kW, are allowed. In this respect, the "added" capacity will benefit from the feed-in tariff awarded to the plant (which will be adjusted to the new capacity).

Please note that the above threshold (5% and 1% on the basis of the plant's size) are overall caps which may not be exceeded during the whole plant feed-in tariff period (meaning that, regardless the number of changes done during the plant's life, the nominal power cannot in any case exceed the above mentioned thresholds).

Additionally, the most important news for potential investors is that the New DTR provides for and encourages expressly repowering activities involving a capacity increase beyond the abovementioned thresholds.

Although the power increase will not benefit from the original feed-in tariff awarded to the relevant plant, the PV owner can, in any case, access the off-take regime upon request. The result is that interesting perspectives for an effective and actual repowering market unfold.

In addition to the above, the New DTR introduces an element of flexibility compared to the previous regulation, allowing producer to replace plants components albeit these are not defective.

For the purposes of implementing repowering interventions, the producer is required to install proper devices able to measure, independently, the "incentivized" energy (up to the 1% and 5% thresholds, as applicable) and the "non-incentivized" energy (exceeding the 1% and 5% thresholds, as applicable) generated by the plant as a result of the works performed.

3. APPLICABLE PROCEDURES TO THE INTERVENTIONS ENVISAGED UNDER THE NEW DTR

The applicable authorization procedures vary depending on the scope of the intervention as detailed below:

  1. Substantial interventions: the relevant works shall be authorized by the Region or the Province, if the relevant competences have been transferred to the latter.
  2. Non-substantial interventions: a simplified authorization procedure (called "PAS") applies, according to which the plant's owner shall communicate to the competent municipality the prospected change (attaching the required documentation) and, if the relevant authority does not raise objections within the following 30 days, the plant's owner can commence the relevant works. In the event the relevant solar plant has been originally authorized through the sole authorization (autorizzazione unica), it is suggested to notify the Region (or the Province if the relevant competences have been transferred to the latter) in this respect.

Without prejudice to the different kind of authorization procedures that the producer shall complete before carrying out any relevant intervention on the plant, it is evident the New DTR offers more clarity as well as certainty to the relevant market and represents a new driver for investments, especially thanks to the regulation on repowering. The New DTR is, in fact, a set of rules that, at least at first glance, seems completely independent from the substantial or non-substantial nature of the variations included in the relevant authorization whereby the competent authority will allow the power increase. Indeed, it is essential to highlight that, once the producer has obtained the required authorization, the installation of a second and independent measurement device for the "non-incentivized" energy seems the only criteria in order not to lose the feed-in tariff awarded to the plant. The above is valid notwithstanding the competent authority considerations on the substantial character of the changes approved.

GSE procedures

There is no requirement to inform in advance the GSE about the relevant intervention. Rather, producers will have to: (i) inform the GSE once the interventions' related works have been completed 3 and (ii) file with the GSE the documentation specified in the annexes of the New DTR (a copy of which must be kept on site) 4. Please note the GSE does not have to reply on the compliance of the intervention carried out vis-ŕ-vis the preservation of the relevant feed-in tariff within a specific timeframe, which may generate uncertainty for the relevant operator, especially in case of transactions involving the interested assets with regard to the relevant transaction economics determination. 

Substantial interventions are subject to a fee to the GSE to cover the evaluation procedure carried out after the filing of the relevant communication and documents 5. Specifically, the producer shall pay a fixed fee equal to € 50.00 plus € 2.00 for each kW up to 20 kW and € 1.00 for each kW beyond 20 kW (calculations are made on the capacity admitted to the feed-in tariff). In case of replacement of the main components (i.e. panels and inverters), the fee at stake is applied on the power of the components under replacement.

4. PRELIMINARY CONSIDERATIONS

As of today, the Italian repowering market has been subject only to minor developments and exploitation; this is due to several reasons of technical, economic and legal nature. In this respect, there are no specific fast-track procedures for works concerning a plant already authorized.

Italian solar portfolios aging process is still at a relatively early stage and the majority of the installed modules are still covered by warranties. Even when the relevant warranties have expired, plants' owners often decide to keep old modules (clearly to the extent these are still performing according to their estimates) considering the costs of modules replacement and the fact that repowering is not duly incentivized.

However, the New DTR has made significant steps forward with respect to the applicable regulation and it has laid down solid foundations for a proper development of the Italian repowering market.
In particular, the New DTR has overcome the uncertainties over repowering's compatibility with the support scheme regulation of the Contos Energia and has provided economic support to repowering (by providing that the extra power generated by repowering interventions may benefit of the energy sale regime), giving to the market reasonable economic prospects.

In light of the above, although repowering will probably start achieving higher margins in a 5/8-years period, considering that the governments are realizing that the existing portfolios are not performing as much as they expected and that there is an actual need to increase the energy production from renewable sources, there could still be interesting opportunities for an "early" repowering. The easiest solution to increase such energy production is indeed to focus on the plants already constructed through their optimization. Clearly, the success of this strategy will depend, further to the legal framework, on governments' incentives schemes and modules replacement cost-effectiveness.

Footnotes

1The previous regulation, named "Regole per il mantenimento degli incentivi in Conto Energia - Documento tecnico di riferimento", was suspended on 9 July 2015 due to illegitimacy claims concerning the retroactive limitation to the possibility for revamped or repowered plants of benefiting from incentives.

2Article 30 of Ministerial Decree 23 June 2016 lists the following principles:

  1. components used for maintenance and upgrading intervention which consist in the definitive replacement of the plant's components shall be new or regenerated and shall meet the newest quality standards
  2. maintenance interventions are allowed to the extent the increase of the nominal power does not exceed 1% (or 5% for plants below 20 kW)
  3. notification to GSE in case of replacement of the main components of the plants (i.e. panels and inverters). Simplified procedures for plants below 20 kW;
  4. no notification obligations for plants below 3 kW;
  5. temporary replacement components must comply with the same technical requirements of the replaced parts and cannot imply a power increase.

3The term is 60 days in case of substantial interventions.

4The most relevant and recurring documents are: (i) communication of works performance as per the relevant draft attached to the New DTR; (ii) plant as built layout subsequent to the intervention; (iii) technical report on the intervention carried out; (iv) pictures before and after the intervention; (v) excel file with data on the replaced components and the newly installed; (vi) documentation showing the reasons underlying the intervention; (vii) list of main components installed for the repowering intervention with specification of technical features thereof; (viii) plant as built electric works layout.

5Please note the GSE may ask for clarifications or additional information if necessary. In this case, the "integration phase" must be concluded by the GSE within 90 days as of commencement thereof.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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