Summary Note On The FER-X Transitional Decree

1. Purpose and Regulatory Context

The FER-X Transitional Decree has been signed but has not yet been published (and therefore has not yet come into force) by the Ministry of Environment and Energy Security in implementation of Articles 6 and 7 of Legislative Decree No. 199/2021. Its goal is to support the production of electricity from renewable energy sources with costs close to market competitiveness.

2. Scope of Application

The Decree applies to electricity generation plants powered by:

• Photovoltaic
• Wind
• Hydroelectric
• Residual gases from purification processes

Agrivoltaic systems are also eligible for incentives, as they fall under the photovoltaic category. However, they do not benefit from any additional incentives or priority criteria for admission to the incentive mechanism.

The scope of application also includes full and partial revamping, as well as upgrades of existing plants, but only for the newly added section attributable to the upgrade.

The validity of the Decree is transitional, expiring on 31 December 2025, unless the power quota for plants larger than 1 MW is exhausted earlier. For plants with a capacity below 1 MW, the Decree will cease to apply 60 days after reaching the 3 GW power quota, if this occurs before 31 December 2025.

3. Support Mechanism

The Decree provides two ways to access incentives:

• Direct access for plants with a capacity ≤ 1 MW (provided they began construction after the FER-X transitional decree came into force).
• Competitive procedures (reverse auctions) for plants with a capacity > 1 MW, with assignment based on economic bids.

For plants with a capacity > 1 MW, the incentive mechanism operates only for 95% of the energy produced by the eligible plants.

The power quotas for small-scale plants amount to 3 GW, while the quotas for competitive procedures are:

• Photovoltaic: 10 GW
• Wind: 4 GW
• Hydroelectric: 0.63 GW
• Residual gas from purification processes: 0.02 GW
• Total: 14.65 GW

4. Selection Criteria and Priorities

Access to incentives is subject to compliance with environmental, technical, and economic requirements.

For plants with a capacity greater than 1 MW, a key requirement is the mandatory participation in the Balancing and Redispatch Market.

Other key requirements for these plants include:

• A valid permit for the construction and operation of the plant (producers can apply for competitive procedures with an environmental impact assessment approval if required).
• A final connection agreement and registration of the plant in Terna’s GAUDI system, validated by the grid operator.
• Compliance with performance requirements and EU/national environmental protection standards, including the “Do No Significant Harm” (DNSH) principle and Annex 3 requirements.
• Proof of financial solidity, which can be demonstrated by: 
  • A bank statement confirming the financial and economic capacity of the applicant.
  • Capitalization requirements (fully paid-up share capital and/or capital increase deposits) based on the investment value: 
    • 10% for investments up to Euro 100 million.
    • 5% for investments between Euro 100 million and Euro 200 million.
    • 2% for investments above Euro 200 million.

Plants larger than 1 MW that started construction before submitting their competitive procedure application are not eligible for incentives.

In case of excess applications compared to available quotas, priority criteria include:

• Removal of asbestos/eternit for photovoltaic plants.
• Full refurbishments and upgrades in agricultural areas without increasing occupied land.
• Location in areas classified as suitable by national regulations.
• Inclusion of storage systems to improve production scheduling.
• Long-term supply contracts (minimum 10 years).
• Earlier application submission date.

Applicants for competitive procedures must provide a temporary guarantee as project quality assurance and commit to providing a final guarantee within 90 days of the final ranking's publication.

The final guarantee is set at 10% of the investment cost based on the following technology-specific investment costs:

The temporary guarantee equals 50% of the final guarantee.

If an applicant withdraws within six months, 30% of the final guarantee is forfeited. If withdrawal occurs between six and twelve months, 50% is forfeited. If the deadline is missed entirely, the full guarantee is forfeited.

5. Incentive Modalities and Pricing

For plants <200 kW, GSE directly purchases and sells the electricity, providing a flat-rate tariff based on the awarded price. However, applicants can opt for the scheme used for plants ≥200 kW.

For plants ≥200 kW, support is granted through a two-way Contract for Difference (CfD):

• If the market price is below the awarded price, GSE compensates the difference.
• If the market price is higher, the producer reimburses the difference.

The market price is the day-ahead market price (PZ) from GME.

The awarded price depends on competitive bidding, but current reference "ceiling prices" are:

• Photovoltaic & Wind: €95/MWh
• Hydroelectric: €105/MWh
• Residual gas: €100/MWh

Additional price corrections:

• +€27/MWh for photovoltaic plants replacing asbestos/eternit.
• +€5/MWh for installations on water surfaces.

Market-negative or zero-price situations:

• For plants participating in the Balancing Market, incentives apply only to the electricity that could have been produced.
• For plants not in the Balancing Market, incentives are suspended for the negative/zero-price period.

In case of curtailment (production cuts), incentives apply only to curtailed volumes.

6. Construction Deadlines and Penalties

Plants must be operational within 36 months of the ranking's publication (except in force majeure cases).

Delays result in progressive tariff penalties:

• 0.2% per month for the first 9 months of delay.
• 0.5% per month for the following 6 months.
• After 15 months, eligibility for incentives is revoked.
• If the plant later reapplies for support, the tariff is reduced by 5%.

Failure to meet deadlines results in the forfeiture of the final guarantee.

7. Publication and Next Steps

The decree has not yet been published and will come into force the day after its publication on the Ministry of Environment and Energy Security (MASE) website.

Within 90 days of its entry into force, further regulations will be issued by GSE and ARERA, covering:

• ARERA: Setting auction prices for plants ≤1 MW.
• ARERA: Publishing reference "ceiling prices."
• ARERA: Technical and procedural rules for: 
  • Managing negative/zero prices and curtailment.
  • Enabling plants to participate in the Balancing and Redispatch Market.

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.