ITALY: Energy Release 2.0 potential for producers

published on April 15, 2025

As is known, the so-called Energy Release 2.0 decree has been in force since July 2024 with its publication on the institutional website of the Ministry of Environment and Energy Security (“MASE”). This decree regulates a mechanism for the purchase of electricity in the availability of the GSE and its subsequent return to the GSE, together with the corresponding guarantees of origin. This support measure aims to promote the installation of new renewable energy systems and to offer energy-intensive companies the opportunity to purchase electricity at reduced prices.

Introduction: the mechanism

Energy-intensive companies - i.e. companies registered with the “Cassa per i servizi energetici e ambientali” (CSEA, i.e. Fund for Energy and Environmental Services) - therefore have the option of first receiving electricity and the associated Guarantees of Origin from the GSE, either individually or in aggregated form, at a capped price of €65/MWh (36-month term) and then reimbursing the GSE for the same amount of electricity and the value of the associated Guarantees of Origin over a period of 20 years (also at a price of €65/MWh), by committing themselves or through third parties to construct new plants for the generation of electricity from renewable energy sources (photovoltaic, wind or hydropower).

Status of the tendering process

Energy-intensive companies therefore had the opportunity to express their interest in participating in the tendering process either directly or via an aggregator via the GSE portal by March 3, 2025, indicating the desired amount of electricity in advance (no more than the current annual consumption). According to the GSE, 559 expressions of interest were submitted, most of them directly by energy-intensive companies and not, as expected, via aggregators. The total amount of electricity requested is reportedly more than 70 TW/h (almost three times the energy available to the GSE, i.e. 24 TW/h/year). The announcement of the results of the tender, which is scheduled for the beginning of April, was not yet available at the time this issue went to press. The parties involved are therefore awaiting the results in order to take the next steps and sign the contracts with GSE (energy prepayment and repayment contracts for the allocated energy).

After the announcement of the electricity volumes, the companies have the option of withdrawing from the mechanism or signing the contract with the GSE within 30 days of the announcement.

Phase 2 will be the most interesting period for producers and plant operators, who will now have the opportunity to make their plants or parts of their plants/generated electricity available to energy-intensive companies.

Important advantages for plant operators

The most important advantages for plant operators are:

receiving remuneration for at least part of the electricity generated by the plant at a fixed price of €65/MWh (which is particularly attractive until the first ARR X auction prices are known; we are currently waiting for the first tender here)
the possibility of receiving an additional bonus with the energy-intensive companies on top of the electricity price of €65/MWh
the possibility of bringing their projects to the market if they are at an advanced stage of development, close to RTB status.

Contract design

The legal issues that were already present in phase 1 of the mechanism during contract design are also present in phase 2. They are very similar to the issues and risks dealt with in a corporate PPA: the most important issue so far is of an economic nature: the GSE requires the company to provide guarantees to cover the possible repayment of the subsidy in the event that the storage facility is not built and the electricity advanced cannot be repaid. The amount of the guarantee is based on the value of the subsidy and therefore quickly reaches significant amounts. As the risk of non-installation is borne by the plant operators, companies tend to at least share the guarantee costs with them. Other issues are Guarantee of the amount of electricity to be purchased and consequences in case of non-compliance, possible withdrawal of one of the parties and consequences, bankability of a project where only part of the electricity is remunerated at a fixed price, duration of the contractual relationship between the parties, opening for further cooperation, for example a real corporate PPA or further services, payment flows.

In a regulatory framework that is not entirely clear, and we recall here that the mechanism is being applied for the first time in its current form, it is still useful to negotiate the terms of the contract in detail and put them in writing, and to provide for alternative dispute resolution mechanisms.

But it is precisely this possibility of negotiation that is a strong point on which producers can focus in order to be competitive on the market and also increase their profit margin.

Conclusion and outlook

In Italy, the response to the mechanism has so far been extremely positive. In the meantime, the positive response to the Italian measure has also come from Strasbourg. The European Parliament underlined (in its resolution of 03.04.2025) the need for further measures to implement the rules to reform the European electricity market, in particular to promote Power Purchase Agreements (PPAs) and Contracts for Difference in order to reduce volatility and energy costs for energy consumers, and has recognized the Italian Energy Release measure as a positive example. The European Commission was asked to examine the possibility of applying the mechanism in other EU countries.