Energy Release 2.0 – Changes for Plant Operators

However, the action was not approved by the Commission, which is why the Commission’s competition authority, in September 2024, initiated an information request ex officio based on press reports. As the Commission saw a risk of market distortions, several meetings took place in the following months between representatives of the Commission and the Italian authorities, in which changes to Energy Release 2.0 were agreed.

The decree amending the mechanism was signed by the competent minister on July 29, 2025 and is now awaiting approval by the Corte dei Conti and subsequent publication in the Official Gazette. The GSE will then adjust the implementing provisions and the contractual documentation for the mechanism (a processing time of around one month is envisaged); we will only have the full picture of the changes at that point.

The Commission’s concerns were not directed at the EIUs’ mode of participation; their expressions of interest already submitted remain valid and will be processed once the adjustment of the legal framework has been completed (as interest exceeds the available electricity volumes, each undertaking will only be allocated a portion of the quantity applied for; the price is EUR 65/MWh for three years). The changes mainly relate to how producers participate and to ensuring that the economic benefits granted are also clawed back.

Tender Procedure for Producers

A tender procedure will be used to select the producers. Producers that build the plants that will return the advanced electricity may be EIUs, aggregators, independent producers, or other third parties (CfD at EUR 65/MWh for 20 years). As things stand today, only those producers participate in the mechanism that have concluded a corresponding bilateral contract either directly with an EIU or with an aggregator (possibly without contact with the EIU). Under the change, the GSE will run a tender procedure for the construction and operation of the new renewable energy plants (solar, wind, hydro), with each plant required to have sufficient capacity to generate twice the amount of electricity supplied to an EIU in the first three years. Participants may be EIUs, independent producers, or the other legal entities mentioned above; they bid on an upfront premium (grant) they require to build the new plant; negative bids are permitted.

Independent producers may participate provided that:

• they have the plant’s construction and operating permit and any concessions that may be required,
• they have the final grid connection solution and the plant has been registered in the GAUDI system,
• they comply with the plant’s performance criteria, the national and EU environmental protection rules (DNSH), and the technical requirements set out in Annex 3 to FER X.

For EIUs, the following applies:

1. If an EIU does not participate in the tender, it will be treated as if it had submitted the lowest admissible bid, meaning the tender is automatically successful for the EIU (no operator is assigned to the EIU and it neither has to pay nor receives the construction cost grant). The EIU has the plant built by the producer with whom it has already concluded a bilateral contract; that producer then returns the electricity.
2. If an EIU is unsuccessful in the tender (because the bid is too high), it pays the construction cost grant to the GSE, which awards the construction to another producer and pays that producer the construction cost advance. The producer then signs the return contract with the GSE and is not entitled to reduce the electricity volumes allocated to it.
3. If an EIU is successful in the tender, it must build the new renewable capacity itself and conclude a 20-year CfD at EUR 65/MWh; it does not receive a construction cost grant.

Claw-Back Mechanism

The claw-back mechanism will certainly apply to all producers that participate directly in the tender and/or are allocated an EIU and/or an electricity volume. It is not entirely ruled out that it will also apply in the case of an EIU’s non-participation; clarification from the legislator is expected.

In any event, the mechanism is intended to work as follows: after the 20 years have elapsed, the GSE checks whether the economic benefit from the first three years has been clawed back via the return contract. If not, the CfD with the operator/aggregator/EIU is extended (with a strike price no higher than the O&M costs of PV plants at the start of the extension period; EUR 22/MWh is currently under discussion) until the originally calculated benefit has been fully clawed back. The obligation and any extension could therefore rest with the independent operator, without any right of recourse against the aggregator/EIU.

Calculation to Determine Any Claw-Back

• Calculation of the initial benefit: ex post difference between EUR 65/MWh and the average forward prices (EEX, traded in May 2025 for 2025–2027), discounted to 2028 at an interest rate of 4.25%.
• Calculation of the benefit clawed back during the return period: comparison of total revenues from electricity sales with a defined LCOE for the plants. For the portion covered by the CfD, revenue corresponds to the strike price of EUR 65/MWh; for the remaining portion, the realised reference prices of the return contract are used. On the cost side, an initial LCOE of EUR 73/MWh is assumed, which is adjusted up or down by 50% of the difference to EUR 65/MWh based on the result of the first FER X tariff auction (note: the first FER X auction recently closed; results are expected in around 3 months). The resulting values are discounted to 2028 using the average cost of capital of renewable energy producers to 2025.

Claw-back:the initial benefit and the benefit already clawed back are netted off, and the return contract is extended if the full benefit has not yet been clawed back.

It is not expected that the claw-back mechanism will affect the bankability of projects, as it only applies after 20 years, i.e., at a point in time when financing has generally been repaid.

One open issue is whether the guarantees provided for in the decree, which must be posted to guarantee the construction of the new capacity, will now have to be provided by the independent producers.

It is currently assumed that the new legal framework will be complete by early 2026 and that the tender could take place in the first trimester of next year. There are some uncertainties that are expected to be clarified only with the GSE’s implementing provisions, so the mechanism’s further success will depend decisively on how these details are resolved.

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From the Newsletter “E|News: Renewable Energy”