Italy: Law Against Virtual Grid Congestion and for the Authorization of Data Centers

Virtual Grid Saturation

One of the biggest obstacles to the expansion of renewable energy (RE) plants is virtual grid congestion, i.e., the reservation of grid capacity by plants that are not authorized and realized, thus blocking grid capacity that would otherwise be available for plants with better chances of realization.

To address this problem, Article 1 of the draft legislative decree proposes a series of corrective actions. In particular, it stipulates that TERNA (the central Italian grid operator) will publish the maximum additional power that can be fed into each part of the grid and update it quarterly with 1) the authorizations granted for the construction and operation of the plants and 2) the applications for grid connection. Offshore plants are exempt from this mechanism.

This is intended to ensure that the targets of the Italian recovery plan PNRR, the Italian energy plan PNIEC, and national and European energy policy can be achieved.

The decree also amends Legislative Decree 190/2024 (the so-called Consolidated Text on Renewable Energies) and instructs the Regulatory Authority for Energy, Grids and Environment (“Autorità di Regolazione per Energia Reti e Ambiente – ARERA”) to establish new technical and economic rules for the connection of renewable energy plants and storage systems (excluding offshore plants) in the TICA within 180 days of the decree’s entry into force. The upcoming changes are based on a microzonal approach and the principle of burden sharing. TERNA is authorized to conduct open-season procedures for the high-voltage grid, even for areas whose theoretical maximum capacity has been exhausted. The feed-in capacity will be allocated to bidders who already possess the necessary authorizations.

Regarding distribution system operators (medium voltage), they can also issue connection solutions for the grids they operate, also within the framework of open-season procedures, referring to a connection point, even if the maximum permissible capacity at that point has already been reached.

Once the ARERA update comes into force, connection solutions already granted for projects not yet authorized and not yet validated by the grid operator will lose their validity. However, affected parties are entitled to reimbursement or re-determination of connection costs already paid, without prejudice to the possibility of participating in the new procedures. Exempt from this, and thus remaining valid, are connection solutions for projects with authorization procedures for which screening prior to the Environmental Impact Assessment (EIA) or a positive EIA or a positive Environmental Impact Statement (EIS) has already been granted.

The planning and authorization of actions for grid expansion, such as connections or substations, will be centralized and carried out by Terna using simplified procedures.

Remedial Actions Against So-Called Pancaking in Wholesale Natural Gas Markets

With the introduction of actions to promote competition and the integration of wholesale gas markets, the so-called Pancaking effect is to be avoided, i.e., the mechanism by which the gas price increases with the growing number of gas transport systems traversed. To promote competition in the national market and its integration into the European market (also due to the disadvantageous difference in the wholesale price of natural gas compared to the Northern European markets), it is foreseen that ARERA will take at least one of the following actions:

• Establishment of capacity charges that eliminate the distortions caused by the accumulation of transport costs to cover fixed infrastructure costs (with reference to deliveries at the Passo Gries entry point on the border with Switzerland);
• Introduction of a “liquidity service” aimed at offering gas in the Italian market at prices comparable to those in Europe, particularly those of the Dutch Title Transfer Facility, with the provision that, for example, SNAM (the largest Italian natural gas transmission company) concludes contracts with operators selected through tender procedures that meet the criteria set by ARERA, including the right of the selected operators to receive a premium paid by SNAM itself after the completion of these procedures.

Of particular interest with regard to the integration of geographically contiguous markets is the forecast that ARERA will submit a proposal to the Ministry of Environment and Energy Security (MASE) within 90 days of the decree’s entry into force for the full integration of the Italian and German natural gas markets concerning transport infrastructures in Swiss territory, in order to limit the phenomenon of Pancaking of transport costs incurred by operators for traversing the three countries concerned.

Simplifications for the Authorization of Data Centers

Furthermore, a unified procedure for granting authorizations for data center projects, generally understood as energy-intensive infrastructures, will be introduced. The authorization procedure will be simplified overall to ensure more efficient and coordinated management of data centers and the corresponding networks for user connections. A unified procedure for the authorization of data centers in Italy and their respective connections to the electricity grid will be introduced. The authorization, granted by the Region (or the Province, if delegated) for data centers up to 300 MW or by MASE for data centers with a capacity above this threshold, will encompass all authorizations to be obtained from the competent authorities. The authorization procedure must be completed within 10 months – which can only be extended under exceptional circumstances and for a maximum of 3 months – and the deadlines for the Environmental Impact Assessment will be halved.

The legislative decree will be discussed in the government in the coming weeks and is expected to be adopted promptly. It cannot be ruled out that the final text of the decree will differ from the draft published in July and will contain further amendments.

Do you have a question about this topic? Get in touch now and our experts will get back to you right away!

From the Newsletter “E|News: Renewable Energy”