Italy: News on Spalma Incentivi 2.0: now a voluntary option for PV system operators

Core content of the new regulation

The new regulation applies exclusively to photovoltaic systems with an installed capacity of more than 20 kW, whose subsidies are based on fixed, non-market-dependent premiums and which were granted under the relevant ministerial decrees between 2005 and 2011. A further prerequisite is that the respective subsidy, under current law, expires on January 1, 2029.

1. Voluntary Reduction of Feed-in Tariffs

Operators have the option to voluntarily opt for a temporary reduction of their feed-in tariffs. Two models are available:

• In the first model, the subsidy will be reduced to 85% of the originally planned amount during the period from the second half of 2026 to the end of 2027. In return, the subsidy period will be extended by three months.
• In the second model, a stronger reduction to 70% of the original subsidy will occur during the same period. In return, the subsidy period will be extended by six months.

The decision for one of these models must be declared to the responsible funding body (GSE) by May 31, 2026 (!) at the latest, although it is assumed that the deadline will be extended as implementing decrees are still missing.

For the extension period, a special tariff applies, which results from the average of the previously reduced subsidy values. This ensures that the extension is economically linked to the preceding reduction.

2. Option for Early Exit from Subsidies

In addition to the temporary reduction, the decree for the first time opens up the possibility of completely exiting the existing subsidy system. Such an exit can be applied for by September 30, 2026, and will become effective on January 1, 2028.

The total volume of this action is limited to an installed capacity of 10 GW.

In return, operators receive financial compensation. This corresponds to 90% of the discounted value of the remaining subsidy payments until the regular end of the subsidy period.

Two central factors are used to calculate this compensation: Firstly, the expected electricity production is determined based on the average of the actual production of the last five years. Secondly, future cash flows are discounted using a discount rate set by the GSE, which is based on the equity costs of photovoltaic investments.

Regarding the selection of systems, the decree provides for a tiered system: system operators who previously chose one of the reduction models will be given priority. For all other systems, a competitive selection process will be carried out, which should be completed by June 30, 2027, at the latest.

In this process, operators submit bids in the form of percentage discounts on a system-specific reference value. This reference value also corresponds to 90% of the discounted residual value of the subsidy. The contracts are awarded to those offers that are expected to provide the greatest benefit to the energy system.

Should demand exceed the planned volume of 10 GW, the selection process will also be applied to the originally prioritized systems.

The compensation is not paid as a lump sum, but in equal installments over a period of ten years. These installments are interest-bearing, with the interest rate set by the GSE and not exceeding a maximum of 6%.

3. Link to Repowering Obligations

The use of the exit option is tied to extensive investment obligations. Operators must completely renew their systems (so-called repowering) between 2028 and 2030.

The target of these actions is a significant increase in electricity production. In principle, production is expected to at least double. Alternatively, depending on the system type, a minimum increase of 40% is also sufficient.

For ground-mounted systems, especially on agricultural land, as well as for other systems, these minimum increases are explicitly specified.

In addition, there are further requirements: only photovoltaic modules listed in a national register and meeting certain technical and territorial criteria (keyword: EU) may be used.

After repowering, the systems can generally participate in new support mechanisms. However, this support is limited to the additionally created capacity. The electricity production beyond that must be marketed, for example, through long-term Power Purchase Agreements (PPAs) or comparable instruments, provided this is compatible with European state aid law.

Furthermore, it is clarified that fully renewed systems on industrial sites remain permissible under licensing law, regardless of their future output, provided they continue to operate within an industrial area.

4. Further Regulatory Measures Still Pending

In parallel, the decree provides for a series of further actions to support its implementation.

Thus, within 90 days of the decree’s entry into force, the competent ministry will issue an implementing decree that will regulate, in particular, the details of the auction procedure, the contractual design of the obligations, and possible sanctions for non-compliance.

Conclusion

Spalma Incentivi 2.0 represents a comprehensive approach to reducing the historically grown subsidy burden in the Italian electricity system without coercion.

For system operators, this opens up a scope for decision-making between a temporary reduction in revenue, a state-compensated exit from subsidies, and subsequent integration into the market. The repowering obligation creates incentives for new investments.

Which option is economically sensible largely depends on the individual characteristics of the respective system. From a legal perspective, for existing projects, it must be examined whether the project rights permit continued operation, i.e., whether the operating permit remains valid beyond the subsidy period and whether corresponding land rights exist. The decree contains an explicit regulation for the permissibility of continued operation only for systems in industrial areas; however, the majority of old systems are located on agricultural land. When weighing the options, it must also be considered that the mechanism is complex overall, key economic values still need to be determined, and regulatory details remain open.

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