Energy & Infrastructure Alert | March.01.2017
The GSE has finally published the new framework on maintenance and renovation of the photovoltaic plants benefiting from Conto Energia support regime (the “New DTR”) 1 . The set of rules provided by the New DTR further elaborates and confirms the principles and guidelines, previously set out under Ministerial Decree 23 June 2016, which served as “temporary regulation” while the new regulation was being prepared 2.
Please find below a summary of the rules provided by the New DTR, which we have organized in the following sections:
The New DTR applies to ordinary and extraordinary maintenance activities aimed at preserving or restoring the functionality and efficiency of solar facilities. Accordingly, the New DTR provides regulation for all such activities aimed at guaranteeing the expected plant performances (functionality) as well as safety, reliability, environmental and efficiency standards (efficiency).
Ordinary maintenance includes all the activities (i) that do not alter the plant core structure and (ii) that are aimed at (a) preserving standard levels of performance of the plant and/or (b) remedying to accidents.
By way of example, ordinary maintenance consists in:
Extraordinary maintenance consists in the replacement of a component with a new one having different features. Therefore, it can entail an upgrade of the plant (e.g. replacement of an inverter with another one more efficient or enjoying higher technical features). Any other activity implying changes to the electric layout of the facility, and the issue of a new electrical system conformity declaration, falls, similarly, within this category.
With reference to maintenance (ordinary and extraordinary) and technological upgrading activities, please note the New DTR also applies to substantial and non-substantial interventions.
Substantial maintenance and upgrading interventions include those works altering the plants’ features thanks to which the relevant plant first qualified to benefit from the feed-in tariff under the relevant Conto Energia (i.e. structure, layout and settings).
Non-substantial maintenance and upgrading interventions include those works, which do not alter the requirements and the features thanks to which the relevant plant first qualified to benefit from the feed-in tariff under the relevant Conto Energia (i.e. structure, layout and settings).
The scope of application of the New DTR is relevant with reference to revamping and repowering.
Revamping involves intervention and/or upgrading of already existing facilities in order to improve efficiency and/or restore original performance.
Repowering involves changes to the existing modules and/or inverters, including electric layout, in order to increase the installed capacity and the annual production.
Both processes can be carried out through ordinary and extraordinary maintenance activities.
In the above scenarios (from a. to d.), the connection point shall remain unique to the relevant plant, otherwise all plants connected to the same connection point will lose the right to benefit from the relevant feed-in tariff previously awarded under the relevant Conto Energia.
The GSE confirmed that interventions causing a capacity increase up to 5%, for plants below 20 kW, and up to 1%, for plants with a capacity higher than 20 kW, are allowed. In this respect, the “added” capacity will benefit from the feed-in tariff awarded to the plant (which will be adjusted to the new capacity).
Please note that the above threshold (5% and 1% on the basis of the plant’s size) are overall caps which may not be exceeded during the whole plant feed-in tariff period (meaning that, regardless the number of changes done during the plant’s life, the nominal power cannot in any case exceed the above mentioned thresholds).
Additionally, the most important news for potential investors is that the New DTR provides for and encourages expressly repowering activities involving a capacity increase beyond the abovementioned thresholds.
Although the power increase will not benefit from the original feed-in tariff awarded to the relevant plant, the PV owner can, in any case, access the off-take regime upon request. The result is that interesting perspectives for an effective and actual repowering market unfold.
In addition to the above, the New DTR introduces an element of flexibility compared to the previous regulation, allowing producer to replace plants components albeit these are not defective.
For the purposes of implementing repowering interventions, the producer is required to install proper devices able to measure, independently, the “incentivized” energy (up to the 1% and 5% thresholds, as applicable) and the “non-incentivized” energy (exceeding the 1% and 5% thresholds, as applicable) generated by the plant as a result of the works performed.
The applicable authorization procedures vary depending on the scope of the intervention as detailed below:
Without prejudice to the different kind of authorization procedures that the producer shall complete before carrying out any relevant intervention on the plant, it is evident the New DTR offers more clarity as well as certainty to the relevant market and represents a new driver for investments, especially thanks to the regulation on repowering. The New DTR is, in fact, a set of rules that, at least at first glance, seems completely independent from the substantial or non-substantial nature of the variations included in the relevant authorization whereby the competent authority will allow the power increase. Indeed, it is essential to highlight that, once the producer has obtained the required authorization, the installation of a second and independent measurement device for the “non-incentivized” energy seems the only criteria in order not to lose the feed-in tariff awarded to the plant. The above is valid notwithstanding the competent authority considerations on the substantial character of the changes approved.
There is no requirement to inform in advance the GSE about the relevant intervention. Rather, producers will have to: (i) inform the GSE once the interventions’ related works have been completed 3 and (ii) file with the GSE the documentation specified in the annexes of the New DTR (a copy of which must be kept on site) 4. Please note the GSE does not have to reply on the compliance of the intervention carried out vis-à-vis the preservation of the relevant feed-in tariff within a specific timeframe, which may generate uncertainty for the relevant operator, especially in case of transactions involving the interested assets with regard to the relevant transaction economics determination.
Substantial interventions are subject to a fee to the GSE to cover the evaluation procedure carried out after the filing of the relevant communication and documents 5. Specifically, the producer shall pay a fixed fee equal to € 50.00 plus € 2.00 for each kW up to 20 kW and € 1.00 for each kW beyond 20 kW (calculations are made on the capacity admitted to the feed-in tariff). In case of replacement of the main components (i.e. panels and inverters), the fee at stake is applied on the power of the components under replacement.
As of today, the Italian repowering market has been subject only to minor developments and exploitation; this is due to several reasons of technical, economic and legal nature. In this respect, there are no specific fast-track procedures for works concerning a plant already authorized.
Italian solar portfolios aging process is still at a relatively early stage and the majority of the installed modules are still covered by warranties. Even when the relevant warranties have expired, plants’ owners often decide to keep old modules (clearly to the extent these are still performing according to their estimates) considering the costs of modules replacement and the fact that repowering is not duly incentivized.
However, the New DTR has made significant steps forward with respect to the applicable regulation and it has laid down solid foundations for a proper development of the Italian repowering market.
In particular, the New DTR has overcome the uncertainties over repowering’s compatibility with the support scheme regulation of the Contos Energia and has provided economic support to repowering (by providing that the extra power generated by repowering interventions may benefit of the energy sale regime), giving to the market reasonable economic prospects.
In light of the above, although repowering will probably start achieving higher margins in a 5/8-years period, considering that the governments are realizing that the existing portfolios are not performing as much as they expected and that there is an actual need to increase the energy production from renewable sources, there could still be interesting opportunities for an “early” repowering. The easiest solution to increase such energy production is indeed to focus on the plants already constructed through their optimization. Clearly, the success of this strategy will depend, further to the legal framework, on governments’ incentives schemes and modules replacement cost-effectiveness.