Fer2 decree: what it is and what are the incentives for upcoming renewables


Emma Potter

The European Commission has approved the Fer 2 Decree, a measure that promotes and supports the construction of production plants from renewable sources that are not fully mature or with high operating costs.

This is an ambitious project of indisputable usefulness for companies, which has the main objective of encouraging the construction of plants powered by renewable sources to reduce dependence on fossil fuels and accelerate Italy's ecological transition.

All this is part of the plans of the European Green Deal, which aims to achieve zero emissions in the shortest possible time.

Fer Decree 2: all the details

As anticipated, the measure in question will support the production of new plants based on innovative or not yet fully mature technologies. The following fall within this definition geothermal systems with zero emissions and those powered by gas or biomass, theoffshore windThe floating photovoltaicthe plants from tidal energy or any other form of energy derived from the sea (such as wave motion), and thermodynamic solar systems.

The deadline for the entry into operation of the plants may fluctuate based on the type of technology used, varying from 31 to 60 months.

The projects will be selected through a tender procedure in which the beneficiaries will indicate the reference price necessary for the realization of the work, calculated on the basis of multiple parameters, including the area in which it will be built.

If accepted, the support will be provided in the form of a two-way contract for the difference with the strike price for each kWh of energy produced and injected into the grid.

When the reference price is lower than the exercise price, the beneficiary will receive a payment equal to the difference between the two prices, otherwise he will have to pay the difference to the State. This model will allow prices to remain stable for a long time and will always ensure a minimum return to renewable energy producers, while ensuring that there are never extra-threshold compensations.

Furthermore, the support will last for the entire (estimated) life of the system.

The incentive for companies will be financed through a levy from consumers' electricity bills, calculated at 35.3 billion euros, and will remain active until 31 December 2028.

Brussels gives the green light to the Fer 2 Decree

Since this economic incentive consists of aid from the Italian State, the green light from the European Commission was necessary.

Brussels gave a positive opinion for several reasons: the production of energy from renewable sources favors the development of companies, and its promotion falls fully within the framework of the EU's strategic objectives regarding European climate objectives (Green Deal and REPowerEU). Europe assessed the measure positively, judging it to be proportionate and equipped with all the essential safeguard measures. In addition to this, the decree produces beneficial effects regardless of any possible distortions of competition.

The text of the Fer 2 Decree, which currently exists only in draft form, will soon be analyzed by the Ministry to obtain the necessary signature. It will then be sent to the Court of Auditors for registration and will subsequently be published in the official gazette.

Thirty days after publication, as required by the rule, it can be fully operational (the Operational Rules will be issued by decree of the Ministry).

What are the requirements to access support

Not all renewable energy plants can access support, but only those that meet certain requirements. The first necessary condition is to be in possession of a qualification for the construction and operation of the plant. An accepted electricity connection quote must also be provided. In Annex 2 of the Fer 2 decree, the minimum performance and environmental requirements to be respected are indicated.

As regards biogas plants, the nominal power must not exceed 300 kW electric; those powered by biomass must not exceed 1000 kW.

There are also limitations regarding wind farms: if they are offshore on fixed foundations, they must have a distance from the coast of at least 12 nautical miles.

In essence, to access the procedure, the systems must comply with the minimum performance and environmental requirements, and if the power is greater than 300 kW, they will have to offer a percentage reduction of at least 2% compared to the reference tariff (all the details regarding are indicated in Annex 1).

Further information on the Fer 2 Decree and final conclusions

The decree contains detailed information for each type of situation. In the case of large projects, for example, the evaluation will be accelerated. Furthermore, the maximum times for the construction of the systems are clearly displayed and the methods for disbursing the tariffs are highlighted.

It is also specified that the incentives can be combined, but only with certain other aid mechanisms, i.e. for newly built plants in an amount not exceeding 40% of the investment cost, with rotation and guarantee funds, and with all tax breaks provided in the form of tax credit or tax relief on business income for investments in machinery.

According to Minister Gilberto Pichetto, the European Commission's green light to the decree represents an essential step forward for the realization of energy objectives, and comes after a long and sometimes tiring discussion with the European institutions. The provision will give a boost to decarbonisation and will allow Italy to fully activate new technologies.