Sphera Energy applauds the announcement on the 21st of December of the approval by the EU Commission for the upcoming state support and auctions mechanism (managed by TSO Terna) for the deployment of 71 GWh of utility-scale Energy Storage in Italy between now and 2033. This decision comes a little ahead than expected and confirms our expectation of the first round of auctions to be held by the end of 2024.
The Italian scheme
The scheme notified by Italy will support the construction of electricity storage facilities with a joint capacity of more than 9 GW/71 GWh. The scheme will run until 31 December 2033.
The measure aims to facilitate the integration of renewable energy sources (‘RES’) in the Italian electricity system. The production of electricity by RES does not always coincide with periods of electricity demand. Electricity storage systems allow to storage of excess electricity at times of overgeneration and to use of it at times of scarcity, thereby reducing RES curtailment and the need to produce additional electricity through programmable but polluting power plants (e.g. fossil fuel-fired plants).
Under the scheme, the aid will take the form of annual payments covering investment and operating costs to electricity storage developers. The beneficiaries will be selected through a competitive, transparent, and non-discriminatory bidding process, where electricity storage developers will compete based on offers relating to the lowest amount of aid requested per offered capacity volume.
The scheme will be open to all technologies meeting the performance requirements set by the Italian Transmission System Operator (‘TSO’) and approved by the Italian Energy Regulator. The list of eligible electricity storage technologies will be revised every two years to reflect technological developments. Currently, eligible technologies include electrochemical lithium-ion storage, as well as hydro-pumped storage plants.
As part of the measure, a new “time-shifting trading platform” will be set up. Through this platform, storage capacity will be pooled and offered to third parties in the form of standardised time-shifting products. The beneficiaries of the measure will be required to make available the storage assets on this platform. The TSO will then assign physical storage assets to execute the standard time-shifting contracts, optimising the use of available storage assets. This platform will enable RES producers to use the storage assets supported by the measure to directly shift their electricity production from times of overgeneration to times of scarcity.
The Commission’s assessment
The Commission assessed the scheme under EU State aid rules, in particular, Article 107 (3)(c) of the Treaty on the Functioning of the European Union (‘TFEU’), which enables Member States to support the development of certain economic activities subject to certain conditions, and the 2022 Guidelines on State aid for climate, environmental protection and energy (‘CEEAG’).
The Commission found that:
• The measure facilitates the development of economic activity, in particular electricity storage plants. In addition, the scheme is necessary and appropriate to speed up investments in electricity storage. At the same time, it supports the objectives of key EU policy initiatives such as the European Green Deal and the ‘Fit for 55′ package.
• The scheme is proportionate, as the level of the aid corresponds to the effective financing needs and necessary safeguards limiting the aid to the minimum will be in place, including a competitive bidding process for awarding the aid.
• The aid has an incentive effect, as the supported storage facilities would not be financially viable without public support.
• The aid brings about positive effects which outweigh any potential distortion to competition and trade in the EU.
On this basis, the Commission approved the Italian scheme under EU State aid rules.
Background
The 2022 CEEAG provide guidance on how the Commission will assess the compatibility of environmental protection, including climate protection, and energy aid measures which are subject to the notification requirement under Article 107(3)(c) TFEU. The new guidelines, applicable as of January 2022, create a flexible, fit-for-purpose enabling framework to help Member States provide the necessary support to reach the Green Deal objectives in a targeted and cost-effective manner. The rules involve an alignment with the important EU’s objectives and targets set out in the European Green Deal and with other recent regulatory changes in the energy and environmental areas and will cater for the increased importance of climate protection.
With the European Green Deal Communication in 2019, the Commission set an objective of net zero emissions of greenhouse gases in 2050 that is enshrined in the European Climate Law. In force since July 2021, the law also introduced the intermediate target of reducing net greenhouse gas emissions by at least 55% by 2030. Through the adoption of the ‘Fit for 55′ legislative proposals, the EU has in place legally binding climate targets covering all key sectors of the economy.
Energy storage is a crucial solution to provide the necessary flexibility, stability, and reliability for the energy system of the future. System flexibility is particularly needed in the EU’s electricity system, where the share of renewable energy is estimated to reach around 69% by 2030 and 80% by 2050. The Commission adopted in March 2023 a list of recommendations to ensure greater deployment of energy storage, accompanied by a Staff Working Document, providing an outlook of the EU’s current regulatory, market, and financing framework for storage and identifies barriers, opportunities and best practices for its development and deployment.
The non-confidential version of the decision will be made available under the case number SA.104106 in the State aid register on the Commission’s Competition website once any confidentiality issues have been resolved. New publications of State aid decisions on the internet and in the Official Journal are listed in the Competition Weekly e-News.
