Why GSE should reduce instead of revoke incentives for PV plants

Legislative background

"Article 42, paragraph 3, of Legislative Decree No. 28/2011, as amended by Article 1, paragraph 960(a), of Law No. 205/2017, provides that: “In the event that the violations detected during the inspections are material for the purposes of the payment of the incentives, the GSE shall reject the application for incentives or order the revocation of the incentives with the claw-back of the incentives already paid, and shall submit the findings of its controls to the Authority for Electricity, Gas and Water for the application of the relevant fines. As an exception to the above, in order to safeguard the production of electricity from renewable energy sources of the plants which – as at the date of the inspection proceeding – already benefit from incentives, the GSE shall reduce the incentives in an amount ranging from 20 per cent and 80 per cent depending upon the seriousness of the violation. If the project owner voluntarily condemns its violation prior and separately from before and outside of an inspection proceeding, it will be granted a further reduction of one third.”

Article 42, paragraph 5 (c-bis) of Legislative Decree 28/2011 mandates the Ministry for Economic Development to issue a regulation identifying, among other things, the material violations that may result in a reduction in the incentives in relation to each particular renewable energy source, type of plant and capacity. As at the time of writing, the Ministry for Economic Development has not yet issued any such regulation.

Recent case law

According to ruling No. 10129 published by the Regional Administrative Court of Lazio on July 30, 2019, the GSE - before reaching a decision on the revocation of incentives - must confirm whether the “renewables exception” set out above in relation to Article 42, paragraph 3, applies (i.e. it must be a plant which, at the time of verification of the violation, received incentives) and assess the amount of the “reduction” having regard to the extent of the violation detected. The Court found that the power to apply the reduction (instead of the revocation) is immediately applicable, even in the absence of a ministerial decree envisaged by Article 42, paragraph 5 (c-bis).

The language of Article 42, paragraph 3, clearly imposes a requirement on the GSE to assess whether the violation is eligible for a reduction in incentives (instead of the revocation of these), regardless of ministerial indications. In fact, the law does not make the application of the exception subject to the issuance of the ministerial decree.

Comment

The rationale underlying the ruling issued by the Regional Administrative Court of Lazio is to avoid the pro-market amendments introduced to Article 42, providing an exemption to the wholesale revocation of incentives remains “frozen” due to the inactivity of the Ministry for Economic Development, which may have the practical and distorting effect of “repealing” a provision of law.

It is a very interesting and powerful official stance by the Court which, as a general rule, means that if the Government delayed in implementing a provision of law, such a delay does not justify the denial of a right recognised by law.

This article was originally edited by, and first published on, www.internationallawoffice.com