A recent Council of State ruling has clarified the conditions for the award of tariffs to solar photovoltaic (PV) plants by finding that a failure to communicate construction completion to the relevant authorising authority cannot be considered a material infringement.

Facts

Article 1(7) of Decree-Law 105/2010, as amended by Law 129/2010, provided that the tariffs granted to incentivise the development of solar PV plants pursuant to a ministerial decree of 19 February 2007 (known as the 'Secondo Conto Energia') would be awarded to applicants that, among other things:

  • completed construction of the plant by 31 December 2010; and
  • notified the authority that authorised the construction, the grid operator and GSE SpA of such completion.

On 23 November 2018 GSE SpA issued an order revoking the Secondo Conto Energia incentives awarded to a company operating a solar PV plant located in the municipality of Pavia, alleging that the company had failed to communicate to the authorising authority (ie, the province) that the plant's construction had been completed by 31 December 2010.

The company filed an appeal with the competent regional administrative court to annul the order issued by GSE SpA. When its appeal was rejected, the company appealed again to the Council of State.

At the Council of State hearing, the company argued that the failure to communicate the completion of construction to the authority that had authorised the construction should be considered a minor infringement which did not result in the revocation of the incentives for the following reasons:

  • The concept of a 'material infringement' in the context of the incentives' revocation is defined in the ministerial decree of 31 January 2014. Specifically, Annex 1(m) of the decree considers a failure to communicate the completion of works as material, but only with reference to GSE SpA.
  • The rationale behind the provision was to enable GSE SpA to ascertain whether the requirements for the award of incentives had been met. The provision was therefore satisfied when the grid operator and GSE SpA were notified within the requisite time limit.

Decision

In Ruling 2695 of 31 March 2021, the Council of State accepted the appeal brought by the company in full and annulled the order issued by GSE SpA.

According to the Council of State, the failure to communicate the completion of construction to the authorising authority by 31 December 2010 was a minor infringement which should not trigger the revocation of incentives, provided that the plant had actually been built by the required deadline and completion had been communicated to the entity providing the incentives (ie, GSE SpA), as well as to the competent grid operator.

The decision aligns with the ministerial decree of 31 January 2014, which envisages a failure to notify GSE SpA alone as a ground for revocation. According to the Council of State, the rationale behind this provision was to ensure that GSE SpA was in a position to perform its function of monitoring eligibility for incentives by ensuring that it was provided with information in a timely and accurate manner. This rationale does not apply to the notice required to be given to the relevant authorising authority.

Comment

Article 42 of Legislative Decree 28/2011 – as it stood at the time and thus applied in this case – provided that, in the event of material infringements, GSE SpA had to order the revocation of the incentives. The ministerial decree of 31 January 2014, in defining the concept of material infringements resulting in the revocation of the incentive tariffs set out under the Conto Energia decrees, does not refer to the failure to communicate completion of construction to the municipality, province, region or competent grid operator; rather, it refers only to the failure to communicate the completion of construction works to GSE SpA.

The Council of State's ruling is particularly important given that previous case law consistently held that the revocation of incentives could be based on any of the circumstances where the applicant failed to notify the competent authorities that construction had been completed and GSE SpA had no other adequate evidence to ascertain that the works had actually been completed by the required deadline.

In this case, the Council of State deemed that Article 1(7) of Decree-Law 105/2010 had been implicitly superseded by Article 42 of Legislative Decree 28/2011, as implemented by the ministerial decree of 31 January 2014. As a result, the failure to communicate the completion of works to the province could not be considered a material infringement resulting in the revocation of the incentives.

The industry is awaiting the new Ministry for Economic Development decree implementing Article 42 of Legislative Decree 28/2011 – as subsequently amended by Law 205/2017, Law Decree 101/2019 and Law Decree 76/2020 – which will detail the cases when the GSE will reduce the incentives by 10% to 50% depending on the seriousness of the infringement. In the meantime, it is comforting that the Council of State has finally deviated from established case law with a view to safeguarding energy investments in Italy and allowing institutions and operators to concentrate on achieving the objectives of the National Integrated Energy and Climate Plan and the European Green Deal.