The future of Italian Hydropower: between concessions crux and potential investments

The government is working on a decree-law to regulate the reassignment of hydroelectric concessions. Frosio Next is ready to seize new market opportunities, in the light of upcoming developments.

by Frosio Next

December 2024

Brief history of the legislation

To better framework the matter of Hydroelectric Derivations, it’s necessary consider that concerns the use of a state property, water, whose ownership belongs to the State (article 822 of the Civil Code and article 144 of Legislative Decree 152/2006). It also concerns aspects of environmental and ecosystem protection whose legislative power, exclusively, belongs to the State (article 117 second paragraph of the Constitution). In addition to this, it concerns the “national production, transport and distribution of energy” which belongs to the concurrent legislative power between the State and Regions (introduced with the entry into force of the amendments to Title V of Part II of the Constitution – article 117 third subparagraph).

To complete the framework, it should be mentioned the DPCM 10/12/2000 (Identification of assets and financial, human, instrumental and organizational resources to be transferred to the Regions and local authorities for the exercise of administrative functions and tasks in the field of public water system property) which definitively implemented the design prefigured by Law 59/1997 providing for the transfer of competences to the Regions, starting from 1 January 2001. This explains why, although the main reference legislation remains the National one, the Regions have, over time, enacted specific provisions valid in their own territory.

The Legislative Decree. 79/1999 C.D. “BERSANI DECREE” (Legislative Decree 16 March 1999 n. 79) was the regulatory watershed in the field of hydroelectric derivations as it effectively introduced the principle of liberalization of energy and competition required by the Community Directive. Differently from the previous regulatory regime, according to which the concessions held by ENEL did not expire and the others had a duration of up to 60 years, it set an extension to 12/31/2010 for the concessions of Large Derivations expiring within that date and defined the expiry of all ENEL large derivation concessions in 2029 (i.e. the thirtieth year following the entry into force of the same Legislative Decree 79/1999).

Inaction in recent past

The Government has been working on for some time on a Decree-Law on Italian strategic assets which could provide for a reassignment and extension of hydroelectric concessions, most of which will expire in 2029. The whole sector has been “prisoner” for several years into a stalemate due to the possibility in the recent past (the Draghi Government’s Competition Law) to put concessions up for tender: this situation has, in practice, mortified any new potential investment, reducing direct intervention on infrastructure to ordinary and “conservative” maintenance.

Renewals and the PNRR matter

In this phase, the Government may wish to align with the European average in terms of duration: we are talking about thirty-fourty years. This would extend the current average duration (thirty years) for plants, bringing with it the mentioned optimism in greater and continuous investments in the sector. If the general intentions seem to take shape in a growing confidence, the need of finding a general compliance with the indications of the PNRR (National Recovery and Resilience Plan), appears more tricky. The highlighted principle is linked to the transparent and competitive assignment of concessions: a point which, if on one side appears obvious in the eyes of the European Commission, on the other inevitably tends to slow down the current line of Government which aims at automatic extensions and renewals.

Key players

The main Italian hydroelectric operators are waiting for decisions. Among them Enel, in the face of a new strategy following the appointment of Flavio Cattaneo as CEO and General Manager of the group, seems to have clearer ideas, strongly focusing on local renewables and planning to invest up to 5 billion euro in the future. In general, operators, in a scenario of reassignment of concessions for a minimum period of 20-30 years, fix the “remaining” investment mobilization of the entire sector at 10 billion, for a sector which, to date, represents almost 20% of national consumption of energy.

Data by Terna S.p.a – April 2023 Report – https://www.terna.it/en/media/press-releases/detail/electrical-consumption-april-2023

“In the Italian market, Frosio Next does not await the government’s pronouncement for the reassignment or the renewal: the planning and implementation of the interventions as well as the monitoring will be, in any case, the obligatory step for the concessionaires (outgoing or incoming) to whom the concessions will be assigned”.

“According to the law under development, when the concessions expire, the concessionaires could obtain their renewal through the renegotiation of the conditions on investments and the fees to be paid to the regional authorities. Longer concessions would certainly guarantee greater certainties for businesses and greater incentives to invest. Frosio Next is ready to give its contribution in this new phase of Italian hydroelectricity”.

Frosio Next ready for future developments

In this phase of growing confidence in an unblocking of the situation and the relative investments put in place, Frosio Next, in continuous growth in international markets, is also looking very carefully at the Italian scenario, ready to offer its design and consultancy services to consolidate and strengthen the infrastructure of the national hydroelectric park but also to actively intervene, in this crucial period for the sector, with an analysis and monitoring service for the plants (for the most part very dated).