Hydroelectricity, regional tenders start again in autumn

With the resumption of business after the summer break, the regions of northern Italy will restart the bidding process for large hydroelectric derivation concessions. However, the question of changing the rule, which requires tenders through a competitive procedure tout court, project finance or mixed public-private companies and which is a unique case in Europe, remains unresolved. The companies in the sector, but also many politicians, are once again urging an extension of that rule to include a fourth way, which would allow the concession to be re-allocated to the same operator against a strong commitment to investment. Of the need to reopen this dossier, by starting negotiations with the European Commission, the Minister for the Environment Gilberto Pichetto Fratin spoke several times over the summer. The issue may become topical again now, with the appointment of Raffaele Fitto as European Commissioner for Budget and Cohesion Policies. Until now, Minister Fitto had remained cool on the advisability of opening a table with Brussels to review that provision of the NRP, perhaps also for fear of complicating the path to appointment. Once this is achieved, however, Fitto could be a key figure in Europe to bring about the revision of the clause on tenders for hydroelectric concessions.

The NRP regulation stipulates that competitive procedures for tendering out expired concessions should be implemented by the end of 2023. In particular for large hydropower generation plants with a capacity of more than 3 me gawatts. The local authorities, which are responsible for the concession assets, have been moving since mid-2023; however, everything has been on standby for months. Since when, in both Northern and Central Italy, resolutions or calls for tenders had been approved or, as in the case of Piedmont, a project finance plan had been presented by Iren to renew concessions that had expired a few years ago. After the start of these procedures, however, challenges and appeals by companies in the sector, exiting companies or competing companies, had blocked everything.

Some mechanism, however, is being set in motion again. In recent days, the Superior Court of Public Waters rejected the appeal against Iren's project put forward by the Bolzano-based company Eisacwerck. The latter claimed that the outgoing company would be in an advantageous situation because it had all the data at its disposal unlike the competing companies, in addition to benefiting from a pre-emption on the project to be assigned. The Piedmont region now intends to go ahead: at stake is the reallocation of the management of 7 reservoirs and 5 hydroelectric plants on the Orco axis (Serrù-Ceresole) and on the Po at San Mauro, all for 320 million of new investments. The ruling of the Water Court, which rejected the Bolzano company's appeal, was of first instance. So Eisacwerck could always go to second instance and, in theory, have the verdict overturned. The resolutions that the Lombardy region had approved at the beginning of the year in order to call for tenders were also challenged. Nevertheless, the Lombardy local authority intends to continue: some tenders were called at the end of May, but others will follow. In all, there are 42 large derivation concessions in Lombardy, 20 of which have already expired and others expiring by 2029. All this is to ensure that the route does not get bogged down in litigation. Even Abruzzo, which had put out to tender a number of concessions managed by Acea, was forced to withdraw the tender after appeals by the outgoing company, Enel and A2A. The picture is very jagged: there are more than 4,600 hydroelectric plants in Italy, but there are a few hundred large derivation concessions, with installed capacity of more than 3 megawatts. These are the concessions that have to be put out to tender. The framework of strong regulatory uncertainty has kept investment in the sector in suspense for years, necessary to upgrade plants but also to create new water reservoirs, interventions that are also indispensable in order not to waste water resources that are increasingly needed, given the increase in temperature and the spread of drought. The sector hopes that the government will open a debate with Brussels as soon as possible to amend the competition law and also introduce the possibility of reallocating concessions, an operation that would put an end to disputes and could unlock more than 10 billion over 10-15 years.

Hydropower, on the other hand, made a decisive contribution to the more than 50 per cent growth of electricity generation in Italy through renewable sources in the first six months of the year, thanks in part to the rainfall that was intended (at least in northern Italy) at the beginning of the year. The situation of relative tranquillity that the country is experiencing in terms of the supply of cheap electricity (although the price in Italy is much higher than the European average) may not last. And from autumn a phase of instability may begin.

Over the past 10 months, Italy has increased its electricity imports, mainly from France, and also from Slovenia. This level has reached record levels, over 20%, with cost mitigation because the French have found themselves with excess production and have therefore sold electricity at lower prices. The French have, however, been pre-alerting neighbouring countries for several weeks that they will have to shut down some nuclear plants for maintenance from autumn, as they did two years ago. Back then, the combined effect of lower imports and drought in the north was about to jeopardise the security of the country's electricity supply, also due to the cut in Russian gas supplies now replaced by imports from North Africa and regasifiers. In any case, an easy restart is not foreseen. The installation of new photovoltaic and wind power plants is by now heading towards a generalised halt, after the various crackdowns introduced with the latest decrees, so much so that the Politecnico di Milano estimates that in 2025 and 2026 no more than 2 gigawatts per year will be installed, compared to the 12 needed to reach the targets. Many large hydroelectric concessions will not expire before 2029: those in Val d'Aosta, managed by Cva, about 20 in Lombardy, many managed by A2A, and concessions managed by Enel. Facing another five years of waiting in the face of uncertainty means that investment will remain at a standstill. If the fourth way were to be introduced, the regions could negotiate new investments with the operators: in the case of concessions that have not expired, an anticipation of the expiry date could be considered, with the reallocation of the concession against new financial commitments of the concessionaires.