Until March 2025, all RES assets in Italy were potentially subject to curtailment orders by the TSO. However, only wind assets were eligible for financial compensation, as curtailment frequency was considered material only in their case.

With Resolution 128-2025-R-efr.pdf, effective April 1, 2025, the Italian energy regulator ARERA has extended this compensation mechanism to all RES technologies, including PV assets.

This marks a significant shift in regulatory recognition: PV curtailment is now acknowledged as potentially sustained and economically relevant, warranting a compensation framework.

 Therefore, through such Resolution, ARERA has extended this compensation mechanism to all RES plants, including PV assets.

Under the new regime, PV operators are entitled to compensation for curtailed production, calculated as:

• Day-ahead zonal price (€/MWh), times
• Estimated producibility of the asset during curtailed hours

The Market Operator (GSE) will determine, on behalf of Terna, the estimated producibility. While the official calculation methodology has yet to be published, it is expected to align with that used for wind assets and be based on solar irradiation data during the relevant curtailment periods.

GSE is expected to confirm that compensation will apply retroactively from April 1, 2025, even if the calculation methodology is formalized at a later date.

Implications for PPAs: «Pay-as-Produced» No Longer Equals «Pay-as-Shined»

This resolution introduces a fundamental shift in how PV production profiles are treated under long-term Power Purchase Agreements (PPAs).

Historically, PV curtailments were so negligible that the commonly called «pay-as-produced» (PaP) profile, meaning the electricity produced and delivered at the grid injection point, effectively matched a hypothetical «pay-as-shined» profile, i.e. the theoretical production based on solar irradiance. This meant the injected profile accurately reflected actual solar conditions.

After the publishing of Resolution 128/2025, with recognized and compensated curtailments, this equivalence no longer holds. As curtailments increase, the volume of energy delivered to the grid may deviate more significantly from the asset’s theoretical producibility.

How to align PPAs to this new mismatch?

The following considerations have to be seen as commercial guidelines, while a legal due diligence on each existing PPA has to be conducted.

On merchant PPAs

In merchant PPAs it is normally agreed that whatever benefit is recognized to the trader from Terna is passed through to the asset. Please note that balancing costs are usually not charged on the curtailed volumes on which the curtailment compensation is calculated.

On Fixed price PPAs

If the PPA contract refers to actual injections into the grid, the PPA price implicitly assumes curtailment-free conditions with full solar cannibalization on the off-taker. However, this not commercially consistent with the reality, implying the need to commercially re-negotiate some of the PPA terms.

There are two commercial approaches that are mostly being discussed to account for the effect of the new resolution:

• Keep the current PaP definition (payment on injected energy) but adjust the PPA price upwards to reflect the fact that during curtailed hours the PPA is not paid, leaving part of the solar cannibalization risk on the producer. This is rarely a fit for assets under project financing.
• Maintain the existing PPA price but redefine the profile to reflect «pay-as-shined», based on the asset’s theoretical production, and thus settling also in curtailed hours. This is the most widespread approach at the time being.

Broader Considerations: Volume Commitment and Availability Guarantee

Operationally, Resolution 128/2025 might also introduce implications for other commercial clauses of the PPA (if provided for in the contract):

• GOs and electricity volume commitment
• Availability Guarantee
• Relationships with the BRP, if the PPA is physical

For tailored advice or to discuss how Resolution 128/2025 could impact on your ongoing and future PPA contracts, do not hesitate to reach out to our Italian team.