Technological innovation and advantageous taxation

The "drivers" of the European energy strategy on decarbonisation

(by Gabriella De Maio) Energy Law Department of Law Federico II, AIDR Member and member of the AIDR Observatory for the Digitization of the Environment and Energy

Implementing the energy transition in our country is a phenomenon that requires a new political, legal and behavioral approach both on the part of institutions and on the part of citizens. In this regard, the direction taken by the European Union is noted which - with the EU Directives 2018/844, 2018/2001, 2018/2002 and 2019/944 - pushes the use of tax leverage and technological innovation as driving factors for achieving of a complete decarbonization.

In fact, European countries will have to develop a long-term strategy in the coming years to support the renovation of residential and non-residential buildings, both public and private.

Suffice it to say that, in the world context, Europe is the continent with the highest rate of urbanization and the related real estate park accounts for about 36% of all CO2 emissions produced in the territory of the Union.

In particular, Directive 2018/844 - amending Directive 2010/31 on the energy performance of buildings (Energy Performance of Buildings Directive - EPBD) - highlighted the need, for individual Member States, to have a high energy efficiency and to ensure that long-term renovation strategies result in the progress needed to transform existing buildings into near-zero energy buildings.

Furthermore, since each percentage point of increase in energy savings reduces gas imports by 2,6%, efforts to increase energy performance in buildings actively contribute to the Union's energy independence and also have enormous potential in terms of job creation in the Union.

To achieve the objectives of reducing greenhouse gas emissions by at least 40% by 2030, the aforementioned Directive, in addition to the obligation to improve the energy performance of new and existing buildings, provided for the introduction of the so-called intelligence indicators and measures to support the development of charging infrastructure for electric vehicles.

This is because it is clear that the digitalization of the electrical system is rapidly changing the energy landscape. Today the ability to control buildings or cities remotely via intelligent devices and the connection via remote access makes distant places, and above all viable efficiency solutions previously unimaginable, monitored.

Following the trend of technological innovation, in fact, the Directive introduces the cd. Smart Readiness Indicator (SRI), i.e. an indicator that measures the ability of buildings to adapt energy consumption to the real needs of the inhabitants, improving their operations and interaction with the network. In these terms, technological innovation will make a building capable of guaranteeing energy efficiency, adapting its operation to the needs of end users, with the ability to adequately inform them about energy consumption.

And there is no doubt that the application of this technology also impacts the flexibility of the overall electricity demand, including the ability to actively and passively participate in the demand and to take account of the network conditions (in demand-response mode), to example through flexibility and capacity to move the load.

The European legislator does not limit himself, however, only to indicate technological innovation as the driving force of a process of complete decarbonisation, but also outlines the fiscal policies to set this path, specifying the Member States must prepare, in the construction sector, "targeted incentives ”To the development of systems predisposed to intelligence and digital solutions in the built environment.

Such an approach offers new opportunities in terms of energy savings, providing consumers with more precise information on their consumption patterns and allowing the system manager to manage the network more effectively.

This implies that financial mechanisms, incentives and the mobilization of financial institutions for renovations aimed at improving the energy efficiency of buildings must play a central role in national long-term renovation strategies and be actively promoted by the Member States.

These measures should translate into energy efficiency mortgage lending for property renovations, in promoting public investment in an energy efficient property park, for example with public-private partnerships or optional energy performance contracts, in the provide accessible and transparent consultancy and assistance tools, such as one-stop-shops that provide integrated energy restructuring services.

The European legislator therefore considers the dynamics of development of incentive tax policies in the field of energy efficiency as a keystone for carrying out the phase-out from coal and, on this point, urges the Member States to actively promote these facilitating policies, in favor of restructuring of the built heritage and urban regeneration that aims to redesign cities.

In the direction of the enhancement of technological innovation and its contribution to increasing energy saving, for example, the extension - arranged, in our country, with Law no.27 of 2019 December 160 (Budget Law 2020) - tax concessions for the installation and commissioning of home automation systems, such as intelligent thermostats and other devices for building automation, which allow the customized automatic management of heating systems or production of domestic hot water or summer air conditioning, including their remote control through multimedia channels.

The tax deduction of 65% of the entire amount spent, also known as the "home automation bonus", is aimed at increasing users' awareness of energy consumption and ensuring more efficient operation of the systems.

The characteristics that these devices must have demonstrate the purpose that is intended to be achieved with the provision of the tax deduction, since the multimedia devices must allow remote switching on and off and weekly programming of the systems and indicate, through multimedia channels, the energy consumption, through the periodic provision of data. In addition, they must show the current operating conditions and the control temperature of the systems.

The long-term objective - facilitating the transformation of existing buildings into nearly zero energy buildings - was also promoted in the 2018/2002 Directive which stressed the need to promote greater stability for investors, in order to stimulate renovations. deep buildings.

At the same time, the European legislator, with the 2018/2001 Directive, has identified - as very effective tools in order to reduce greenhouse emissions - the reduction of energy consumption, greater technological progress, incentives for use and dissemination public transport and the use of energy efficient technologies.

The role of technological progress in the management of networks and in the generation of electricity from renewable sources is also underlined in Directive 2019/944, in which it was specified that consumers should be able to benefit from the full introduction of intelligent metering systems and , when this introduction has been evaluated negatively, they should be able to choose to have an intelligent metering system and a contract with dynamic electricity prices.

This, in fact, allows consumers to be informed in real time about their consumption, given that the lack of such data has prevented them from actively participating in the energy market.

But the role of digital disruption does not only concern urban real estate, but the entire network involving the transition process from the current energy model based on a predominant use of fossil sources (coal, oil, natural gas) and infrastructures capable of transporting these sources at great distances, to the distributed energy generation model, based on widespread production units (wind, solar, photovoltaic, biomass and cogeneration fields) of small dimensions connected directly to the users and at low voltage.

The electricity grid, within this new scenario, is gradually destined to transform itself from a "passive" network, in which the flow of current flows from the place of production to that of consumption, to an "active" and "intelligent" network (smart grid), capable of managing and regulating multiple electrical flows that travel discontinuously and bi-directionally.

Compared to traditional electricity grids, in fact, smart grids make the most of the advantages offered by the digital age, although there is no doubt that the transition from the energy model to one based on distributed generation and powered by renewable sources will be neither simple nor short, as all the formulations of operational proposals must include an integration, necessary for smart grid systems, between: Information and Communications Technology, smart metering, district heating and tele-cooling in stand-alone or grid-connected applications, electrical storage and thermal, micro-cogeneration, power-to-gas applications.

According to this view, current technologies allow us to imagine a world in which the energy backbone has essentially "rescue" functions with respect to local systems, technologically evolved and efficient, which allow local independence in a circular economy perspective, with benefits in terms of local competitiveness-attractiveness, employment, abatement of emissions and well-being in general (think of local renewables, sustainable mobility, connected services for smart-cities and smart-territories).

A delicate transition, the one we are experiencing, in which tax breaks, together with technological innovation, can play a role of no small importance in guiding the current phase of energy transition which, due to factors that have now become almost emergency, necessarily requires a systematic and coordinated approach to ensure that environmental policies are fully integrated with climate policies.

We often talk about smart cities (so-called smart cities), and even more about smart communities, understood as places or territorial contexts where the planned use of human and natural resources, managed and integrated through technologies, allows the creation of a ecosystem capable of making the best use of resources and providing integrated and increasingly intelligent services.

In fact, smart cities should integrate a governance model in which the participation of investors who are called to make and implement investments in technologies, with the inclusion of public and private entities, is enhanced and new financing models are then developed , also in this case considering both public sources (national and supranational), both forms of private financing, and models of public-private partnership.

If the European Union has therefore hit the mark in terms of an energy strategy that leads to complete decarbonisation, it is now time to implement and implement these guidelines in our country. And undoubtedly the recent Legislative Decree 10 June 2020, n. 48, which, in implementation of Directive 2018/844, promotes the improvement of the energy performance of buildings, taking into account the external local and climatic conditions and the requirements relating to the climate of the internal environments.

However the text of the decree, although introducing interesting ideas, such as, for example, the establishment of the National Portal on the energy performance of buildings, with the main purpose of providing citizens, businesses and the public administration with information on the energy performance of buildings and on energy performance certificates, it could have further enhanced the multiple opportunities offered by technological innovation in terms of energy efficiency of urban real estate assets.

The hope is, therefore, that in the subsequent phases of updating the long-term restructuring strategy, as part of the Integrated Energy and Climate Plan, the European guidelines on decarbonisation will translate into more concrete forecasts about promotion - also through incentive policies - of intelligent technologies, including those that favor the interconnection between buildings.

There is no doubt, in fact, that only a forward-looking approach that takes into due consideration the need to invest in technological innovation and to promote, through advantageous taxation, new behaviors on the part of stakeholders and citizens, can lead to the development of the energy efficiency in domestic and urban areas and the creation of innovative and sustainable transport solutions.

Gabriella De Maio - Energy Law Department of Law Federico II, AIDR Member and member of the AIDR Observatory for the Digitization of the Environment and Energy

Technological innovation and advantageous taxation