Transition 5.0: what it is and how to implement it

The "Transition 5.0" represents a crucial step for the future of Italian companies, especially for Energy Service Companies (ESCOs). This ambitious plan, part of the broader National Recovery and Resilience Plan (PNRR), aims to support the digital and energy transition of companies by promoting investments in advanced technologies that reduce energy consumption and increase operational efficiency.
In this article, we will explore in detail what Transition 5.0 entails, who can benefit from it, what investments are eligible, and how companies can access these incentives.

What is Transition 5.0?

Transition 5.0 is a government initiative outlined in Art. 38 of Decree-Law 2 March 2024 No. 19, in line with the ECOFIN Council decision of 8 December 2023. This plan is part of Mission 7 – REPowerEU of the PNRR, focusing on the digital and energy transition of companies.
The total resources available under PNRR Measure M7 - Investment 15 "Transition 5.0" amount to €6,3 billion, or €3,15 billion for each of the years 2024 and 2025. A reserve of €4032 billion is established to meet climate change objectives in accordance with Annex VI of Regulation (EU) 241/2021 of the European Parliament and Council dated 12 February 2021. The implementation methods of the reserve will be defined by a ministerial decree yet to be adopted.

Objectives of Transition 5.0

Transition 5.0 aims to:

• Encourage companies to invest in 4.0 tangible and intangible assets and generally adopt innovative and advanced technologies.
• Reduce energy consumption in production facilities.
• Support the self-production of energy from renewable sources.
• Promote staff training in new technologies.

 Beneficiaries of Transition 5.0

The tax credit is available to:

• Companies based in Italy, regardless of their legal form, size, or economic sector.
• Permanent establishments of non-resident entities.

Companies in liquidation, bankruptcy, or subject to disqualifying sanctions are excluded.

Eligible Investments

Eligible investments for the tax credit include:

• Technologically advanced tangible and intangible assets: as per annexes A and B of Law 232/2016 purchased or leased in 2024 and 2025.
• Software and platforms for plant intelligence: enabling continuous monitoring of energy consumption.
• Tangible assets for the self-production of renewable energy: such as photovoltaic systems excluding biomass systems.

Investments must ensure:

• A reduction in energy consumption of the production facility by at least 3%.
• A reduction in energy consumption of the affected processes by at least 5%.

Exclusions

To ensure compliance with the DNSH principle, investments intended for:

• Activities directly related to fossil fuels;
• Activities within the EU Emissions Trading System (ETS) generating emissions;
• Greenhouse gases not below relevant benchmarks;
• Landfill activities, incinerators, and mechanical biological treatment plants;
• Activities producing a high dose of pollutants classified as hazardous special waste whose long-term disposal could harm the environment;
• Assets freely devolvable by concessionary companies operating in regulated sectors (energy, water, transport, infrastructure, postal services, telecommunications, wastewater collection and treatment, and waste collection and disposal).

Incentives and Rates

The incentives are provided as a non-transferable tax credit usable in compensation. Rates vary based on the reduction in energy consumption and the amount of investments:

How to Access the Incentives for Transition 5.0

Mandatory Certifications

Incentives are granted upon presentation of certifications issued by an independent evaluator. These certificates confirm:

• Ex ante: the potential energy consumption reduction achievable through investments.
• Ex post: the actual realization of the investments.

Access Procedure

1. Presentation of the Ex Ante Certification: Companies must submit a preliminary certification and project investment communication through the Revenue Agency's online services.
2. Investment Progress: Companies must send periodic communications on the progress of the investment.
3. Ex Post Certification: Upon completion of the investment, companies must present a final certification confirming the results achieved.

Below is a summary table of the process needed to access Transition 5.0 incentives:

Aid Scheme and Cumulability

The incentives under Transition 5.0 are considered state aid and subject to EU regulations. Accounting certifications are mandatory to verify the accuracy of expenses incurred and the actual realization of investments.

The tax credit is not cumulative with other EU-funded incentives in accordance with Art. 9 Regulation (EU) 2021/241 "Additionality and Complementary Funding," nor with the tax credit for investments in 4.0 tangible and intangible assets (ex. Art. 1, paragraphs 1051 and following of Law 178/2020), nor with the ZES Unica tax credit (ex. Art. 16 D.L. No. 124/2023 as amended).

The tax credit is only cumulative with other incentives on the same costs provided that the combined amount (considering also the non-contribution to the formation of income and the IRAP tax base) does not exceed the actual cost incurred.
Below is a summary table on this matter:

* Without exceeding the net actual cost of tax benefits on the IRES and IRAP tax base.

Examples of Investment Projects in Transition 5.0

Examples of projects that may fall under the Transition 5.0 plan include:

• Implementation of Energy Monitoring Systems: Using advanced software to monitor and reduce energy consumption in real-time.
• Installation of Photovoltaic Systems: For the self-production of renewable energy, complying with specific regulatory requirements.
• Staff Training: Investments in training employees on new technologies relevant to the digital and energy transition.

For more details on the implementation of advanced technologies such as thermal batteries, you can consult our Guide to thermal batteries: how they work and their advantages.

In summary, Transition 5.0 represents a fundamental opportunity for Italian companies to improve their energy efficiency and competitiveness through technological innovation. It supports environmental sustainability and offers a path for companies to innovate and grow in a market increasingly oriented towards process optimization and advanced technology.
ESCOs, in particular, can benefit from these incentives to develop sustainable and advanced projects, thus contributing to the country's climate and energy goals.
To maximize the benefits of this opportunity, it is essential to fully understand the regulations and access procedures for the incentives and to carefully plan investments over time.
Visit the MISE or PNRR websites for complete access to information and insights on the requirements and access and utilization methods of Transition 5.0.