Energy in Italy: Trends and opportunities

The energy sector continues to be a cornerstone of Italy’s economic and environmental strategy, driving resilience and innovation amidst global market challenges. As the country aligns with European climate objectives, businesses are navigating a complex landscape of regulatory frameworks and emerging opportunities in renewable energy, storage technologies, and biofuels. In this pivotal moment, the stakes are high: the ability to adapt will define the sustainability and competitiveness of market participants.

2024 activity levels and regulation novelties

The year 2024 concluded with notable growth in investment activity across Italy. Across the Italian M&A market as a whole over 1,300 transactions took place, reflecting a 10% decrease compared to the 1 the previous year. The total value of these transactions, where data was available, was close to €62 billion, representing a 27%% increase year-on-year. Private equity played a significant role in Italian M&A in 2024.

These results highlight the resilience in the market, underpinned by opportunities for consolidation and innovation. The energy transition, in particular, remains the primary catalyst for growth in the M&A market across the energy and infrastructure sectors.

Key transactions in the energy sector included Eni’s partnership with KKR, which saw the latter acquire a 25% stake in Enilive for a reported €2.94 billion. Another pivotal deal was VTTI and Snam’s acquisition of Adriatic LNG, a majority stake in Italy’s largest LNG terminal, with the deal expected to value the terminal at around €800 million. These moves underscore the growing emphasis on strategic partnerships and sustainable energy investments.

Beyond these market developments, significant regulatory updates have shaped the sector:

• FER 2 Decree of 19 June 2024: it aims to promote innovative renewable energy technologies, including offshore wind and solar thermal systems. Specific incentives are provided to accelerate their deployment.
• Energy Release 2.0 of 23 July 2024: it introduces a mechanism for pre-purchasing electricity from renewable sources at fixed price (trough CfDs) for three years. The scheme includes auctions to allocate energy to intense energy customers which commit to build renewable capacity. Such renewable capacity will be subject to a CfD for 20 years.
• Mechanism for the Provisioning of Electric Storage Capacity (MACSE) of 10 October 2024: it sets out the remuneration scheme for BESS with long-term capacity contracts.
• Consolidated Law on Renewables - Testo Unico sulle Rinnovabili of 25 November 2024: a comprehensive legislative text consolidating various renewable energy regulations, offering streamlined permitting processes and clear guidelines to reduce bureaucratic hurdles.
• FER X Transitorio (draft regulation approved by the European Commission on 17 December 2024): Incentive scheme for new renewable capacity generated by photovoltaic, wind, hydroelectric and residual gas treatment plants from purification processes.

While these measures collectively foster innovation and the expansion of renewables, certain other regulatory developments could act as deterrents to M&A activity. For instance, the DL Agricoltura (Decree-Law No. 63 of 15 May 2024, converted into Law No. 101 of 12 July 2024) imposes a general ban on ground-mounted photovoltaic plants on agricultural land with some exceptions, potentially limiting opportunities in solar energy. In addition, the Decree Aree Idonee (Ministerial Decree 21 June 2024), by delegating to the Regions the identification of areas where the development of renewable plants follows a simplified procedure and the areas to be considered unsuitable for the development of renewable plants, has led to varied regional approaches.

Outlook

Italy’s energy landscape is evolving rapidly, presenting both opportunities and challenges. Possible delays in implementing legislative reforms and restrictive local policies in some Regions could be seen as risks. However, the expansion of renewables, energy storage, and biofuels is attracting diverse stakeholders and the electricity spot price is expected to remain relatively high due to the ongoing reliance on gas. Current and future incentive schemes and high energy costs, influenced by Italy’s dependency on gas imports, make the market attractive for international investors.

In 2025, M&A activity is forecast to remain robust. High liquidity in the system and increasing investments by private equity funds are expected to sustain growth. The energy sector will likely remain a focal point, driven by the energy transition, diversification initiatives by multiutilities, and growing interest in technologies supporting electrification. Private equity’s role is poised to become even more significant in this segment.

Substantial government incentives, totalling €17.7 billion for energy storage and €5.7 billion for renewable energy communities, underscore Italy’s strong commitment to the energy transition. Achieving the country’s 2030 renewable energy targets will hinge on accelerated reforms, substantial infrastructure investments, and effective collaboration among public and private stakeholders.

Key takeaway

Italy’s energy M&A market is at a critical juncture. As the country accelerates its transition to renewables, the sector offers immense opportunities and challenges. To thrive, stakeholders must stay informed, agile, and proactive in leveraging incentives and navigating this dynamic environment.