Chasing Zero – Energy Transition
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31 7月 2024
Insight
Italy
In 2023, wind power in Italy generated 23.4 TWh, a record for the technology, which last year covered 7.6% of the country's electricity demand.
Wind energy is currently the third most potent renewable source by generation, accounting for 20.7% of total renewable energy production. However, the annual installed capacity is not matching the pace needed to meet 2030 targets. In fact, in 2023, according to the transmission system operator Terna, new installations amounted to almost 488 MW, a slight decrease (-7%) compared to 2022.
According to certain projections, the Italian market is expected to reach 2.1 GW by 2030 (starting in 2025) for offshore generation and to increase from 1.5 GW in 2024 to 2.1 GW in 2026 for onshore.
The need for increased wind production is clear, with a demand of at least 40 TWh over the next seven years. Between 2014 and 2023, wind power generation has only increased by 8.3 TWh. This shows both the readiness in demand and the need for investments and expansion in the sector.
Italy has a significant potential, both for the onshore and offshore sector. As of December 2022, Terna had received requests for the connection for 75 GW of onshore wind farms and 104 GW of offshore wind farms. These numbers highlight the considerable untapped potential of Italian wind power. The fact that the full potential of the sector has not been exploited yet is probably due to the difficulties the sector has had to face in the permitting phase before a number of simplifications have been implemented.
Resistance to wind power has also historically been linked to the landscape and environmental impact but mitigation strategies are common to make wind farms compatible with biodiversity conservation. In fact, a new approach to the wind sector seems to have gained traction among environmentalist associations, with many now supporting the wind sector. For instance, Legambiente is trying to address the sensitivity of local communities towards wind plants with tourist guides and similar initiatives.
The wind market in Italy has been limited and has not nearly reached its potential. Yet, operators are active and optimistic and, once the regulatory framework is completed for offshore wind, a new wave of larger projects is expected.
In terms of technologies, there is a huge prevalence of onshore farms over offshore. One of the reasons for this is a much clearer set of rules and incentives for their installation and production. Although some wind farms – such as newly developed wind farms or revamped wind plants, for which a simpler permitting process is available – operate on the basis of private power purchase agreements, most of them benefit from incentives in the form of contracts for difference.
The incentive scheme will be updated soon. A draft of the new regulation (so-called FERX) was published in May 2024 and the legislative process is ongoing, including the necessary approval by the European Commission on state aid.
Regarding offshore projects, for many years they have suffered an unclear and burdensome permitting framework, which discouraged players to invest in the sector. Things are different now. The first projects have been fully authorised and a new piece of legislation (so-called FER 2) will be issued soon, incentivising renewables installed on sea, lakes and rivers.
A few off shore projects are already operational and many others are ongoing. The size of the wind farms varies from small-medium scale (eg, 30MW) to much bigger projects (eg, 1GW).
Players in the sector are both national, such as Renexia, GreenIt (a joint venture between Eni and CDP) and international investors, like Copenhagen Infrastructure Partners and BayWa r.e., which has announced its intention to expand its Italian business with the development of offshore wind projects. These include 14 projects for over 9 GW, with two in Lazio, two in Puglia, four in Sardinia, and six in Sicily.
In conclusion, the wind market in Italy has been limited and has not nearly reached its potential. Yet, operators are active and optimistic and, once the regulatory framework is completed for offshore wind, a new wave of larger projects is expected.
In Italy the offshore sector in general is interesting because there is excellent expertise among constructors who would be capable of managing these projects. The problem, however, remains a lack of clarity around incentives, the framework of which awaits the FER II.
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© Herbert Smith Freehills 2024
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