During the last 5 years, Italy has setnew and ambitious targets in terms of carbon emissions, renewable energydeployments and carbon neutrality. Major target, which is to reach 100% Carbon Neutrality, is set to be achieved by 2050.
Renewable Energy is assumed to be the main driver and the main focus of the country to reach carbon targets, thus total share of Renewables is set to reach 30% in Total Energy Consumption and55% in Electricity Production by 2030.
Although Renewables might be seen as they are at the centre of the focus, we see several impediments and, apparently, Italy has pinned its hopes on some other resources which may failin the long run, such as Hydrogen and Carbon Capture. Around 500 mn Euro budget was spared for Hydrogen Research and Development.
Renewable Energy development faces several local and central resistance due to existing laws and regulations. Just after the launch of the Russian invasion towards Ukraine, Italian Government introduced new mechanisms to ease up Renewable Energy Project Development procedures and overcome long and thorny administrative impediments that makes permitting procedures extremely difficult. However, old habits resist against the new schemes and we hope the local institutions, and central ones to some extent, will comply in a better manner than it is today.
Italy imports more than 75% of its primary energy, Natural gas and oil, of which 41% is imported from Russia in2021 together, dominate the energy pool. Coal is not substantial. Buildings are the major end users together with Industry and Transport.
Italy in 2022 started reducing Russian natural gas imports, by signing new contracts with alternative suppliers as well as reducing overall demand for natural gas through Renewable EnergyDevelopments and energy efficiency, especially in the building sector.
Although it looks Italy is on track to reach its National Energy and Climate Plan (NECP) for 2030, further aggressive measures need to be taken to reach 2050 targets and in particular, possible new requirements to be imposed by EU, due to FiT-for-55 (FF55) package.
From time to time, it appears so, we have the feeling that Italy’s main focus is, instead of reaching 100% CarbonNeutrality through Renewables, to cut-off Russian imports and to find alternative Gas and Oil routes and to use Natural Gas for Hydrogen production.
According to the IEA report, the share of renewables in total final energy consumption has increased from 7% in 2005to 16% in 2014 and in 2020, the share of renewables increased to 18%, mainly asa result of new Solar and Wind Power Plants.
Bioenergy is the main renewable energy source, Hydropower comes as the second largest renewable source of energy, which accounted for 55% and 20% of renewables use in 2021 respectively.
To achieve the 2030 targets, the NECP(National Energy and Climate Plan) mainly points towards the expansion of wind and solar electricity generation particularly agri-PV.
Renewable sources’ share inelectricity production increased by more than 100% between 2005 and 2021. Itaccounted for 40.5% of total electricity generation in 2021 and 36% of grosselectricity consumption in 2020. Overall, between 2010 and 2020, generationfrom Solar PV increased by more than twelve-fold. This increase was mainly dueto the incentives that were provided before 2016. This upwards trend iscontinuing and the share of Solar PV shall increase dramatically in the comingyears thanks to the major drops in solar LCOE (Levelised Cost of Electricity)bringing solar below the Grid Parity. After a steady period of Solar PV from2017 to 2020 we shall see more and more Solar PV domination.
According to the NECP, by 2030, installed solar PV capacity should increase from 24.2 GW in 2022 to 52.2 GW, which points to a 31 GW additional capacity. Where, wind capacity should increase to 19.7 GW from its 11.7 GW 2022 level. Please note that Solar PV has already reached 29 GW by the end of 2023.
Solar Project Development in Italy
Around 3.8 GW of Solar PV was deployed in 2023, bringing the total Solar PV capacity to around 29 GW in Italy. The country is very attractive for Solar Project development for various reasons.
High irradiation rates, lower LCOE, big population, energy consumption, Grid Infrastructure although additional investments are required, highly developed private sector and industries, thus private consumers, availability of the PPAs with private consumers not only inItaly but also in other parts of Europe, integrity to the EU inter connection and financial system, well developed free electricity market, increasing electricity demand in summer time which corresponds with the peak solar PV production, penetration of electric vehicles, limited local gas and oil resources and ambitious Solar PV targets are the basic reasons which make SolarPV more attractive.
Italy is from time to time busy withHydrogen and Carbon Capture developments. We see that these developments are consuming the valuable time and resources. Hence, the National Recovery andResilience Plan (NRRP) stated that developing hydrogen as indicated by the preliminary guidelines would require about EUR 10 billion in investments until2030.
Although some see that Natural Gas could be used for Hydrogen production, cheap Solar PV is planned to use for that. It is always more environment friendly and economic to use the electricity from Solar PV. In any case, it is not hard to see that Solar PV shall dominate Italy’s future energy production.
The competition is tough, almost all of the world energy giants are already in Italy and developing & buildingSolar PV projects. Therefore, it is not easy to take place in the market, however we still see a broad room for opportunities in Italy.
There are of course several key factors for success.
Investors should:
- Learn the Project Development Sub-Regulations, namely; AU, PAS, DILA, Comm. to the Municipality and Free Building Development
- Understand pros and cons of each
- Understand which sub-regulation fits its needs
- Decide the size of the prospect PV projects based on needs
- Choose a trustable developer
- Understand the land types and secondary land regulation
- Select the appropriate land type
- Find the land, implement a land DD, check the constraints
- Select the appropriate capacity for each prospect project
- Check the availability of the Grid
- Understand the permitting processes and the approval authorities
- Understand the costs and build a reasonable and correct budget
- Foresee the expected time lapses
- Find appropriate project design companies
- Understand the agri-PV regulations, if needed
- Try to understand the nature of PPAs and see if they are suitable
- Try to understand not only the local but European wide finance opportunities
- Try to understand the wholesale electricity prices and the market.
