Italy to launch series of mixed wind-solar auctions totaling 4.8 GW

Italy's Ministry of Development (MISE) has submitted to the country's State-Regions Conference and the Italian Regulatory Authority for Energy, Networks and Environment (ARERA) a draft decree for the introduction of a new incentive scheme (Decreto Fer), which includes, among other things, a mixed wind-solar auction mechanism for projects over 1 MW, as well as a tender mechanism for renewable energy installations up to 1 MW.

Auctions for utility-scale solar and wind

According to the draft decree, to which pv magazine gained access, the first auction for large-scale solar and wind is expected to be held this coming November, and will assign around 500 MW of capacity.

Three similar auctions are set to be held in 2019, in March (500 MW), July (700 MW) and November (700 MW); while another three auctions are planned for 2020, in March (700 MW), July (800 MW) and November (800 MW).

Overall, through the mixed auctions for wind and solar over 1 MW, around 4.8 GW are expected to be allocated in Italy in the period 2018-2020, while other power projects over 1 MW, relying on different renewable energy technologies, are expected to see a total share of just 245 MW, which will be assigned in separate auctions.

Furthermore, MISE is planning to tender 490 MW for existing renewable energy power plants that will be partially or entirely retrofitted, provided these plants have surpassed at least two thirds of their life-cycle, and are not currently receiving incentives.

As for the development of PV projects, the decree establishes that these have to be completed within 24 months after the date of the auction's conclusion, and that the maximum price will be €70/MWh.

Projects planned for landfills, quarries and depleted mines, or landfill areas and contaminated sites will be prioritized, MISE said in the decree.

Projects under the auction scheme will not be permitted in areas, which are already saturated with non-programmable renewable energies, and that the incentives awarded in the auctions will be suspended in the hours in which the zonal prices will reach zero for a period of six consecutive hours, or in the case of negative prices on the wholesale market.

Renewable energy projects located abroad will also be allowed to participate in the auction, provided that they export the generated power to Italy

Tender scheme for solar and renewables up to 1 MW

The decree also includes a mechanism to support power projects not exceeding 1 MW in size. Overall, MISE plans to allocate 590 MW of installed power for PV and wind over the period 2018-2020 via seven different tenders.

Two different maximum prices for PV technology were set: €110/MWh for projects ranging in size from 20 kW to 100 kW; and €90 for projects between 100 kW and 1 MW.

Approval of the EU

Once the decree is approved by the relevant Italian authorities, it will be submitted to the European Commission for final approval.

It is very unlikely, however, that such a scheme will be rejected by the Brussels' authorities, since it includes the most important recommendations made by the EU for member states regarding the development of renewable energies, such as, among others, the adoption of technology-neutral auctions to support large-scale renewables, and allowing projects located in neighbor countries to participate.

The Italian government has stressed that the decree has taken into consideration the Clean Energy Package 2020-2030, which the EU is currently defining, and Italy's new energy strategy for the period 2020-2030 (Strategia Energetica Nazionale – SEN), through which the Italian government expects the share of renewables to increase from around 17.5% currently – the 2020 EU target of 17% was already achieved by the country – to 27% in 2030.

As per the new energy strategy, solar is set to play a key role, and account for around 50% of newly installed capacity.

MISE expects power production from PV to increase from 23 TWh currently, to 72 TWh by 2030. According to Italian renewable energy expert, Gianni Silvestrini, in order to achieve the 72 TWh target, new solar installations must exceed 3 GW per year, while total new PV capacity installations are estimated to be over 30 GW for the 2020-2030 period.

Revival of large-scale solar in Italy

If implemented, the new scheme will enable large-scale solar – a segment that saw huge development between 2009 and 2013, when the Conto Energia scheme was still in place; and almost zero growth over the past four years following its removal – to regain momentum.

In the meantime, several projects for unsubsidized solar parks have been developed over the past year, as the Italian market appears to offer good opportunities in the private PPA market.

The combined effect of auctions and the PPA market, in the end, may push Italy back into the club of Europe's largest PV markets over the coming years, particularly when one considers that it was able to deploy between 300 and 400 MW annually over the past four years (mostly rooftop installations), despite the fact no direct incentives were available.