According to International Energy Agency (IEA) website publication on Renewables 2022 Analysis and forecast to 2027 report:
Italy is accelerating renewable capacity deployment in response to the energy crisis, but permitting challenges persist
Italy’s renewable capacity is expected to increase 25 GW over 2021-2027 (+40%). Utility-scale and distributed solar PV each account for 40% of growth, with onshore wind providing the remainder. This year’s forecast has been revised upwards 17% because stronger distributed PV expansion is expected from Italy’s net-billing scheme, generous tax incentives and higher electricity prices, which improve the technology’s economic attractiveness.
Meanwhile, the main drivers for utility-scale deployment are competitive auctions with growing contributions from merchant projects and bilateral PPAs. However, while utility-scale solar PV and onshore wind additions accelerate over the forecast period, they expand more slowly than previously expected because permitting challenges persist despite reform attempts.
Although auctions remain the primary driver of utility-scale PV deployment in Italy, the average allocation rate was just 35% in all rounds. After nine auctions, total awarded capacity had reached 5 GW, while the pipeline of PV and onshore wind projects applying for grid connection at the end of 2020 was 105 GW. A complicated and lengthy permitting process is the main obstacle impeding project development and preventing developers from bidding.
In addition, regulations restricting the participation of projects built on agricultural land significantly limit capacity available for auctions. Although the government introduced new regulations in December 2021 to streamline permitting and facilitate investment on agricultural land, auctions conducted in 2022 remained undersubscribed. Nevertheless, our forecast anticipates an uptick in utility-scale project deployment.
For distributed solar PV, policies introduced in response to the energy crisis should lead to rapid expansion. The new regulations have significantly simplified the permitting process for rooftop PV systems of less than 200 kW on commercial buildings and extended the 110% tax rebate introduced during the Covid-19 crisis by another year. In addition, higher electricity prices have improved the economic attractiveness of distributed PV under the net-billing scheme. Accordingly, distributed PV additions in 2022 will reach almost 2 GW, the highest growth since 2012.
In the accelerated case, Italy could achieve almost 50% higher renewable capacity growth over 2022-2027 than in the main case. Significantly streamlining permitting processes will be crucial to spur development of the huge pipeline of utility-scale PV and wind projects. At the same time, raising support for distributed PV through new tax rebates, subsidies and rooftop PV mandates should incentivise greater consumer investment. In parallel, faster development of power grids and flexibility resources will be necessary to ensure efficient integration of additional variable renewable capacity.
