Despite Italy’s high energy prices and a capable industrial base, the country has long grappled with a fractured relationship with renewable energy, writes Patrizio Donati, co-founder and director of engineering firm Terrawatt.
This tension has persisted through numerous government changes over the last two decades, often stemming from concerns that renewables might damage the landscape and restrict land use for other purposes.
Additionally, Italy has historically struggled with consistent and effective management. Poorly drafted policies have often been implemented unevenly across Italian territory, leading to confusion and limiting investment.
Italy’s renewable energy development has been marred by policy missteps. Data from the International Renewable Energy Agency (IRENA) illustrate this clearly. In 2010, Italy had 30.3GW of renewable capacity installed, with more than half coming from established hydro sources. By 2014, this figure had risen to 49.5GW, largely due to an increase in solar power installations.
However, growth slowed dramatically, and by 2019, total capacity had only increased to 54.4GW. This raises the question: How did Italy nearly double its installed renewable energy capacity between 2010 and 2014, only to add fewer than 10GW over the next six years?
The answer lies in the Italian government’s retroactive reduction of the incentive rates supporting renewable energy firms’ investments. This abrupt policy change created market turmoil, leading to a significant withdrawal of both domestic and foreign investment. A graph from IRENA shows that while other countries expanded their renewables capacities during the last decade, Italy’s growth plateaued due to a lack of investment, with its position in installed capacity overtaken by Spain.
The consequences of a decade of underinvestment are clear: Italy is now the largest importer of energy in the EU.
When the energy crisis began in early 2022, driven by the war in Ukraine and a sharp reduction in Russian gas supplies, Italy was particularly hard hit. Energy prices surged, reaching peaks of over €500/MWh. Since then, Italy has consistently faced the highest power prices in Europe, averaging around €100MWh over the past year – up to six times higher than other European countries.
Agrovoltaics: Solution or problem?
Utility-scale ground-mounted solar is the cornerstone of the energy transition. It offers cost-effectiveness, low technical complexity and consistent production, with the potential for the lowest levelised cost of electricity (LCOE) of any form of energy generation.
The scalability of solar significantly reduces costs per megawatt as the size of the installation increases. Large-scale solar farms provide not only some of the cheapest energy available, but also the greatest returns for investors. This advantage stems from the fact that one of the major expenses – connecting a solar farm to the grid – does not necessarily increase proportionately with the size of the farm. Consequently, larger projects benefit from reduced relative grid connection costs, enhancing their overall economic viability.
Agrovoltaics are technical solutions that combine PV systems with agricultural activities. These approaches can vary from simple methods, like allowing sheep to graze between the panels, to more sophisticated, such as elevating solar panels to permit full-scale cultivation underneath. However, many of these advanced solutions are still considered experimental and often receive funding under the National Recovery and Resilience Plan due to their innovative nature.
It is important to recognise that almost all agrovoltaic solutions generally increase the LCOE for solar farms. This increase is relatively predictable, as the main cost factors for a solar farm – land, support structures and maintenance – are affected by the additional requirements of integrating agricultural activities.
Essentially, agrovoltaics often require adjustments that can lead to less optimal technical solutions and higher overall costs. In May 2024, the Italian government introduced the DL Agricoltura, an emergency measure designed to support the agricultural sector.
Among its provisions were direct monetary support, legislative reforms and a proposed ban on the development of ground-mounted solar on agricultural land. The legislation proposed limiting solar installations on such land to advanced agrovoltaic systems, with ambiguous exceptions for projects already in the authorisation pipeline.
Because of the nature of this emergency legislation, it became legally binding upon publication, with 60 days for conversion into law. Despite minor adjustments during the legislative process, the final law differed little from the original, poorly drafted content, creating significant market uncertainty due to its vague provisions.
Ongoing uncertainty
The impact of the DL Agricoltura has so far been twofold.
First, in anticipation of the law’s publication, many market operators scrambled to submit authorisation requests, in some cases even presenting incomplete or hastily prepared layouts and other documentation, as the legislation included provisions preserving the legality of projects with an authorisation request submitted ahead of the DL Agricoltura’s publication. This rush has understandably overwhelmed public administrations, slowing down the already sluggish authorisation process.
Secondly, the legislation has effectively halted solar development in Italy by requiring more complex and costly technical solutions for the best land, and by overturning the previously defined ‘aree idonee’ or ‘suitable areas’ for development. This has created, once again, legislative uncertainty in a market that typically makes investment plans over 30-plus years. The shift has disrupted investment strategies and created additional barriers to the expansion of solar energy in Italy.
Finally, the primary arguments used by legislators to support the publication of this legislation hinge on two main points. First, they point to data from Terna which shows that the current grid connection requests with the grid operator are enough to satisfy Italy’s renewable energy needs three times over.
Specifically, they point out that there are 341GW of open connection requests spread between solar and wind, compared to the 2030 target of 131GW. Second, legislators claim that solar installation on farmland is detracting from agriculture, weakening Italy’s self-sufficiency and harming a vital sector of the economy. Both arguments warrant closer examination.
The way forward
Data reveal a significant gap between the number of projects with an accepted grid connection request and those that have actually concluded development – 161GW vs 7.3GW with a Final Technical Solution. This is because many developers speculatively present grid connection requests for projects that are unlikely to see completion for a variety of reasons.
Considering land use, a recent study by the European Environmental Bureau indicates that approximately 2% of total EU land will be required to achieve the energy transition. If all of Italy’s renewables targets were met with solar power, 131GW would occupy roughly 200,000 ha of land. Currently, Italy has between 3 and 4 million ha of agricultural land lying fallow and abandoned for one reason or another.
The need to install renewable energy capacity by 2030 is driven not only by the imperative to reduce greenhouse gas emissions but also by the imperative to reduce energy costs for Italian businesses and consumers.
Regardless of how this capacity is deployed and whether certain types of land are excluded or not, the sector needs a stable, overarching regulatory framework which will allow private agents to make consistent investment decisions. As a consequence, this will enable regulators to manage the approvals process in a streamlined and efficient manner.
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