Italy to Award Contracts for Difference for Offshore and Floating Wind Projects, EU Greenlights EUR 35.5 Billion Renewables Subsidy Scheme

June 5, 2024, by Adrijana Buljan

Italy will award Contracts for Difference (CfD) for fixed-bottom and floating offshore wind projects through a scheme for which the Italian government just received the EU’s go-ahead.

The EUR 35.5 billion scheme is comprised in a draft decree, dubbed Decree FER2, which the Italian Ministry of the Environment and Energy Security (MASE) delivered to the EU Commission earlier this year and which promotes the construction of renewable energy projects using technologies that are not fully mature or have high operating costs.

The objective of Decree FER2 is to incentivise the buildout of 4.6 GW of new projects by 31 December 2028, including fixed-bottom and floating offshore wind farms, floating solar, tidal, wave and other marine energies, as well as geothermal energy, and thermodynamic solar projects. CfDs will also be awarded to biogas and biomass production projects through the same scheme.

The projects will be selected through a transparent and non-discriminatory bidding process, where beneficiaries will bid on the incentive tariff (the strike price) needed to carry out each project, the European Commission states.

Under the scheme, subsidies will be provided as a two-way CfD for each kWh of electricity produced and fed into the grid, which will be paid for a duration equal to the useful life of the projects.

The deadlines for the selected projects to enter operation will range from 31 to 60 months, depending on the technology.

“The green light from the Commission is an important step forward towards our energy objectives, which comes after a long and constructive discussion with the European institutions. This long-awaited measure will enable new technologies that are fundamental for decarbonisation,” said Italy’s Minister of the Environment and Energy Security, Gilberto Pichetto.

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Decree FER2 will now be sent before the relevant Ministers for their sign-off before being dispatched to the Court of Auditors for registration and subsequent publication. Within thirty days from the date of publication, the Operational Rules will then be issued through a decree of the Ministry of the Environment and Energy Security that will put the measure into effect.

The news on the progress of the Italian decree on the CfD auction scheme comes shortly after the government opened a window for expressions of interest from the port authorities for developments that would facilitate the creation of a national offshore wind supply chain in Italy.

The government invited expressions of interest under Energy Decree 181 from 2023, which calls for at least two ports in Southern Italy that are part of the port authority system or adjacent to areas where gradual elimination of the use of coal is underway to be identified for setting up infrastructure to support floating wind and shipbuilding capabilities that will support offshore wind buildout.

Italy, which so far has one offshore wind farm in operation, already has a number of concession applications for offshore and floating wind farms spanning its entire coastline.

By the end of 2021 alone, the government received 64 expressions of interest to build floating wind farms in the country and several new applications have been submitted since then.