The cost of energy in Italy is too high.
The recent Energy Decree (so-called Bills Decree) seeks to address this problem with specific interventions such as a proposed measure on the ETS (Emission Trading System), aimed at containing the cost of electricity through the marginal price formation mechanism. However, it does not include structural measures on factors such as the excessive dependence on generation from fossil fuels, whose supply, mainly imported, exposes the country to strong price fluctuations and energy security risks.
The signatories of this letter represent national and international investors and independent electricity producers engaged in the development of new renewable and storage capacity in Italy. Their work represents the solution to the structural reduction of energy costs in the long term, as evidenced by the results of the recent RES Auction Rounds (FER) and MACSE (Italy’s Electricity Storage Procurement Mechanism) auctions, in which the average hammer price was less than half of the market price and where independent operators obtained the largest share of the allocations. These allocations will activate new investments that strengthen the country’s energy independence, while supporting a strong national and European industrial supply chain.
Today, some short-term measures envisaged in the aforementioned Bills Decree are weakening investor confidence, slowing down the development of new investments and curbing the consequent lowering of energy prices. The signatory companies therefore ask the Italian Government – in particular Ministry of Environment and Energy Security (MASE), Ministry of Business and Made in Italy (MIMIT) and the Presidency of the Council – for a clear and coordinated direction to support the sustainable growth of the electricity system also from an economic point of view.
Our proposals for a more competitive Italy:
1. RES and BESS auctions planned and consistent with the NECP (National Energy and Climate Plan) and PNRR (National Recovery and Resilience Plan)
Renewables and storage are mature technologies and already represent the cheapest solution for electricity production: recent auctions confirm this. But in order to attract the huge private capital needed for the energy transition, a stable, long-term, predictable regulatory framework consistent with the objectives of the NECP and PNRR is needed.
The immediate definition of a multi-year and stable calendar, with defined volumes and dates of tenders for renewables and storage systems, is essential to plan, mobilize investments and ensure competitive prices for businesses and households.
The latest tenders also show that competition between projects is a key factor in reducing award prices. For this reason, regulatory certainty and speed in permitting and access to networks become essential to ensure lower prices.
2. Extend the MACSE to the entire national territory and promote real competition in storage systems
In order to deploy storage capacity throughout the country, it is necessary that the upcoming MACSE auctions are effectively contestable and, wherever feasible, extended to the entire national territory – including Northern Italy – through the introduction of mechanisms that guarantee a level playing field and equal access for new entrants.
This is particularly relevant at a time when the ETS rule contained in the decree significantly reduces revenues on the spot market, making it even more important to support the development of storage through competitive auction mechanisms.
In addition, the new rules proposed by Terna for the Capacity Market, particularly through the definition of derating coefficients, favour gas-fired plants over storage solutions, thereby undermining the principle of technological neutrality.
3. Market PPAs, accessible to all Italian companies
The PPA (Power Purchase Agreement), or long-term energy contracting, is a bilateral and flexible instrument that plays a key role in promoting the development of renewables and in managing price volatility.
To make the benefits of PPAs accessible to businesses, including SMEs, it is necessary to foster a more advanced energy procurement culture. The regulation should favor purchasing consortia, without imposing obligations, and provide the possibility that Italy’s Energy Services Operator (GSE) facilitates SMEs access to this instrument, for example by allowing the consortia to participate as an additional demand in the same tenders.
In this context, the role of the GSE as guarantor of last resort would strengthen the bankability of projects, increasing investor confidence and encouraging further investments in renewables.
4. Avoiding distortions of the ETS mechanism that penalise renewable energy consumers
We share the intention behind the Government’s action to improve the overall efficiency of the market, including through an intervention on the ETS mechanism aimed at reducing the impact of CO₂ costs on energy prices and correcting certain distortions in the marginal price formation mechanism, which do not provide any benefit to newly built plants. However, the measure currently envisaged risks redistributing ETS costs indiscriminately across all final consumers, including those who have already chosen to source electricity from renewable suppliers.
In our view, ETS costs should instead be allocated in proportion to the actual emissions content of each energy supply, thereby reflecting the real environmental impact of different generation sources. Such an approach would enhance the attractiveness of renewable energy and ensure a more efficient and transparent allocation of ETS-related costs. It would also reinforce the competitive advantage of clean energy supplies and further encourage the uptake of long-term renewable contracts, including PPAs..
Ultimately, this would support a structural reduction in energy costs, stimulate electricity demand and electrification, and strengthen both the competitiveness of the industrial system and national energy independence.
A commitment to the country
The high electricity prices in Italy derive mainly from the Country’s strong dependence on generation from fossil fuels and the significant fiscal burden that weighs on the bills of households and businesses. The structural solution to reducing energy costs and strengthening national energy sovereignty lies in renewables and storage. Increasing the use of gas cannot provide a lasting answer, as it would further expose the country to market volatility and dependence on third countries.
It is possible to combine lower electricity costs, price stability for Italian households and businesses, and enhanced energy security through action complementary to the Bills Decree, in line with the points set out above.
Private operators and their shareholders are ready to make significant investments in new renewable and storage capacity in the face of clear, stable and consistent rules. Investors in new renewables are not looking windfall profits or high prices: rather, they require certain and predictable conditions that safeguard the investments made to date and allow them to continue investing today to structurally reduce the cost of tomorrow’s energy.
