- Interest in developing offshore wind in Italy has surged, but subsidies will be crucial to realising the sector’s potential: both fixed and floating projects in Italy are not viable without subsidies before 2040, Aurora Energy Research finds
- Italy’s draft FER2 decree aims to subsidize 3.5 GW of floating offshore wind capacity, to be installed by 2030, but clear legislation and faster permitting processes are needed to achieve this target
- Action to accelerate the subsidy programme could boost installations further—5.7 GW of floating offshore capacity would be able to bid below the set price cap in an auction taking place in 2024, Aurora’s modelling shows
- Installing 3.5 GW of floating offshore wind by 2032 would save Italian power consumers EUR 4.7bn between 2028 and 2060, Aurora calculates
“Offshore wind” and “Italy” are two phrases not traditionally seen together. Installed offshore wind capacity in Europe has grown over the past decade—rising to 26 GW in 2021, from 5 GW in 2012—but remains minimal in Italy, totalling just 30 MW as of November 2022. There are signs that the winds are changing; Italy’s electricity transmission system operator, Terna, announced that connection requests for offshore wind projects had hit 95 GW at the end of October 2022.1 And the development of floating offshore wind technology could remove existing geographical barriers: floating capacity accounts for 96% of Italy’s theoretical offshore wind potential, Aurora Energy Research calculates.2
Subsidies will be crucial to realising Italy’s offshore wind potential. Unsubsidised, or “merchant”, projects are not viable in the short term. Aurora modelled the internal rates of return (IRRs)—a standard profitability measure—for geographically viable fixed and floating offshore wind projects in Italy and found that profitability will remain below attractive levels for investors (minimum 7%) until 2040 for fixed projects and 2050 for floating.
The planned FER2 subsidy scheme aims to allocate support to up to 3.5 GW of floating projects that start commercial operations by 2030, but a lack of concrete legislation and transparent, efficient permitting processes threaten the scheme’s success. It is unlikely that Italy will be able to hold at least three floating offshore wind auctions before 2027, as the latest draft of the scheme’s legislation states. No projects have yet secured all of the permits required to participate, despite ample interest, and the process for obtaining permits is unclear.3
Aurora expects 2 GW of floating offshore wind capacity, subsidised through FER2 auctions, to start commercial operations by 2030. A further 1.5 GW of subsidised floating capacity would come online in 2032. Permit requests indicate that the auctions would attract strong competition—developers have submitted seabed concession requests for projects totalling 36 GW capacity and environmental impact assessment (EIA) requests for 18 GW of projects. Aurora calculates that 5.7 GW of capacity would be able to bid below the set price cap in an auction taking place in 2024.
Implementing the FER2 scheme as Aurora forecasts would reduce the cost of Italian electricity by EUR 4.7bn between 2028 and 2060. The floating offshore wind assets supported by the scheme would increase Italy’s supply of low-cost power generation, reducing average wholesale power prices and, as a result, consumers’ energy bills. The total cost of the scheme, if implemented as Aurora forecasts, would be EUR 6.1bn.
Matteo Coriglioni, Italian Market Lead at Aurora Energy Research, commented:
“The surge in interest in developing floating offshore wind projects in Italy is very encouraging for the future of the Italian energy system, especially considering the lack of diversification of baseload power sources. The draft FER2 decree is definitely a step in the right direction, but in order to not miss the boat, it is essential to act quickly on the authorisation front, while also making sure that the final version of the decree properly takes into account the current inflation of project costs and construction periods.”
Michele Scolaro, Senior Associate at Aurora Energy Research, commented:
“Once developers have the necessary clarity on the subsidy scheme and permitting processes to advance offshore wind projects, co-ordinating project development with grid planning will be crucial. Projects will likely be large in size and—given the necessary geographical conditions—concentrated around southern Italy, Sicily, and Sardinia. This could compromise grid stability in these regions, requiring upgrades or amendments to the subsidy auctions that factor in locational constraints.”
2 Aurora’s theoretical potential calculations considered areas where the annual average wind speed is over 6 m/s, water depth below 50 m for fixed offshore wind farms and between 50 m and 1000 m for floating plants, and power density of 6.5 MW/km2
3 Eligible projects need to have a grid connection agreement, issued by Terna; a seabed concession, issued by the Ministry of Sustainable Infrastructures and Mobility; and an environmental impact assessment, issued jointly by the Ministry of Environment and Energy Security and the Ministry of Culture. The correct order for submitting and receiving permits is not clear. Projects with submitted requests for all three permits total 14 GW.
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Megan Tracey, European Press Officer
megan.tracey@auroraER.com | +44 (0)7810 817354
From its Oxford academic roots, Aurora Energy Research has grown to become the largest dedicated power market analytics company in Europe, providing data-driven intelligence for strategic decisions in the global energy transformation. We are a diverse team of more than 350 experts with vast energy, financial, and consulting backgrounds, covering power, hydrogen, carbon, and fossil commodities. We are active in Europe, Australia, and the US, working with world-leading organisations to provide comprehensive market intelligence, bespoke analytic and advisory services, and cutting-edge software.