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Italy’s solar renaissance: the challenges, the opportunities and the grid

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Italy currently has 140GW of solar PV projects in its grid connection queue. Image: Juwi

In 2023, Italy installed over 5GW of new solar PV generation capacity, by some distance the most since 2011. Of last year’s new capacity, a far larger share was taken up by large-scale projects; the national trade body, Italia Solare, recorded that in Q3 2023, the country added 341MW of solar in plants of 10MW or more, compared with 420MW from the same-sized facilities in the preceding two and a half years.

As Italy’s solar market looks to be finding its feet after a decade of stumbling around below the 1GW mark, 2024 could be the year it starts to cover real ground again. But hurdles still remain, from grid constraints to permitting issues, engineering, procurement and construction (EPC) bottlenecks and land constraints.

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Grid congestion

PV Tech Premium recently spoke with Cristiano Spillati, Managing Director of Limes, a solar and renewable energy developer headquartered in Italy. Our conversation took place in a hotel lobby at the Large Scale Solar Europe 2024 conference in Lisbon last month. As was reflected in our coverage of the event at the time, grids were a recurring topic, particularly when conversation turned to Southern Europe.

Spillati said that around 140GW of solar PV projects are currently in the grid connection queue in Italy and that the total queue for all renewables is in excess of 300GW. This, he said, comes down to permitting: “There is no barrier to entry” for projects to get accepted for a connection point, as he claims it currently costs only around €3000.

He continued: “There are many individuals or companies who do only the first two steps; they sign [for] a piece of land, they get the connection point and, even without accepting it…you have the idea of a project that you can sell for much, much more [than you spent on the applications].”

“This is why you have – in solar alone – 140GW of connection requests.”

These sorts of project speculations are clogging the interconnection queue with projects that lack the fundamentals to come to fruition in the near future. This, Spillati said, lengthens an already bureaucratic approvals process. Terna, the national grid operator, has a three-month period in which it must provide an answer to a grid connection request; “At the beginning, you would get the answer after one month,” Spillati said, “but now, at the end of the 90th day you get the answer because they are so overwhelmed.”

“And in Italy, even if you have the [approvals] centralised at a ministerial level, and that helped to get the large projects environmentally approved…you have the issue that they then go back to the regions for final approval. There you have all these small permits that take a while.”

North-south divide

Local regions and the distribution of solar assets on the grid create another problem for Italy. According to the 2011 census, Italy’s most densely populated areas – and its densest electricity demand – are predominantly in the north, but its solar irradiance levels are higher in the south, and subsequently, more solar projects are deployed there.

The physical reality of moving electrons the length of a country is a challenge for useful solar development in Italy, as there are limits to what the transmission grid can do.

Picking up on another prevalent theme at the LSS EU conference, Spillati said that this reality opens up the opportunity for energy storage projects co-located with solar PV. “The only solution is storage,” he said, “there’s no other way. It costs much less – especially now with the decreasing CAPEX [of storage plants] – than adding kilometres and kilometres of grid.”

“Plus, if permitting is an issue for PV plants, can you imagine it for hundreds of kilometres of grid? The short-term answer is storage.”

He cites Chile, where his company, Limes, owns solar and storage assets under development, and where “it’s impossible to operate our solar plant” without the use of storage because of curtailment. He predicts that “it will come to that level” in Italy “because you need it for the grid…and the demand for colocation will skyrocket.”

PV Tech Premium published a feature on the emerging business case for co-located solar and storage last month, during the course of the LSS conference.

Terna, the Italian grid operator, recently announced an €18 billion investment over the next five years to modernise and develop the Italian transmission grid. Primarily, the upgrades will support a shift towards a decentralised system as more PV, energy storage and other renewables come online. Investment of this scale has the potential to free up the backlog and disparity in the market and build on the momentum from 2023.

An EPC drought

Another major hurdle that Spillati sees is finding an EPC contractor to facilitate project construction.

“You need to find a bankable EPC, and there just aren’t enough – definitely in Italy,” he said. He said this is a symptom of the makeup of the construction and engineering markets more generally in Italy. Shortages of bankable companies lead to a lot of competition for contracts and, subsequently, high contract prices to get a project built.

PV Tech Premium asked him if he saw the potential for EPC framework agreements to emerge in Italy like the one signed between Sonnedix and Eiffage to work on an 858MW solar project portfolio across Europe.

“If you look at the way construction companies are organised in Europe, you see that the major Italian EPCs are not involved in solar,” Spillati said. “You have [major construction firms] Maire Tecnimont and Bonatti…their main market is oil and gas. Then you have the companies that build roads, concessions, etc. Again, they are not in solar.”

He compares Italy to Spain, where major EPC Vinci acquired the solar and renewables development arm of ACS Group, another construction firm. “That’s something that is missing in Italy”, he said.

“So you don’t have large EPCs with large bank balances that can take the framework agreements.”

This is partly due to the smaller average size of solar plants in Italy compared with other European countries—the country is fairly mountainous, and flat land is concentrated in certain areas. EPCs can’t make the ten- or one-hundred-million Euro deals that can provide an economy of scale and greater bankability for solar development.

As with many of the discussions at the Large Scale Solar EU conference, hurdles and restraints holding PV projects back across Southern Europe seemed to fade into the background against a wider, more pervasive optimism.

Spillati said that, with the subsidies for rooftop PV which have driven a lot of Italian solar additions coming to an end, he is expecting “almost three times the amount of utility-scale solar as in 2023” and that “the average size of projects is going to get bigger”.

26 November 2024
Málaga, Spain
Understanding PV module supply to the European market in 2025. PV ModuleTech Europe 2024 is a two-day conference that tackles these challenges directly, with an agenda that addresses all aspects of module supplier selection; product availability, technology offerings, traceability of supply-chain, factory auditing, module testing and reliability, and company bankability.

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