Italy Power Market Size & Share Analysis - Growth Trends & Forecasts (2025 - 2030)

Italy Power Market Trends and Insights

Accelerated Permitting Reforms under Legislative Decree 199/2021

Implementation of Legislative Decree 199/2021 has trimmed authorization timelines for renewable projects by about one third, thanks to digitalized permitting portals and clearer zoning of “suitable areas”. Photovoltaic capacity caps were raised and wind-farm buffer zones narrowed, boosting application volumes in 2024. Northern regions clear projects fastest because of higher administrative capacity and greater availability of certified installers. The August 2024 FER2 decree complemented the reform by introducing two-way contracts-for-difference for offshore wind, targeting 4.6 GW by 2028. Remaining bottlenecks revolve around environmental impact assessments for projects exceeding 30 MW, yet the overall framework is lowering investor barriers and accelerating the Italy power market transition.

Grid-scale Battery Capacity Market Auctions (Terna)

Terna’s MACSE mechanism is Europe’s first dedicated storage capacity market, aiming to contract 9 GW by 2030 through 15-year pay-as-bid auctions. Battery additions reached 2.1 GW in 2024, representing over half of new grid connections. The inaugural September 2025 auction will award 10 GWh, attracting international developers seeking revenue certainty. Southern Italy offers superior arbitrage spreads due to high renewable curtailment, whereas industrialized northern zones require storage for peak-shaving and frequency support. The auction design complements Italy's power market needs by monetizing capacity, energy, and ancillary services, enabling storage to act as the critical enabler for higher renewable penetration.

Coal Phase-out by 2025 Creating Capacity Gap

Italy will shutter nearly 7 GW of coal capacity by 2025, except for limited Sardinian units delayed to 2026-2028. Coal’s share fell to 1.3% of generation in 2024, leaving natural-gas turbines to bridge reliability gaps. Four new CCGT plants totaling 3.4 GW plus 0.7 GW of upgrades are scheduled before 2026. The strategy safeguards short-term adequacy but raises stranded-asset risks as renewables keep scaling. Rising electrification of industry and transport further widens the supply gap, reinforcing the need for accelerated solar, wind, and storage build-outs across the Italy power market.

REPowerEU-funded HVDC Projects (Tyrrhenian Link)

The EUR 1 billion Tyrrhenian Link will connect Sicily and Sardinia to mainland Italy via a 1,000 MW HVDC cable, commencing installation in February 2025.^{[3]Siemens Energy, “Tyrrhenian Link Press Release,” siemens-energy.com} The project is part of Terna’s EUR 23 billion plan to raise cross-zonal transfer capacity from 16 GW to 39 GW by 2030. Enhanced north-south flows will cut regional price spreads and unlock southern renewables for national consumption. Parallel HVDC projects such as Adriatic Link and ELMED will integrate the Italy power market with Balkan and North African grids, cementing the country’s role as a Mediterranean energy hub.

Grid Congestion in Apulia & Sicily (≥36-month Delays)

More than 348 GW of renewable projects await interconnection, dwarfing the current 137.53 GW system. Apulia and Sicily suffer the longest queues, with developers waiting over 36 months for grid access. The bottleneck stems from weak north-bound transmission corridors and complex environmental approvals for new lines. Terna’s EUR 16.5 billion five-year plan allocates significant funding to relieve southern congestion, yet construction lead times remain protracted. Delays raise capital costs, erode PPA competitiveness, and slow solar and wind build-outs, constraining the Italy power market growth outlook.

Offshore Wind Tender Under-realisation (Adriatic)

Italy holds 157.32 TWh/year of offshore wind potential, but limited capacity cleared auctions because of environmental litigation and protracted maritime concessions. Adriatic tenders repeatedly undershoot targets, diverting capital to the United Kingdom and Spain. Supply-chain constraints for floating foundations and grid connection. The FER2 decree introduced two-way CfDs, yet permitting clarity and seabed rights remain unresolved. Under-realisation of offshore wind curtails diversification and forces heavier reliance on onshore renewables and imported gas within the Italy power market.

Segment Analysis

By Power Generation Source: Gas Dominance Amid Solar Acceleration

Thermal power generation controlled 59% of Italy's power market size in 2024, supplying flexible baseload and balancing services.^{[4]Politecnico di Torino Energy Center, “Italy’s Gas Dependency Update 2024,” energycenter.polito.it} Renewable, while accounting for roughly 41% of generation, is expanding fastest at a 5.32% CAGR through 2030 under declining module prices and streamlined permitting. Hydroelectric contribution rebounded to 35% of renewable output after wetter 2024 conditions, and wind reached 20% of renewable capacity with significant offshore upside. Coal slipped to 1.3% of total production and will exit by 2025.

Solar’s growth owes much to corporate PPAs and utility-scale projects, yet price cannibalization drives Enel to tilt its new-build mix toward 5.7 GW of wind versus 3.2 GW of solar by 2027. Biomass and geothermal provide baseload renewable capacity, which is increasingly valuable as coal retires and gas costs rise. The Italy power market share of dispatchable gas may decline beyond 2028 as storage and demand-response scale, but its role remains pivotal until HVDC links and batteries neutralize intermittency.

Note: Segment shares of all individual segments available upon report purchase

By End-User: Utilities Leadership with Residential Momentum

The utilities segment held 68.12% Italy's power market share in 2024, reflecting control of large generation fleets and regulated distribution franchises. Residential demand, however, is forecast to post a 12.89% CAGR between 2025 and 2030, the fastest among customer classes. Distributed rooftop solar, community energy schemes, and electrified heat pumps drive this surge. Corporate PPAs exceeding 4 GW by 2025 illustrate commercial-industrial appetite for direct renewable procurement.

Market liberalization moved 4.5 million regulated customers to competitive supply in 2024, opening share gains for digital multi-utilities. The Superbonus 110% incentive ended in February 2023, but left a legacy of 1 GW of residential storage installations that enhance self-consumption. Energy Release 2.0 allows energy-intensive firms to secure 36-month 65 EUR/MWh contracts, boosting industrial competitiveness while mandating renewable additions. Utilities are responding with vertical integration and smart-meter rollouts to defend margins in an increasingly prosumer-centric Italy power market.

Note: Segment shares of all individual segments available upon report purchase

Geography Analysis

Southern Italy possesses abundant solar irradiation and onshore wind resources, generating surplus renewable electricity yet facing transmission bottlenecks that widen regional price spreads. Sicily and Sardinia rely on the Tyrrhenian Link to evacuate excess generation and import mainland support during low-output periods, a step that should cut curtailment once the cable becomes operational by 2030. Apulia hosts Italy’s densest cluster of utility-scale solar and wind projects, but grid congestion defers commissioning by at least 36 months, diluting developer returns.

Central Italy benefits from legacy hydro reservoirs that provided stability during the 2022-2023 drought and boosted output by 30.4% in 2024. These plants support frequency regulation essential for integrating more intermittent generation across the Italy power market. Northern regions remain consumption-heavy due to industrial clusters in Lombardy, Veneto, and Emilia-Romagna. Administrative efficiency enables faster permitting, explaining why rooftop PV adoption under the Superbonus program skewed north. Nonetheless, limited land availability and stricter landscape constraints slow large-scale renewables north of the Po River.

Coastal zones along the Adriatic and Tyrrhenian seas show emerging offshore wind pipelines such as Med Wind’s floating project. Delays in maritime spatial planning and EIA procedures hinder near-term capacity, but successful FER2 CfDs could accelerate build-out post-2027. Cross-border interconnections with France, Switzerland, Slovenia, and Tunisia will raise import-export flexibility from 16 GW to 39 GW, positioning the Italy power market as a Mediterranean trading hub and lowering reliance on pipeline gas.