Introduction
The second half of 2024 was a turbulent period for Italy’s solar industry, with multiple policy and regulatory developments creating uncertainty for developers and investors. Three key legislative actions put the brakes on renewable energy growth.¹
The Agriculture Decree Law (Decreto Legge Agricoltura) effectively halted solar development on farmland, freezing a large portion of the project pipeline. Meanwhile, the Testo Unico FER, a long-anticipated comprehensive framework for renewable energy, remained under discussion, leaving critical aspects unresolved and contributing to industry-wide uncertainty. Adding to these challenges, the Suitable Areas Ministerial Decree (DM Aree Idonee) introduced ambiguity regarding land classification, which not only delayed permitting processes but also forced developers to reassess their site selections. Together, these measures created a highly uncertain environment, slowing down the momentum of Italy’s solar expansion efforts. However, as 2025 begins, clarity is emerging. Projects are being transacted again, and construction will soon pick up pace.
A key driver of this recovery is the FER X Decree, a Contracts for Difference (CfD) mechanism introduced to stabilize electricity prices for solar and other renewable projects. The decree will be adopted in two stages. During the first stage, the FER X Transitional Decree intends to guarantee the promotion of solar, wind, hydropower, and residual gas plants until the end of 2025, while a second decree is planned for the period from 2025 to 2028. This article provides an overview of the FER X Transitional Decree support mechanism, focusing on how it will reshape Italy’s solar market and bring certainty back to investors.
Expected tariffs and duration of subsidy
As anticipated the incentives’ tariffs regulated under the FER X Decree are allocated through direct access for small-scale power plants and competitive procedures for large-scale plants.
In line with the structure of the previous DM FER ¹, the tariffs vary depending on the relevant renewable technology to be developed.³ For solar, the current reference "ceiling price" is €95/MWh. While the final strike price will be determined through competitive auctions, analysts estimate it will range between €70-90/MWh, based on prior auction results. For plants with a capacity > 1 MW, the incentive mechanism operates only for 95% of the energy produced by the eligible plants, with 5% exposed to market fluctuations.
The decree offers 20-year contracts from commissioning, providing long-term financial security for solar investments.
Additionally, bonus incentives apply to specific types of solar installations:
- +€27/MWh for solar replacing asbestos/eternit.
- +€5/MWh for floating solar.
- +€4/MWh for projects in Central Italy.
- +€10/MWh for projects in Northern Italy.
Agrivoltaic systems qualify for incentives under the FER X Decree as part of the broader photovoltaic category.² However, they do not receive any additional financial benefits or preferential treatment in the application process.
The scheme also covers full and partial revamping of existing installations, as well as capacity upgrades. However, incentives apply only to the newly added sections resulting from the upgrade, ensuring that support is directed toward expanding and modernizing renewable energy capacity rather than subsidizing existing production.
Market-negative or zero-price situations:
Solar plants under FER X face certain limitations when electricity prices drop to zero or negative values² :
- For plants in the balancing market, incentives apply only to the amount of energy that could have been produced.
- For plants not in the balancing market, incentives are suspended during negative/zero-price periods.
- If production is curtailed, incentives apply only to the curtailed volume.
Entry requirements
To qualify for incentive tariffs under the FER X Decree, solar project developers must meet a set of regulatory, financial, and technical requirements:⁴
- Permitting approval – Secure the necessary construction and operational permits for the plant.
- Grid connection agreement – Finalize and register the plant in Terna’s GAUDI system, with validation from the grid operator.
- Regulatory compliance – Adhere to National and EU environmental regulations, including the Do No Significant Harm (DNSH) principle.
- Financial proof – Provide a bank-issued declaration confirming the developer's economic and financial capacity, taking into account the project's expected profitability and the financial standing of its corporate group. Alternatively, a bank commitment to finance the project may be submitted.
- Certified equipment – Use solar modules sourced from manufacturers that comply with Legislative Decree No. 49/2014, ensuring participation in an approved waste management system for electrical and electronic equipment.
If the number of applications exceeds the available quotas, priority will be given to projects that meet specific criteria:²
- Projects that replace asbestos or eternit roofing with solar installations.
- Full refurbishments and upgrades of agricultural areas, provided there is no increase in occupied land.
- Sites classified as "suitable" under national regulations.
- Inclusion of battery storage systems to enhance grid stability.
- Projects backed by supply contracts lasting at least 10 years.
- Earlier application submission date.
To ensure project credibility, applicants participating in competitive procedures must submit a temporary financial guarantee as a quality assurance measure. Once awarded an incentive, developers must provide a final guarantee within 90 days of the final ranking's publication, set at 10% of the total investment cost, calculated at €900/kW.
If an applicant decides to withdraw within six months, they will lose 30% of the final guarantee. If the withdrawal occurs between six and twelve months, the forfeited amount rises to 50%. Missing the deadline entirely results in the complete loss of the guarantee.
Construction deadlines and penalties
All awarded projects must be fully operational within 36 months from the publication of the final ranking, except in cases of force majeure. Any delays will result in progressive tariff reductions, with a 0.2% monthly penalty applied for the first nine months beyond the deadline.² If the delay extends beyond this period, the penalty increases to 0.5% per month for the following six months.
After 15 months of delay, the project loses its eligibility for incentives entirely. Should the developer choose to reapply for support at a later stage, the awarded tariff will be subject to a 5% reduction. Additionally, failure to meet the required deadlines will lead to the forfeiture of the final guarantee, reinforcing the importance of timely project execution.
Conclusion
After months of uncertainty, the FER X Transitional Decree provides a clear and structured framework for solar development in Italy. By introducing a CfD mechanism, the scheme restores investor confidence, revives stalled projects, and creates the financial predictability needed for long-term investment. The CfD model shields developers from market price volatility, ensuring revenue stability even amid fluctuating electricity prices. With 20-year contracts, the decree enhances financial security, making large-scale solar projects more viable and attractive to investors.
Beyond stability, the scheme also promotes market efficiency by using competitive auctions to drive cost reductions and optimize the allocation of incentives. With 10 GW of solar capacity available under this transitional phase until the end of 2025, the next wave of solar investments is set to take off.
Sources
1 PV Tech (2025) Legislative hurdles dominated Italian solar in 2024, 2025 could be no different. Retrieved from https://www.pv-tech.org/legislative-hurdles-dominated-italian-solar-in-2024/
2 Advant (2025) Summary Note on the FER-X Transitional Decree. Retrieved from https://www.advant-nctm.com/en/news/nota-di-sintesi-del-decreto-fer-x-transitorio
3 Rödl & Partner (2024) Promotion of RE Installations in Italy: FER-X Decree to be adopted in two Stages. Retrieved from https://www.roedl.com/insights/renewable-energy/2024/october/italy-promotion-of-ee-installations-fer-x-decree
4 PwC (2024) FER X Decree: new incentives’ schemes for the promotion of the Italian renewable energy sources. Retrieved from https://blog.pwc-tls.it/en/2024/04/15/fer-x-decree-new-incentives-schemes-for-the-promotion-of-the-italian-renewable-energy-sources/?utm_source=chatgpt.com
