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Europe Funds Offshore Wind Energy in Italy with €2 Billion Investment Using Contract for Difference

The European Commission has approved an Italian scheme to support offshore wind energy projects with a €2 billion investment. This initiative is part of a larger effort to boost renewable energy capacity in Italy and aligns with the European Green Deal, aiming to reduce reliance on Russian fossil fuels.

The Italian government notified the Commission of its plan to support electricity production from renewable energy sources, specifically targeting offshore wind power, both floating and fixed installations. The scheme will run until December 31, 2028, and will be financed through a levy on electricity bills.

The financial aid for these offshore wind projects will be administered through a two-way contract for difference for each kWh of electricity produced and fed into the grid, covering the plant’s useful life. This contract type ensures that when the market price is below the strike price, beneficiaries will receive payments to cover the difference. Conversely, when the market price exceeds the strike price, beneficiaries will pay the difference back to the Italian authorities. This mechanism provides long-term price stability for renewable energy producers while preventing overcompensation during periods of high energy prices.

Projects will be selected through a transparent and non-discriminatory bidding process. Bidders will propose the incentive tariff they need for each project, and the reference price for electricity will be based on the hourly zonal price, reflecting the electricity price at the time and location where the energy is fed into the grid.

The European Commission assessed the scheme under EU State aid rules and concluded that it supports the development of offshore wind technology, aligns with the EU’s strategic objectives, and is necessary and appropriate for Italy to meet its climate targets. The aid is considered proportionate, limited to the minimum necessary to trigger investments, and includes safeguards to ensure a competitive bidding process and manage profitability.

This approval is part of the EU’s broader strategy to achieve net-zero greenhouse gas emissions by 2050, as outlined in the European Green Deal and the European Climate Law. The full decision will be available under case number SA.105880 in the State aid register on the Commission’s Competition website once confidentiality issues are resolved.

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