Analysis

1. ANALYSIS
Italy’s new energy strategy
raises hopes of fresh tender
round
Daniel Atzori 2:15 PM 05 December 2017
While Italy's M&A deal activity remains signi cant,
given the ongoing process of consolidation, a new
wind tender could soon be on the agenda
In November [2017], Italy released its national
energy strategy (SEN 2017), a much-awaited
government plan that aims to signi cantly increase
the adoption of renewables, while phasing out coal-
red thermoelectric plants by 2030.
From now until 2020, SEN urges the promotion of
new investment in renewables through incentives,
extending the tool of competitive auctions and
adopting a neutral approach among technologies
with similar costs. What is more, SEN recommends
differentiated aid schemes for smaller assets and
"particularly innovative technologies".
The expectations for a new non-PV tender are high,
as Italy still needs to comply with EU targets.
However, the details of the auctions will be
determined by a new government, after the highly
uncertain 2018 spring elections.
"It is a matter of fact that we are negotiating a huge
number of green eld deals in the wind sector, in
which the main condition to reach closing is the
awarding of a feed-in tariff in a future auction, to be
called by the Gestore Servizi Energetici (GSE) as
soon as the new decree will be published. We trust
the condition precedent will be ful lled," says Carlo
Montella partner, co-head of the European Energy &
Infrastructure Department at Orrick.
SEN a rms that, after 2020, technological and
economic maturity will allow an evolution of support
mechanisms for renewables close to market parity,
from direct incentives to enabling policies. Among
the priorities, the plan mentions the introduction of
long-term contracts for larger plants, to be awarded
through competitive tenders with the aim of
reducing market risk. For existing wind assets, a
streamlining of authorisation processes for
repowering, with ad-hoc procedures, is advocated.
SEN goes as far as proposing speci c competitive
tenders – non-technology neutral – for
thermodynamic solar, geothermal, offshore wind
and tidal energy.
Goals of Italy's new energy strategy
The SEN document also aims to enhance the
country's competitiveness, to reach de-
carbonisation objectives and to improve the security
of energy supply, as well as the overall exibility of
the energy system and its related infrastructure.
research events about

2. In particular, the plan aims to eliminate the gap
between the price of gas in Italy and Northern
Europe, which in 2016 was estimated to be
2€/MWh, and of the price of electricity compared to
the EU average. SEN clearly identi es the further
promotion of renewable energy, energy e ciency
and technological innovation as key to reach these
goals.
It is now hoped that the government's new strategy
will give fresh impetus to Italy's green eld
renewables, which has been relatively depressed in
recent years after the boom of 2008-2012.
Italy's installed capacity, 2000 - 2016
Source: IRENA, inspiratia. Note: selected renewables
technologies
Italy's target was to achieve 17% of renewables in
total energy consumption by 2020, a goal that was
attained in 2015, when the country reached 17.5%.
The new 2030 targets, enshrined in SEN 2017, are
shown in the table below.
Type of
renewables
2015 2030
Electric 33.5% 48-50%
Thermal 19.2% 28-30%
Transport 6.4% 17-19%
Total consumption 17.5% 27%
Moreover, SEN recommends the integration of
increasing quantities of electric renewables
capacity, including distributed generation, into an
increasingly smart, exible and resilient system.
"Italy's new national energy strategy is fully in line
with the EU-wide objectives. However, more secure
and sustainable policy instruments are needed in
order to drive progress in achieving 2030 energy
targets," says Dr Carlo Carraro, Professor of
Economics at the University of Venice and Vice-
Chair, IPCC WG III.
"Moreover, the upcoming Italian general election in
spring next year [2018] gives an indication of
uncertainty in the future direction of climate change
policy," adds Carraro.
While the fact that Italy has nally laid out the main
objectives of its energy transition has been
welcomed, the market awaits more details.
"What is missing in the SEN is a clari cation on the
tools to reach the goals. In our opinion, the SEN is
an extremely valuable document but, in order to be
able to attract more investment in the relevant
market, the relevant piece of law and/or regulations
must be approved soon," says Orrick's Montella.
Italy's electricity generation by sector, 2000 - 2014

3. 12/5/2017 inspiratia
auctions coal national energy strategy SEN
Source: IRENA, inspiratia
Outlook
While SEN 2017 is hoped to revive Italy's green eld
renewables – an area where Italy is also pioneering
grid-parity projects, after ve subsidy-free solar
farms owned by Octopus started operations in Italy
in June [2017] – there is currently no shortage of
activity on the M&A side.
"In 2017, we witnessed an amazing growth of
investment in Italy's renewables: green eld,
secondary market and re nancings of existing
portfolios," says Orrick's Montella.
In March 2017, Orrick's Italian energy team advised
Sonnedix in the acquisition of the 21.6MW Grape
Portfolio, located in Apulia and Lazio, from private
equity rm First Reserve. Orrick is also advising VEI
Green and Foresight Group on the 100% sale of the
ForVEI 89MW solar PV portfolio to energy company
ERG.
In onshore wind, big players continue to eye
portfolios of previously subsidised assets, but they
are also looking at wind farms that – while already
authorised – did not yet manage to secure tariffs.
Moving forward, capital markets will play a larger
part in the nancing of projects, as the appetite for
project bonds is currently high. Institutional
investors looking for steady cash- ow are also
eyeing new opportunities in the Italian market.
"From the point of view of nancing, it is not limited
to bank credit. International investors are
increasingly involved, with the aim of reducing the
cost of nancing and bringing down the cost of
electricity," says Claudio Vescovo, investment
director at Glennmont Partners. In October [2017],
Glennmont closed the re nancings of a 245 MW
onshore wind portfolio, one of the country's largest,
originally acquired from Iberdrola in June 2016.
"We expect to see a good level of activity in terms of
acquisitions in wind and PV, as investors acquiring
new assets are going to re nance the assets they
buy, especially large portfolios," Glennmont's
Vescovo adds.
Further reading
Italy’s new energy strategy raises hopes of
fresh tender round
05/12/2017
Grand vision for industrial strategy but detail
lacking
04/12/2017
Political risk the dominant narrative in
infrastructure
01/12/2017
COP23 sets global climate nance agenda for
coming years
30/11/2017