Date: December 13
Interest in developing offshore wind power in Italy has increased, but subsidies will be crucial to harness the potential of the sector: both fixed and floating projects in Italy are not viable without subsidies before 2040, according to a study by Aurora Energy Research .
As reported by the company, installed offshore wind capacity in Europe has grown in the last decade (up to 26 GW in 2021, from 5 GW in 2012), but it remains minimal in Italy, with a total of just 30 MW in November. However, it seems that the situation is gradually changing: Italy’s electricity transmission system operator, Terna, announced that connection requests for offshore wind projects had reached 95 GW by the end of October 2022. And the development of floating offshore wind technology could remove existing geographic barriers: Floating capacity accounts for 96% of Italy’s theoretical offshore wind potential, Aurora Energy Research calculated.
Given this scenario, subsidies will be crucial to realizing Italy’s offshore wind potential. Unsubsidized, or “commercial” projects are not viable in the short term. Aurora modeled the internal rates of return (IRR) – a standard measure of profitability – of geographically viable fixed and floating offshore wind projects in Italy and found that profitability will remain below investor-attractive levels (minimum 7%) until 2040 in the case of fixed projects and up to 2050 in the case of floating projects.
FER2 plan
The FER2 grant scheme is intended to allocate aid to floating projects of up to 3.5 GW that come on stream before 2030, but the lack of concrete legislation and transparent and efficient permitting processes threatens the success of the scheme. According to the company, it is unlikely that Italy will be able to hold at least three floating offshore wind auctions before 2027, as the latest draft of the plan legislation establishes. No project has yet obtained all the necessary permits to participate, despite great interest, and the process for obtaining permits is unclear.
Aurora expects 2 GW of floating offshore wind capacity, subsidized through FER2 auctions, to come online commercially in 2030. Another 1.5 GW of subsidized floating offshore capacity would come online in 2032. Permit applications indicate the auctions will attract strong competition : Developers have submitted seabed concession applications for projects with a total capacity of 36 GW and Environmental Impact Assessment (EIA) applications for 18 GW of projects. Aurora calculates that 5.7 GW of capacity could be offered below the maximum price set in an auction to be held in 2024.
The implementation of the FER2 plan according to Aurora forecasts would reduce the cost of Italian electricity by €4.7 billion between 2028 and 2060. Floating offshore wind assets supported by the scheme would increase Italy’s supply of low-cost electricity generation, reducing costs. average wholesale electricity prices and, consequently, the energy bill of consumers. The total cost of the scheme, if applied according to Aurora’s forecasts, would be €6.1 billion.
Source: Review Energy
