EU Greenlights Italy's FER2 Decree, Accelerating Offshore Wind Expansion

The FER2 decree, proposed by the Italian Ministry of the Environment and Energy Security (MASE), aims to support the construction of 4.6 GW of new renewable energy capacity by the end of 2028. The scheme targets innovative and high-cost technologies, including both floating and fixed offshore wind farms. The measure will be in force until 31 December 2028 and will be financed through a levy from end consumers' electricity bills. The maximum amount allocated to financing is 35.3 billion euros. The deadline for successful offshore wind farms to commence operation will be 50 months from the date the bidder has won the given auction.

-With the FER2 decree finally approved by the EU, Italy is ready to take an important step towards building offshore wind farms in Italy. Developers will soon start making investment decisions on their offshore wind assets, creating opportunities for the Norwegian supply chain, says Saverio Ventrelli, leader of Norwegian Offshore Wind’s Working Group for Italy. Norwegian Offshore Wind will host a webinar on the impacts of the FER2 decree, 27 June 12:00-13:00. 

More than 15GW of offshore wind project are in the pipeline, with about 6 GW of these located mainly in Puglia, Sicily and Emilia Romagna, ready to submit bids in the first auction. The applicable projects have or will receive the necessary permits to take part in the auctions.

-The timing is right for targeting the Italian market in 2024. With the offtake auction approaching, Norwegian companies targeting the CAPEX and OPEX segments should now start approaching the Italian market, especially in the Puglia and Sicily regions, says Ventrelli. Norwegian Offshore Wind is planning several activities towards the Italian market, such as a Visit NOW to Bari, 21-23 October. 

Contract for difference support scheme

The support will be provided through a two-way Contract for Difference (CfD) mechanism. This ensures long-term price stability for energy producers by guaranteeing a minimum return on investment while preventing overcompensation during periods of high market prices. Under this scheme, beneficiaries will bid on the incentive tariff (strike price) necessary to make their projects viable. If the market price falls below the agreed strike price, the government will pay the difference; conversely, if the market price exceeds the strike price, the beneficiaries will return the excess to the state.

The draft FER2 decree establishes a tariff of 185 euros per MWh over a 25-year lifespan for offshore wind projects, regardless of their capacity. This tariff forms the foundation for the competitive bidding procedures. For 2024, the compensation method ensures the full tariff, while from 2025 to 2028, the tariff will decrease by 3% annually for all systems, with an exception for projects up to 300 kilowatts. For these smaller projects, the reduction will commence in 2026, as clarified in the decree.

-With the implementation of the FER2 Decree Italy is poised to become a significant player in the offshore wind market, says Eugenio Tranchino from Watson Farley Williams. The pros and cons of the FER2 Decree will be discussed in the webinar.

The FER2 decree will first go to the relevant ministers for their approval, then it will be sent to the Court of Auditors for registration and eventual publication. Within thirty days of its publication, the operational rules will be issues by the Ministry of Environment and Energy Security through a decree, making the measure officially effective.

The FER2 decree's approval coincides with Italy’s efforts to develop its offshore wind supply chain. The government has recently invited expressions of interest from port authorities in Southern Italy to establish infrastructure supporting offshore wind projects, further signalling a robust commitment to renewable energy.