The European Commission has approved a €23 billion state aid program proposed by Italy to speed up the development of renewable electricity across the country. This initiative is one of the largest clean energy support efforts in Europe. It aims to significantly boost Italy’s energy transition and assist in achieving broader European climate goals. This approval comes as governments across Europe work to increase renewable energy, enhance clean energy investment, raise solar power and wind energy capacity, and speed up decarbonization efforts.

The initiative aims to support the construction of new electricity generation facilities using onshore wind, solar energy, hydropower, and sewage gas. According to the European Commission, this program will add more than 37 gigawatts (GW) of renewable electricity capacity, which is almost 48% of Italy’s current renewable energy generation. The investment will help Italy meet its renewable energy targets and contribute to the EU’s overall climate and energy security goals.

Approval Under New EU State Aid Framework

The Commission approved the program under the Clean Industrial Deal State Aid Framework (CISAF). This policy allows EU member states to provide targeted support for key sectors connected to the green transition. The framework was introduced in May 2025 as part of the EU’s Clean Industrial Deal and aims to accelerate the deployment of renewable energy technologies, support industrial decarbonization, and strengthen Europe’s clean technology manufacturing.

European policymakers view the framework as an essential tool to speed up state-backed investments that support climate goals while improving industrial competitiveness. This initiative also helps the EU reduce reliance on imported fossil fuels and enhances long-term energy resilience.

Contracts for Difference to Drive Investment

Under the Italian scheme, financial support will come through two-way Contracts for Difference (CfDs). This mechanism is increasingly used in Europe to encourage investment in low-carbon energy projects. The contracts guarantee developers a fixed “strike price” for the electricity they supply to the grid.

If market electricity prices drop below the agreed strike price, the government will compensate project operators for the difference. If market prices rise above the strike price, developers will return the extra revenue to the state. These contracts will last for 20 years, offering long-term revenue certainty for renewable energy developers and investors.

The Commission believes this method will promote investment in new renewable energy projects while shielding consumers and public finances from high costs during periods of elevated electricity prices.

Competitive Bidding Process Planned

Support under the program will mainly be allocated through open and competitive bidding. Renewable energy developers will compete by offering the strike price needed to make their projects financially viable. This process aims to ensure efficient distribution of public funds and keeps support levels appropriate to project needs.

Italy will run a separate auction for solar and wind energy projects with capacities over 1 megawatt (MW). These larger projects will face additional regulatory requirements and oversight.

Smaller renewable energy facilities with capacities below 1 MW will not need to take part in competitive auctions. Instead, they can receive support directly through set strike prices determined by Italy’s energy regulator, Autorità di regolazione per energia reti e ambiente (ARERA). This approach seeks to simplify participation for smaller developers and encourage more widespread use of renewable energy technologies.

Budget May Be Lower Than Expected

While the scheme has a stated budget of €23 billion, the European Commission indicated that the actual public support might be much lower. This estimate relies on current expectations for future electricity market prices.

Since the support mechanism requires repayments when electricity prices exceed the agreed strike price, higher-than-expected market prices could lower overall government expenses. Therefore, the final net cost of the program will largely depend on future energy market developments over the coming decades.

Supporting Italy’s Climate and Energy Goals

The Commission noted that the program meets CISAF framework requirements and will significantly contribute to Italy’s goal of generating 39.4% of its gross final energy consumption from renewable sources by 2030. The initiative also supports the objectives of the EU’s Clean Industrial Deal and the REPowerEU strategy, which aims to boost energy security and hasten the transition from fossil fuels.

Commenting on the approval, Teresa Ribera, Executive Vice-President for Clean, Just, and Competitive Transition, mentioned that the scheme would back renewable electricity generation across various technologies, including wind, solar, and hydropower. She emphasized that the program would help Italy lessen its dependence on fossil fuel imports and raise the proportion of renewable energy in the country’s energy mix.