Markets
Italy is short of buyers, not projects
The study on power purchase agreements (PPAs) that the European Commission's Directorate-General for Energy published in July 2026 (the final report is dated May 2026) contains one figure worth pulling out. In Italy, the gap between renewable output available to contract and the demand able to absorb it widens from around 20 TWh in 2030 to around 80 TWh in 2035.
For years the debate on the Italian market centred on the supply side: land, permits, grid connection queues, projects to carry through to ready to build. The study finds that the scarcity has moved. Italy has more contractable projects than it has off-takers in a position to sign for them, and the ratio gets worse over time.
Our reading of this is operational. If demand is the bottleneck, value moves to whoever can structure it: qualifying the off-taker, allocating risk so that the contract survives a board meeting and not only a model, and recognising the cases where the right answer is not a PPA at all but self-consumption.
Potential Italian PPA supply and demand, TWh
2030
2035
| Horizon and scenario | Supply (TWh) | Demand (TWh) |
|---|---|---|
| 2030 Low | 47.56 | 25.92 |
| 2030 Average | 68.54 | 47.53 |
| 2030 High | 68.54 | 55.50 |
| 2035 Low | 103.80 | 34.00 |
| 2035 Average | 164.83 | 69.61 |
| 2035 High | 164.83 | 85.03 |
What the study is, and what it rests on
The report is titled Understanding the renewables power purchase agreements market and is the final deliverable of contract ENER/C1/2024-334, awarded by the Commission to Grant Thornton Greece, with Capgemini Invent as subcontractor. It is a study carried out for the Commission: the views it contains are the authors' and do not necessarily reflect the Commission's official position.
Its evidence base is stated: 157 responses to an EUSurvey questionnaire that closed on 11 April 2025, 22 interviews, and two DG ENER workshops with 155 and 140 participants. The supply and demand projections rest on two explicit assumptions, both worth holding in mind when reading the gap: low appetite for merchant risk among developers, and a progressive reduction in public support. If support proves more generous than expected, or if the market takes on more merchant exposure than the study assumes, the numbers move.
The European picture in three numbers
By 2030 the study puts potential greenfield PPA supply at between 350 and 500 TWh, potential demand at between 200 and 300 TWh, and the gap between them at 167 to 220 TWh. By 2035 supply almost doubles while demand grows by around 50%: the spread widens.
The market is concentrated on both sides. Mature markets accounted for over 90% of cumulative European PPA volume in 2024, and Spain, Sweden, Germany and the Netherlands alone make up 60% of that group's volume. On the buy side, ICT and heavy industry together covered roughly 75% of the market between 2021 and 2025, with the ICT share falling from 73% to 40% in 2024. Typical contract tenors remain 8 to 15 years.
The underlying technology has changed as well. Wind was around 80% of the market between 2000 and 2021; in more recent years solar is around 60% of volume.
Technology mix of the European PPA market
2000-2021
Recent years
Wind plus solar hybrids
10% of the last four years' volumes, up to 30% in Spain.
| Period | Leading technology | Stated share | Rest of the market |
|---|---|---|---|
| 2000-2021 | Wind | 80% | 20% |
| Recent years | Solar | 60% | 40% |
Italy is a mature market with the opposite problem
The study classifies Italy as a mature market, fourth by size in Europe, solar-dominated. In matching countries to intervention areas it pairs Italy with demand stimulation, at the full score, and with improving an already mature market; supply stimulation gets the lowest score.
The projections explain why. In the Average scenario Italian supply goes from 68.54 TWh in 2030 to 164.83 TWh in 2035, while demand moves from 47.53 to 69.61 TWh: the gap widens from 21.01 to 95.22 TWh. The study summarises this as a shift from around 20 to around 80 TWh without saying which scenario it refers to; the 2035 figure matches the High scenario, where livelier demand of 85.03 TWh absorbs a larger share of the same supply. In the Low scenario the gap is 21.64 TWh in 2030 and 69.80 TWh in 2035. Whichever scenario is taken, the direction is the same and the order of magnitude is tens of TWh.
The Italian gap in the Average scenario, TWh
| Year | Demand (TWh) | Supply (TWh) | Gap (TWh) |
|---|---|---|---|
| 2030 | 47.53 | 68.54 | 21.01 |
| 2035 | 69.61 | 164.83 | 95.22 |
Our reading: for a market that has spent recent years debating suitable-area rules, permitting timelines and connection queues, this reverses the priorities. The permitted project stops being the scarce resource. The counterparty able to sign becomes it.
Why demand is not taking off
Of the obstacles the study analyses, four weigh directly on demand. None of the four is solved by building more plant.
- Creditworthiness. A ten-year PPA is a balance-sheet commitment, and the study names the insufficient creditworthiness of many potential buyers, unrated companies above all, as a persistent barrier. This is why guarantee instruments are appearing: in 2025 the Commission and the EIB launched a EUR 500 million pilot (an indicative amount) under which the EIB counter-guarantees, through partner banks, part of the PPAs signed by mid-sized and larger companies. National precedents have seen limited take-up: Spain's FERGEI is associated with a single documented PPA, France's GER with three uses, Norway's Eksfin with two corporate users as of June 2024.
- Shaping costs. Turning a generation profile into a consumption profile has a cost, and which party carries it depends on the delivery structure.
- Negative prices and curtailment. Negative prices are increasingly frequent in most European power markets, and curtailment is becoming more frequent in areas with high renewable penetration: the study gives examples from Germany, Spain and Greece. For a buyer this means the contracted volume may not arrive.
- Transaction costs. Negotiating a ten-year bilateral needs legal, credit and market skills. The study notes that the burden falls hardest on small and mid-sized companies and public bodies without a dedicated energy team.
Above the four sits a structural fact. European electrification has been stuck at around 23% for a decade, against a target of 32 to 33% by 2030. Until electricity consumption grows, PPA demand has nowhere to come from.
Nor is it easily imported. Between 2013 and mid-2025 the study counts 66 cross-border partnerships, worth 15.6 TWh a year, at an average size of 273 GWh a year and an average tenor of 10.6 years, 85% greenfield and all of them virtual. No physical cross-border PPA is confirmed anywhere in Europe. The liquidity that would make hedging straightforward is missing too: the conventional threshold for a forward market is a churn rate at or above 10, and in Europe only Germany clears it.
The technical crux: who carries which risk
The point at which a PPA either works or does not is the delivery structure, meaning what exactly the seller commits to deliver and when. According to the study's survey, Pay-as-Produced is the structure of 60% of the PPAs already signed by respondents: the seller delivers what the plant produces, hour by hour, and the buyer takes what arrives.
Who bears which risk, by delivery structure
| Structure | Profile risk | Volume risk | Price risk | Effect on the strike price |
|---|---|---|---|---|
| Pay-as-Produced60% of PPAs signed, study survey | Buyer | Buyer | Sharedresidual with the buyer | Benchmark, the lowest |
| Baseloadflat, constant delivery | Seller | Seller | Sharedthe buyer stays exposed to falling prices | Carries the full shaping premium |
| Pay-as-Nominatednominated schedule; deviations with the seller | Buyer | Shared | Sharedshared between the parties | Above Pay-as-Produced |
| Pay-as-Consumeddelivery against the offtake profile | Seller | Seller | Sharedresidual with the seller | The highest, absorbs the buyer's volume too |
Our reading: for a consumer with an inflexible load, a plant on fixed shifts or a continuous process, a Pay-as-Produced contract can wipe out the expected saving. Energy arrives when the plant generates, not when the factory consumes: the shortfall has to be bought on the market in the hours it costs most, and the surplus sold back in the hours it is worth least. The strike price looks attractive and total procurement cost does not fall.
It follows that the delivery structure is chosen before the price. A Baseload contract at a higher price can cost less than a Pay-as-Produced one at a lower price, and the test is run against the consumer's actual hourly profile, not against the price per MWh. It is the same reasoning we applied to routes to market in When, not how much.
What is moving in Italy
The regulatory picture is moving on several fronts, and they do not all push the same way.
The acts shaping the Italian PPA market, 2024-2026
- June 2024Reg. (EU) 2024/1747Inserts Article 19a into Reg. (EU) 2019/943: support schemes must admit projects reserving output for PPAs.
- June 2025DM 152/2025Guidelines to GME for a market dedicated to PPAs (MPPA); GSE as guarantor of last resort.
- December 2025CfD guidanceC/2025/6701: how to design two-way CfDs and how to combine them with PPAs.
- January 2026IFRS 9For periods beginning on or after 1 January: own use can hold despite market-forced resales, if the firm stays a net buyer for the contract period.
- February 2026DL 21/2026GSE's guarantee also covers contracts of at least three years registered on the PPA bulletin board; eligibility set in MASE-MEF operating rules.
- August 2026Full FER X schemeIn force since 7 August (DM 194/2026), after the 2025 transitional scheme: two-way CfDs, which the study flags as a possible brake on PPAs.
| Act | When | What changes |
|---|---|---|
| Reg. (EU) 2024/1747 | June 2024 | Inserts Article 19a into Reg. (EU) 2019/943: support schemes must admit projects reserving output for PPAs. |
| DM 152/2025 | June 2025 | Guidelines to GME for a market dedicated to PPAs (MPPA); GSE as guarantor of last resort. |
| CfD guidance | December 2025 | C/2025/6701: how to design two-way CfDs and how to combine them with PPAs. |
| IFRS 9 | January 2026 | For periods beginning on or after 1 January: own use can hold despite market-forced resales, if the firm stays a net buyer for the contract period. |
| DL 21/2026 | February 2026 | GSE's guarantee also covers contracts of at least three years registered on the PPA bulletin board; eligibility set in MASE-MEF operating rules. |
| Full FER X scheme | August 2026 | In force since 7 August (DM 194/2026), after the 2025 transitional scheme: two-way CfDs, which the study flags as a possible brake on PPAs. |
The market dedicated to PPAs (MPPA) is the most direct intervention on the demand problem. A decree from MASE, the environment and energy security ministry, issued jointly with the finance ministry MEF (Ministerial Decree No 152 of 20 June 2025), gives the power exchange operator GME guidelines for developing it and sets the conditions under which the state energy agency GSE acts as guarantor of last resort should a counterparty default. Contracts are standardised and 5 to 10 years long; in its consultation document no. 1/2025 GME proposed a minimum quantity of 1 MW per contract and, at least at launch, baseload products only. Sellers must own renewable plants in operation or authorised.
The study flags two limits: standardisation that adapts poorly to specific requirements, and a guarantee available only to those trading on the platform. On the second, the law has already changed, through Decree-Law No 21 of 20 February 2026 (Article 4), converted by Law No 49 of 10 April 2026. GME's PPA bulletin board now has dedicated demand-side sections for contracts of at least three years. These contracts are signed outside the board and must be registered on it. Parties that meet the requirements may ask GSE to act as guarantor of last resort, within the resources set aside for it. Once those are exhausted, the export credit agency SACE may issue guarantees to GSE, with cover of up to 70%. The same provision tasks the state-owned company Acquirente Unico with demand aggregation services. Our reading: the crux moves to the eligibility requirements for the guarantee, which under the law are set by operating rules approved by MASE and MEF on a proposal from GSE.
On curtailment, through Resolution 128/2025/R/efr of 27 March 2025 the energy regulator ARERA extended, from 1 April 2025, compensation for output lost to extraordinary downward modulations ordered by the TSO Terna to all plants running on non-programmable renewable sources, solar included; it previously covered wind only. For that case, it is one risk item fewer to negotiate.
The IFRS 9 amendments the IASB approved in December 2024, endorsed in the EU by Regulation (EU) 2025/1266 and effective for annual periods beginning on or after 1 January 2026, address an accounting issue specific to PPAs. For contracts referencing nature-dependent electricity, the own use exemption can hold even where market rules force the sale of unused electricity, provided the firm has been, and expects to remain, a net purchaser of electricity for the contract period. In determining whether the firm has been a net purchaser, a reasonable amount of time is considered, and it may not exceed twelve months. How that applies to a specific set of accounts is a question for the company's own accounting advisers, not one to settle at market level.
FER X, Italy's support scheme for renewables based on two-way contracts for difference, runs the other way: the study flags it as a possible factor compressing the Italian PPA market, because it offers the same project a contract for difference at a guaranteed price. The full scheme (Ministerial Decree No 194 of 18 June 2026, in force since 7 August 2026) does, however, allow support to be sought for only part of a plant's capacity and, where auction bids tie, counts long-term supply contracts of at least ten years among its priority criteria.
In the background, Article 19a(5) of Regulation (EU) 2019/943, inserted by Regulation (EU) 2024/1747, requires support schemes for renewable electricity to allow the participation of projects that reserve part of their output for sale through PPAs, provided this does not harm competition. Belgium's PEZ-1 case, described in the study, shows how that can be calibrated: up to 75% of volume contractable through PPAs, of which 50% open to any counterparty and 25% reserved for SMEs, citizens and local authorities.
Flexibility is moving as well, and flexibility is what makes shaping cheaper: the first MACSE auction, held by Terna on 30 September 2025 under Italy's storage capacity mechanism, awarded 10 GWh of storage capacity, lithium-ion battery systems scheduled to enter operation in 2028.
PPAs and self-consumption are a ladder, not a fork
The question is often framed as a choice: a PPA or self-consumption. Our reading is different. They are rungs on the same ladder, ordered by how much consumption can be brought under a single profile.
On-site self-consumption captures full value because it removes the profile problem at source: the energy is needed where and when it is produced, and there is no delivery structure to negotiate. Remote self-consumption extends the same principle across several offtake points, which is the ground we covered writing about Italy's iperammortamento 2026. A PPA comes in when demand exceeds what a self-consumption configuration can cover, and at that point the delivery structure decides whether the contract creates or destroys value.
If demand is what constrains the market, the skill that counts is not finding another project. It is being able to say, against a real consumption profile and a real balance sheet, which rung is needed and which contract will hold. That is the part of the work we set out under What we do, with the typical counterparties described under Who we work with.
If you have a consumption profile on the table and are weighing whether a PPA is the right instrument, write to us.
Sources
Study: European Commission, DG ENER, Understanding the renewables power purchase agreements market, Final Report, dated May 2026 and published on 3 July 2026, prepared by Grant Thornton Greece and Capgemini Invent under contract ENER/C1/2024-334. ISBN 978-92-68-41506-1, doi:10.2833/8245351, MJ-01-26-068-EN-N. © European Union 2026. Reuse authorised under the Creative Commons Attribution 4.0 International licence (CC BY 4.0).
EU acts: European Commission, COM(2025) 85, The Clean Industrial Deal, 26 February 2025, and COM(2025) 79, Action Plan for Affordable Energy, 26 February 2025 (announcement of the EIB PPA pilot and indicative amount; electricity share of final consumption and 2030 target); Commission Recommendation (EU) 2026/917, 22 April 2026 (recital on the EIB pilot: launch in 2025 and target companies); Regulation (EU) 2024/1747, 13 June 2024, inserting Article 19a into Regulation (EU) 2019/943; Commission guidance on the design of two-way contracts for difference, C/2025/6701, 19 December 2025; Commission Regulation (EU) 2025/1266, 30 June 2025 (amendments to IFRS 9 and IFRS 7).
Italian acts and sources: MASE, Ministerial Decree No 152 of 20 June 2025; GME, consultation document no. 1/2025, 1 July 2025; Decree-Law No 21 of 20 February 2026, Article 4, converted by Law No 49 of 10 April 2026 (Normattiva); ARERA, Resolution 128/2025/R/efr of 27 March 2025; Terna, press release on the first MACSE auction, 1 October 2025; MASE, press release on the entry into force of the transitional FER X, 27 February 2025, Ministerial Decree No 194 of 18 June 2026 (full FER X scheme) and publication notice, 6 August 2026. Italian sources are in Italian.
The supply and demand values shown in the charts are taken unmodified from Tables 9 and 10 of the study; the gaps are differences calculated by Altheon. The risk allocation by delivery structure, and the passages introduced by «our reading», are Altheon analysis and form no part of the original publication.
Update of 2 October 2026, after a check against the primary sources: corrected the publication date of the study (July 2026, report dated May 2026) and the role of Capgemini Invent (subcontractor); clarified that the 60% for Spain, Sweden, Germany and the Netherlands refers to the group of mature markets and that the 60% for Pay-as-Produced comes from the study's survey; restated the EIB pilot, the description of GME's PPA market under Ministerial Decree 152/2025 and GME consultation document no. 1/2025, the start date and scope of the ARERA curtailment resolution, the IFRS 9 net-purchaser requirement and the scope of Article 19a of Regulation (EU) 2019/943; corrected the expected year of entry into operation of the capacity awarded by the first MACSE auction (2028, not 2027); removed the curtailment figures for Germany and Spain; marked as our reading the passage on Pay-as-Produced for inflexible loads; added Decree-Law 21/2026, Ministerial Decree 194/2026, ARERA Resolution 128/2025, Regulation (EU) 2025/1266 and the sources for each act. Sources checked as of 2 October 2026. This article is not legal, accounting or tax advice.