On 18 June 2026, the Italian Ministry of Environment and Energy Security (MASE) signed the long-awaited Final FER X Decree.
The main change is the increase in incentivised capacity for renewable energy plants with a capacity of over 1 MW, which rises from 14.65 GW to 27.15 GW, with an additional 10 GW allocated to plants up to 1 MW.
Notably, the decree significantly increases the capacity reserved for onshore wind projects after the FER X Transitional auctions for this technology failed to fully allocate the available volumes. For utility-scale photovoltaic projects, however, the available capacity appears more limited when compared with the current project pipeline and the expected level of market competition.
The decree also confirms the dynamic auction mechanism, whereby the Italian Energy Services Operator (GSE) will determine the auction volumes based on market demand and the discount levels offered by participants.
Eligibility requirements
Renewable energy plants with a capacity of up to 1 MW can access the incentive scheme directly.
Those with a capacity above 1 MW must participate in the competitive auctions organised by the GSE instead
To qualify for the auctions, projects must:
- hold the final authorisation for construction and operation. This is one of the key changes for photovoltaic projects compared to the Transitional FER X framework, under which participation was permitted before the final permit was obtained. For onshore wind projects, a positive Environmental Impact Assessment (EIA) remains sufficient.
- have definitively accepted the grid connection offer and completed plant registration in Terna's GAUDÌ system;
- comply with the environmental requirements established by the decree, including the European Do No Significant Harm (DNSH) principle, by demonstrating that the project will not cause any significant harm to any of the six environmental objectives. Compliance is verified by the GSE through a technical self-declaration supported by environmental documentation;
- fulfil the obligations related to participation in the Balancing and Redispatching Market. This requirement applies to the plant's entire installed capacity, even where only part of the capacity is submitted to the auction. Consequently, selecting a reliable and experienced Balancing Service Provider (BSP) becomes a strategic decision, as the BSP must demonstrate operational robustness and proven expertise in managing aggregated renewable portfolios. In exchange for benefiting from the guaranteed-price support mechanism, incentivised plants assume greater responsibility for maintaining grid stability.
The decree also strengthens the financial eligibility requirements. Developers must demonstrate their financial capacity through a bank declaration or adequate capitalisation equal to 10% of the investment for projects up to €100 million, 5% for investments between €100 million and €200 million, and 2% for investments exceeding €200 million.
Finally, the decree limits each project to a maximum of three expressions of interest, including those already submitted under the Transitional FER X scheme. This measure aims to prioritise projects that are ready for construction, accelerating the deployment of mature renewable energy investments.
What changes compared with the Transitional FER X framework?
The Final FER X Decree introduces several important changes compared with the Transitional FER X framework. The most significant are outlined below.
- A stronger focus on onshore wind
The decree sends a clear signal: onshore wind will play a central role in Italy's renewable energy development over the coming years.
Compared with the Transitional FER X scheme, the new decree allocates 16.5 GW to onshore wind and 10 GW to photovoltaic projects. This reflects the government's objective of accelerating wind deployment, although progress will continue to depend on overcoming the lengthy and complex permitting processes that still affect this technology.
Currently, Italy's photovoltaic project pipeline significantly exceeds both the available FER X capacity and the wind project pipeline. As a result, many PV projects may ultimately need to compete under the future FER Z mechanism. Consequently, photovoltaic auctions are expected to be highly competitive, particularly in Sicily, where applications under the Transitional FER X exceeded the available capacity by more than twofold. By contrast, wind auctions could experience lower competitive pressure, provided that the market succeeds in delivering a sufficient number of authorised projects and that auction prices remain attractive.
This represents a significant opportunity for independent power producers (IPPs), investment funds and developers. Companies with already authorised wind projects or repowering initiatives may benefit from more favourable conditions for accessing the incentive scheme.
- A new definition of photovoltaic plant capacity
One of the most significant changes introduced by the Final FER X Decree concerns the way photovoltaic plant capacity is calculated.
Under the new framework, plant capacity is based on the nominal capacity of the PV modules (DC), whereas the Transitional FER X scheme effectively referred to the capacity on the inverter side (AC).
This seemingly technical change has important practical implications. Utility-scale PV plants are usually designed with a DC/AC ratio greater than 1, meaning that even when injecting the same amount of power into the grid, these projects will consume a larger share of the available auction capacity. They will also be subject to higher financial guarantees and capital requirements, and in some cases, they will exceed the 1 MW threshold that makes participation in competitive auctions mandatory.
For some projects, this may require revisiting both plant design and permitting. Likewise, overbuilding – the common practice of installing more DC capacity than AC inverter capacity to maximise energy yield – will need to be reassessed under the new regulatory framework.
It will therefore be crucial to review the GSE's implementing rules to understand precisely how DC capacity will be accounted for when calculating the available auction volumes.
- A more structured auction process
The Final FER X Decree introduces a new three-stage auction process consisting of:
- Preliminary qualification by the GSE;
- Expression of interest;
- Submission of the financial bid.
The key innovation is the introduction of a preliminary qualification phase, which takes place before participation in individual auctions and enables the GSE to verify the eligibility of projects at an early stage. This step will effectively determine which projects are admitted to the competitive procedures and which are excluded.
In this context, Vector Renewables supports developers and investors throughout this process by reviewing and preparing the technical, administrative and permitting documentation required by the GSE. This helps identify potential issues early, improve compliance and reduce the risk of exclusion from subsequent auction rounds.
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- Support duration and price indexation
The support mechanism remains valid for 20 years from the plant's commercial operation date and is based on a two-way Contract for Difference (CfD) with the following reference prices:
Renewable technology
Plant size (MW)
Strike price (€/MWh)
Maximum strike price (€/MWh)
Minimum strike price (€/MWh)
Photovoltaic
>1
80
95
65
Onshore wind
>1
85
95
70
Hydropower
>1
90
105
80
Residual gases from wastewater treatment processes
>1
85
100
75
The incentive applies to up to 95% of the plant's electricity production, while the remaining 5% remains exposed to the wholesale market or can be monetised through Power Purchase Agreements (PPAs).
Compared with the Transitional FER X framework, the Final FER X Decree introduces a more comprehensive inflation indexation mechanism. When each auction is launched, the reference prices will be indexed to Italy's Producer Price Index (PPI) for industry, with adjustments applied both at the time the plant enters into operation and annually throughout the 20-year contract period.
- 5. The pricing challenge: lessons from the Transitional FER X scheme and Energy Release 2.0
The first auction under the Transitional FER X scheme highlighted the intense level of competition in the photovoltaic sector. Strong bidding pressure drove prices down to levels that raised concerns about the economic viability of some projects. Despite being heavily oversubscribed, the auction closed with an average award price of around €57/MWh, with significant discounts and minimum awarded prices falling well below €55/MWh, while EPC costs, module prices and financing costs continued to increase.
The Final FER X Decree addresses these issues by increasing the reference prices, setting a maximum auction price of €95/MWh and a minimum strike price of €65/MWh, while also introducing a more comprehensive inflation adjustment mechanism that extends to the construction phase.
At the same time, the results of Energy Release 2.0 confirm that the market is seeking remuneration levels that better reflect the actual cost of developing renewable energy projects, reinforcing the importance of submitting financially sustainable and bankable bids. The scheme, designed around the efficient cost of mature renewable technologies, generated exceptionally strong industrial demand, with more than 70 TWh requested by around 3,400 energy-intensive companies, compared with approximately 23 TWh per year available, in exchange for the commitment to develop around 5 GW of new renewable capacity.
- Curtailment compensation and improved bankability
One of the most significant yet often overlooked aspects of the Final FER X Decree is curtailment, which involves reducing the amount of electricity injected into the grid when Terna instructs this in order to safeguard system security or manage network constraints.
The new framework strengthens investor protection by introducing compensation mechanisms based on the plant's expected producible energy, while also recognising the value of Guarantees of Origin (GoOs) for projects awarded through the auction process.
Alongside the 20-year contract duration and the enhanced inflation indexation mechanism, these provisions improve revenue predictability and significantly enhance the bankability of renewable energy projects. Consequently, developers can benefit from improved access to project financing and more robust financial models.
These protections become increasingly valuable in a power system facing growing grid congestion, especially in areas with a high penetration of renewable generation. By reducing the volume risk borne by project owners, the new rules contribute to more stable and predictable cash flows, strengthening the investment case for future renewable developments.
Next steps
In the months following the publication of the decree, MASE, GSE and ARERA will issue the implementing measures that will define the operational framework of the new incentive scheme. These will include the Operational Rules, the auction calendar, auction volumes, zonal coefficients and updates to the relevant technical regulations.
Until these documents are published, several practical aspects remain to be clarified, including how the zonal coefficients will be applied, how projects will consume the available auction capacity, and the detailed rules governing curtailment compensation. These elements are likely to significantly impact developers' bidding strategies and investment decisions.
How to assess a project's economic viability
The Final FER X Decree appears to strike a better balance between competition and the actual deliverability of renewable energy projects, moving beyond a system in which the lowest bid alone determined success. Measures such as enhanced curtailment compensation, the 20-year Contract for Difference (CfD) framework and greater revenue predictability contribute to strengthening the overall robustness of the incentive scheme.
At the same time, developers and investors will need to accurately interpret the new regulatory framework and translate it into bidding strategies that reflect the technical and financial fundamentals of their projects.
In this context, the role of specialised advisors such as Vector Renewables becomes increasingly valuable. By providing end-to-end support, from assessing technical and permitting readiness to managing auction participation and evaluating the economic and financial viability of projects, Vector Renewables helps developers and investors reduce regulatory and procedural risks, prepare genuinely competitive bids and improve the bankability of their investments in a market where the balance between price, risk and project deliverability is becoming ever more critical.