As much as EUR 8bn of capex might be required in the near term to finance the large pipeline of solar and wind projects awarded in Italy’s latest renewable auctions this month – but the financial market is expected to be up to the task, according to experts.

The larger FER X auction, announced on 1 December, has resulted in 8.64 GW of mostly solar capacity awarded to a significant number of Italian and international players, including developers backed by infrastructure funds.

The smaller FER Net-Zero Industry Act (NZIA) auction, which backs projects with European-made PV modules, saw another 1.1 GW of solar projects being awarded a few days later.

Advisory firms Finergreen and Prothea have predicted that up to EUR 8bn could be required for this bonanza of projects.

“We believe that the lending market will be able to sustain the level of debt needed for these projects, which we have calculated in the EUR 6bn-EUR 7bn range,” Finergreen Director Valerio Ingiusto told Infralogic.

The new solar plants and wind farms will have three years to become operational to benefit from the government-backed CfD support scheme, with a further extension of another nine months if necessary, at a slightly lower tariff.

Banks’ interest

Given the projects’ relatively low complexity, a large number of banks are expected to try and gain a slice of the projects for financing.

Italian banks such as Intesa Sanpaolo, UniCredit and BPER as well and French, German and Dutch banks with a strong presence in Italy, ranging from Credit Agricole to Natixis, from ING to BayernLB, are expected to participate, according to market experts. Spanish banks, which have less exposure to Italy, will also seek to grow.

Advisors also believe that for institutional debt providers il will be more difficult to be competitive with traditional banks for this type of projects. This is because banks can be more competitive than debt funds in case of a traditional project financing with a 75%-85% gearing, as they have a lower cost of capital.

The EIB is also expected to participate. Edison in a statement said that the projects it won at the FER X auction will benefit from its agreement with the EIB for up to EUR 800m of loans, with the possibility to finance up to 75% per project.

“The market is hungry for these projects, which are GSE-backed and easy to finance,” said Ingiusto.

“These aren’t complex facilities that require specialisation as something like biomethane might, so big and small banks alike can and will join, including very local banks”, he said.

Typical projects can expect to be financed with up to 80% gearing on capex, and long tenors covering most of the 20-year duration of the contracts, according to Ingiusto.

Amleto Monsellato, vice president at Green Horse Financial Advisory, predicts an even higher gearing and “aggressive” financing structures. “Lenders will be considering providing senior plus junior financing or unitranche financing, so projects might even reach leverage above the traditional 80% threshold,” he said.

In this case, there might be some room for debt funds, if some developers seek higher leverage despite the higher cost associated with unitranche financing, which combines senior and junior debt features.

The first deals are expected to reach financial close in the first half of 2026, added Monsellato. He believes that banks are well prepared, having initially allocated significant capital to the BESS-related MACSE auction.

“Following the outcome of the auction — which led to a concentration of awarded capacity among a limited number of players — a portion of this capital is now being redirected towards FER X financings in the coming months,” he said.

Developers might have to work harder to secure construction contracts quickly and avoid delays, however, according to Monsellato. “The number of EPC firms is limited and there might be bottlenecks, so it is crucial that project owners be proactive to ensure delivery meets their deadlines,” he said.

The large number of projects might create challenges. “It will be a bit more difficult than in the past for asset owners to find turnkey EPC contractors, so this will probably favour mixed structures where different types of EPC firms take part in the process,” said European Energy country manager for Italy, Alessandro Migliorini.

European Energy has secured more than 500 MW of capacity at the auction, including for the landmark 225 MW Vizzini solar PV project in Sicily, set to become Italy’s largest agri-PV solar park. Migliorini told Infralogic that interest from lenders, however, is unequivocal: “We received a lot of expressions of interest from Italian and international banks for the Vizzini project”.

More generally, FER X is seen as a major opportunity for the banking system, “given the size of capex required and the CfD structure that ensures stable returns for the next 20 years”, he added.

The highly competitive FER X auction has been described by Finergreen as “by far the most substantial renewable auction ever executed in Italy, confirming the interest of the market and the competitiveness of PV and wind technology in the country”.

It contrasts with its predecessor FER 1, launched in 2019 and with significant limitations – such as the requirement that projects needed to be in or near industrial areas – which reduced the number of projects eligible to participate and resulted in higher auctions pricing, at around EUR 77/MWh on average. In the case of FER X, all projects at ready-to-build stage that had secured authorization were eligible, including on agricultural land.

Solar vs wind

Auction prices were significantly lower than government ceiling prices, according to Finergreen’s analysis.

Successful solar projects won average CfDs of EUR 56.82/MWh – a discount of more than 37% to reference prices. This was partly driven by over-subscription levels, with 10 GW of projects competing for 8 GW of capacity.

For wind, the average awarded tariff was EUR 72.85/MWh, a 19.7% discount. But unlike for solar, the auction was significantly undersubscribed. Just 1.6 GW of projects applied for 2.5 GW of capacity, and only 936 MW of this was awarded.

This, according to sources, was linked to pent-up demand as many solar developers have been delaying their projects until the auction.

For wind, the lower participation was also due to a lack of suitable land for projects.

Many of the winning projects involved the repowering of existing assets rather than new developments, which according to Bird & Bird partner Pierpaolo Mastromarini “reflects the limited authorizations obtained in recent years”.

Only a small percentage of new wind projects have obtained the necessary authorizations in the last five years, he said, while authorizing the repowering of plants that are nearing the end of their cycles is easier.

In its own analysis, financial advisory boutique Prothea noted that most of the assigned wind capacity was in the hands of incumbent players, including 400 MW for revamping, with just over 500 MW of new capacity and few newcomers.

A combination of higher capex and fewer available projects resulted in an average tariff nearly 10 EUR/MWh higher than solar, the advisory firm added.

Solar CfDs were also more evenly spread across small and big developers, which reduces concentration. Some of the main winners included Sonnedix, which through the FER-X auction secured 670 MW and additional capacity with its NZIA-aligned scheme; European Energy with 513 MW; Antin Infrastructure’s Opdenergy with 278 MW; and BlackRock-backed Recurrent Energy with 238 MW (see table 1 for more details).

The wind auction was instead dominated by Edison with the largest chunk of capacity, followed by ERG and IVPC. “In the case of wind, a scarcity of authorized projects has impacted the results, with a few big winners and an undersubscribed auction,” Monsellato said.

This trend is likely to change over the coming years, but as Mastromarini noted, “suitable sites for projects with good returns are very few and inflated”. This makes the wind market increasingly complicated compared to other competing technologies, he said.

A large part of the winning solar projects were in Apulia and Sicily – many of which above 50 MW – and developers were looking forward to the FER X auction to ensure the projects’ bankability, as private power purchase agreement (PPA) prices tend to be lower in these regions. “Our internal analysis shows average prices of EUR 57/MWh for plants above 25-30 MW, in particular in Sicily and Apulia, where around 70% of the auctioned capacity is located,” said Monsellato.