The European Commission has approved a €23bn Italian state aid scheme to support renewable electricity production, in one of the largest national subsidy measures cleared under the EU’s current clean-industry rules.
The decision allows Italy to support new renewable electricity projects through 20-year two-way contracts for difference. Under that mechanism, the state compensates producers when market prices fall below an agreed level, while producers repay the difference when prices rise above it.
The scheme is designed to help Italy reach its target of covering 39.4 per cent of gross final electricity consumption from renewable sources by 2030. It will support electricity production from sources including wind, solar, hydropower and biogas from wastewater treatment.
Brussels said the measure was compatible with EU state aid rules and with the objectives of the Clean Industrial Deal State Aid Framework, adopted by the Commission in June 2025 to accelerate investment in decarbonisation, clean technology and industrial competitiveness.
Teresa Ribera, the Commission’s executive vice-president for clean, just and competitive transition, said the Italian scheme would support the deployment of renewable electricity, reduce dependence on fossil fuel imports and increase Italy’s renewable energy share.
The decision also illustrates how state aid has become one of the main instruments of Europe’s energy transition. EU climate targets are formally set at European level, but delivery depends heavily on the ability of individual governments to mobilise national funds, design subsidy schemes and bring projects through permitting and grid-connection procedures.
That creates an uneven policy environment. Larger member states with greater fiscal capacity can deploy multi-billion-euro support schemes, while smaller or more indebted governments face tighter limits. The result is a transition governed not only by EU targets and regulations, but also by national budgetary room and administrative capacity.
Italy’s €23bn scheme is therefore more than a renewable-energy support programme. It is also a test of how far Brussels is prepared to allow national governments to intervene in electricity markets while maintaining the integrity of the single market.
The Commission said the budget was based on estimated market prices and that the actual net cost could be lower if electricity prices are higher than expected. This is a key feature of two-way contracts for difference. They provide revenue certainty for investors, but also allow the state to recover money when market prices exceed the agreed strike price.
The mechanism has become increasingly important in European energy policy because it offers a way to support capital-intensive projects without relying solely on volatile wholesale electricity markets. It can reduce investment risk and lower financing costs, but it also increases the role of governments in shaping the economics of power generation.
For Italy, the approval comes amid continuing pressure to reduce reliance on imported fossil fuels and to accelerate the deployment of domestic renewable electricity. The country has significant solar potential, but its transition has been constrained by permitting delays, grid constraints and regional differences in project delivery.
The scheme will also be watched by investors and other member states. If it succeeds in bringing renewable capacity online at scale, it could strengthen the case for broader use of long-term contracts in Europe’s electricity market. If implementation is slow, it will reinforce concerns that subsidy approval alone is insufficient without faster permitting, grid investment and local administrative capacity.
The broader question for Brussels is whether national state aid can remain compatible with a level playing field across the EU. Since the energy crisis and Russia’s full-scale invasion of Ukraine, the Commission has allowed member states greater flexibility to support strategic sectors, reduce energy dependence and accelerate decarbonisation. That flexibility has helped unlock investment, but it has also increased concern that wealthier member states can support domestic industry more aggressively than others.
Italy’s scheme sits within that wider debate. It supports EU climate and energy-security objectives, but it also underlines the growing dependence of the green transition on national subsidy capacity. For companies, this means investment conditions will increasingly vary by country. For policymakers, it raises the question of whether Europe can meet its renewable-energy targets without deepening internal disparities.
The Commission’s approval gives Rome the legal clearance to proceed. The harder test will be whether the scheme produces enough new renewable electricity quickly enough to affect Italy’s 2030 target, reduce fossil-fuel exposure and contribute to Europe’s wider effort to lower energy costs while preserving industrial competitiveness.
