Italy Opens the Door to Billions in New Green Energy Investment
Italy is preparing to seek billions more in energy investment over the next three years, after the European Union agreed to let governments exclude part of this spending from its strict deficit limits, provided it supports the shift away from fossil fuels. The exact figure will depend on the plan Italy formally submits.
Finance Minister Giancarlo Giorgetti told parliament that Italy will use the full flexibility available for energy, equivalent to 0.6% of GDP, while requesting 0.9% of GDP for defence, less than the 1.5% ceiling Brussels has set for that category under the mechanism's conditions. Rome's next step is to formally submit its investment plans to the European Commission, expected by mid-August.
The choice to prioritise energy over the full defence allowance is notable in itself, and reflects the scale of the challenge facing Italy's power system. The country has made significant progress on renewable electricity, but remains heavily dependent on fossil fuels.
A power system still reliant on gas
In 2025, renewables supplied 48.8% of Italy's electricity, with solar providing 16.9%, hydropower 15.8% and wind 8.1%. Fossil fuels still accounted for 51.2% of generation, with natural gas alone responsible for 47.2%.
That makes Italy particularly exposed to changes in gas prices and imported energy. The country currently has no domestic nuclear generation, though Italy passed a law in 2025 beginning the process of reintroducing it, with any actual generation still years away. For now, renewables remain the primary route available to reduce Italy's reliance on fossil fuels, and the country's national energy and climate plan targets 69% renewable electricity by 2030, up from roughly 49% today.
Why the investment matters
Adding more renewable generation is only part of the challenge. Italy will also need stronger grids, more storage and greater flexibility to make full use of electricity produced when the sun is shining or the wind is blowing.
This is not a hypothetical concern. In parts of the country, rapid solar growth is already creating localised grid congestion, raising the risk of curtailment, where renewable generation has to be switched off or wasted because the grid cannot absorb it in that moment. Without matching investment in grids and storage, continued growth in solar and wind risks running into that same constraint more often and at greater scale.
The additional spending could help address that gap, potentially reducing gas consumption and exposure to volatile fossil fuel markets while supporting Italy's progress towards its 2030 target. It is also worth noting that using this fiscal flexibility keeps Italy under the EU's ongoing excessive deficit procedure, since its budget deficit remains close to the bloc's 3% limit, meaning the investment is not without cost elsewhere in the public finances.
The immediate focus is on securing the investment framework with Brussels. The bigger question is what Italy chooses to build with it.