Addressing challenges in the Italian EPC market in light of growing renewable energy deployment

Italy stands at the cusp of a renewable energy revolution, with ambitious targets set to transition towards a more sustainable energy mix by 2030. As the nation commits to reducing its carbon footprint, the role of Engineering, Procurement, and Construction (EPC) players becomes increasingly critical: while the renewable market is poised for rapid expansion, the current EPC deployment capacity needs to quickly evolve and grow to support progress towards Italy's green objectives.

The Italian renewable energy sector has seen a resurgence in recent years, driven by global environmental and geopolitical concerns as well as local policy initiatives such as the National Integrated Plan for Energy and Climate. EPC contractors are pivotal in this landscape, offering turnkey solutions that are essential for the timely and efficient rollout of renewable projects. However, the market's ability to meet rising demand is under scrutiny.

Forecasts suggest that Italy's renewable energy capacity could double by 2030, with solar and wind power leading the charge. This growth trajectory is supported by the declining cost of renewable technologies and a favorable regulatory environment. However, the anticipated surge in project deployments raises questions about the readiness of the EPC sector to handle the influx.

Installed capacity as of June’ 2024 and 2030 Targets (GW)

EPC contractors are essential in the development of renewable energy infrastructure: their expertise in managing complex projects is indispensable for the timely delivery of renewable energy assets.

Despite the optimistic outlook, the EPC market faces several challenges that could affected negatively its ability to scale up operations. Low EPC availability in terms of workforce and machinery, combined with their low capitalization, is negatively affecting the potential deployment capacity and the achievement of new market growth opportunities.

Renewables Value Chain

Key initiatives to ensure the Italian EPC sector can support the renewable market's growth include:

• Enhancing Supply Chain Resilience: Developing local supply chains and fostering partnerships with reliable suppliers.
• Investing in Workforce Development: Collaborating with educational institutions to train the next generation of renewable energy professionals.
• Facilitating Access to Finance: Creating financial instruments and incentives to support EPC contractors in project financing.

Furthermore, the Italian competitive landscape is characterized by several small operators that are not able to leverage the economies of scale necessary to win the market. The future of EPC market will be oriented towards the creation of a handful of national champions acting as aggregators of small players offering an E2E Platform of high value-added services along the RES value chain. This will require support from financial investors, who are finally recognizing attractive fundamentals in a historically ignored sector.

So, the integration along the value chain and the aggregation of operators may drive the EPC to become more profitable and sustainable in the medium to long term, thanks to the IPP (renewable platform/IPP) value proposition that gives them more stability and visibility about their revenue streams.