The decree, approved by Italy’s Council of Ministers in mid-February, proposes reimbursing gas-fired generators for certain transport and carbon costs embedded in the wholesale price formation mechanism from 2027 onward, subject to EU approval. This triggered a sharp sell-off in Italian power futures as markets priced in the possibility of structurally lower wholesale power prices. That shift is now feeding through into long-term PPA pricing and buyer sentiment.
The average solar PPA Fair Value in Italy (1) stood near 60 EUR/MWh in January before falling to 56 EUR/MWh in February and dropping further to around 51 EUR/MWh so far in March. Similarly, the range of market price evidence from offtakers collected by Pexapark fell from 47–62 EUR/MWh in February to 44–53 EUR/MWh in March, reflecting a roughly 10 EUR/MWh downward shift in the market’s perception of long-term value.
Market participants say the repricing is still unfolding as buyers and sellers reassess the policy risk introduced by the decree. Several sources said PPAs are being re-evaluated across portfolios, with contract negotiations slowing as counterparties reconsider pricing assumptions. In some cases, deals are being renegotiated or delayed while participants wait for greater clarity on the final implementation of the policy.
At the same time, uncertainty remains over whether elements of the decree could still be revised. The proposal has faced criticism from industry groups and market participants in light of the recent geopolitical tensions, raising the possibility that ministers could adjust or partially backtrack on the measures during the approval process. This uncertainty is itself creating friction in the market, as counterparties struggle to price long-term power exposure against an unclear regulatory backdrop.
Market sources also warned that the episode risks damaging liquidity in both Italy’s forward and PPA market. The prospect of government intervention in price formation has made some international investors more cautious about entering or expanding exposure in the country. According to several participants, foreign buyers and developers are increasingly concerned that regulatory changes could alter the long-term economics of projects after contracts are signed.
The timing is significant because Italy’s PPA market had been gaining momentum. According to Pexapark analysis of publicly disclosed information, in 2025 alone, nearly 1.8 GW of PPA capacity was announced, a substantial increase compared with activity recorded in 2024. Early announcements in 2026 (totalling over 500 MW to date) suggested that momentum could continue. However, market participants say the DL Energia shock has disrupted that trajectory, leaving the outlook for deal activity this year far less certain.
Notes: 1) The value concerns a 10-year, Pay-as-Produced deal starting January 2027, excluding GoOs and balancing costs.
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