Italy’s FER-X auctions reveal the economic cost of supply chain resilience
Italy is turning renewable auctions into an industrial early-stage policy experiment. As one of the first European markets to include supply chain criteria under the EU’s Net-Zero Industry Act, it has used its FER-X scheme to carve out a parallel solar tender – one that deliberately sidesteps Chinese components. The result is an early glimpse of how far the government can tilt the market before prices, participation and competition start to push back.
From industrial policy to auction design
Today, China is the undisputed global leader in photovoltaic production, spanning all key stages from polysilicon to modules, supported by more than a decade of sustained investment and industrial consolidation. Meanwhile, the European Commission is focused on gaining industrial independence with the introduction of the Industrial Accelerator Act.
The new regulation is set to strengthen the industrial base while advancing decarbonisation with a target for manufacturing to account for 20% of EU GDP by 2035, prioritising domestic production capacity and supply chain resilience. In practice, this translates into a policy preference for “made in EU” or trusted-partner equipment.
These principles are already being operationalised through Regulation (EU) 2024/1735 under the Net-Zero Industry Act (NZIA) framework, with introduced supply chain resilience criteria. The regulation allows contracting authorities to limit exposure to third-country suppliers where they account for a significant share of EU supply, including thresholds above 50%. Italy’s FER-X transitional scheme is an early example of this implementation, with Decree MASE No. 220/2025 establishing a dedicated procedure for photovoltaic projects above 1MW using non-Chinese modules, cells and inverters.
At the same time, policymakers recognise the limits of rapid decoupling: up to €119 billion (£102bn $136bn) of investment through the period 2023-2030 would be needed for the European Union to fully localise clean technology supply chains by 2030, with zero import dependence.
Italy’s FER-X mechanism can therefore be seen as an early attempt to operationalise this trade-off. Rather than imposing blanket restrictions, the scheme introduces optionality within auctions.
Pricing outcomes and the emergence of a premium
The most immediate effect of the dual structure of FER-X auctions is visible in pricing. In the main 2025 FER-X round, 474 solar projects secured contracts for around 7.7GW at a weighted-average price of €56.8/MWh. The NZIA-aligned tender, by contrast, awarded 88 projects totalling only around 1.1GW at €66.4/MWh.
This implies a consistent premium of roughly €10/MWh, or close to 17%, associated with projects that exclude Chinese modules, cells and inverters. However, the underlying dynamics extend beyond costs alone.
Share of projects for FER-X General and NZIA auctions; tail distribution for projects with discounts relative to the maximum allowed price below 25% and above 40%
Source: Gestore Servizi Energetici (GSE), processed by inspiratia
Bidding behaviour differs systematically across the two segments. In the general auction, participants submitted highly competitive offers, with average discounts of approximately 36.7% against ceiling prices and a substantial share of bids exceeding 40%. In the NZIA segment, average discounts fall to around 26.6%, with almost no equivalent “aggressive” tail.
Average discount relative to the maximum allowed price (%) per project size pool
Source: Gestore Servizi Energetici (GSE), processed by inspiratia
Analysis of auction data shows a minimal relationship between installed capacity and bid reductions for FER-X general auction, indicating that the pricing gap is structural rather than a function of project size. However, this dynamic changes for NZIA projects within the 25-50MW capacity pool.
What also emerges is a new competitive environment. The general auction combined relatively tight clustering with a strong presence of highly competitive bids, whereas NZIA auctions displayed greater dispersion, with price pressure concentrated at lower levels. In practical terms, this translates into weaker competition and higher clearing prices.
Market structure, regional patterns and participant behaviour
Differences between the two auction tracks are also evident in participation and project composition.
The general FER-X auction accounts for the overwhelming majority of activity, representing roughly 84% of projects and over 90% of awarded capacity. The NZIA segment, while not negligible, accounts for only about 16% of projects and 8% of total capacity.
This imbalance is partly driven by the absence of very large projects in the NZIA pool. While median project sizes are broadly comparable, the NZIA segment lacks the upper tail of large-scale installations that characterise the main auction. As a result, average capacity per project is significantly lower.
Average discounts relative to the maximum allowed price by region and auction type
Source: Gestore Servizi Energetici (GSE), processed by inspiratia
Regionally, stronger bid reductions for NZIA are observed in areas such as Lazio, Toscana, Campania and Sicilia, with several regions falling back in terms of the presence of NZIA projects.
Participation patterns reinforce the structural separation between the two markets. The general auction is dominated by repeat developers submitting multiple projects, indicating a more established and scalable segment. In contrast, NZIA participation is more fragmented, with a larger share of single-project bidders and limited overlap between participants.
This segmentation is also reflected in bidding strategy. More aggressive bids in the general auction are often associated with one-off participants, while larger developers tend to cluster closer to average reduction levels. In the NZIA segment, the distribution shifts downward and becomes more uneven, with a concentration of relatively conservative bids.
NZIA has become a refuge for projects that face a lot of competition in FER-X. Pablo Lopez, director at Optimize Energy, comments: "The competitive intensity in the FER-X transitorio was high, with a large volume of authorised or partially authorised capacity eligible to participate. For projects facing a structurally lower probability of award in the standard track, the NZIA route — where a higher expected CfD provided greater margin flexibility — represented a more viable competitive position, although this had to be balanced against the additional investment required to meet NZIA compliance criteria."
Implications for EU market design
Italy’s experience highlights the complexity of integrating industrial policy into renewable support schemes.
At a headline level, the introduction of supply chain constraints leads to higher prices and reduced competitive intensity. However, the data also indicate that these effects are not solely driven by equipment sourcing. Market segmentation appears to influence which projects participate, potentially amplifying the observed premium.
Lopez also adds that: "The NZIA route gave projects the additional revenue headroom needed to remain economically competitive, provided the incremental cost of NZIA adherence did not offset the benefit of the higher award."
The result is a dual market structure. The general FER-X auction is expected to operate as a mature, highly competitive segment, characterised by large projects and strong price pressure. The NZIA-aligned auction, by contrast, is much smaller and more fragmented.
This distinction has implications for future policy design. If NZIA-style criteria are rolled out more broadly, policymakers will need to consider not only the direct cost impact of supply chain diversification, but also its indirect effects on competition and market composition.
Italy is not only adjusting auction design but also stress-testing a broader European policy direction. The late 2026 FER-X auctions are therefore likely to move NZIA policy from early evidence to calibration, shaping how far governments can pursue supply chain resilience without materially re-pricing the cost of the energy transition.
