Italy: Law against virtual grid congestion and for the approval of data centers

published on October 27, 2025

The new decree law “DL Energia 2025” is expected to be passed in the coming weeks, with the draft having been in circulation since the end of July. The measure introduces a package of strategic measures aimed at

counteracting virtual congestion on the electricity grid,
influencing prices on the wholesale natural gas market,
simplifying the procedures for granting permits for the construction of data centers.

Virtual grid saturation

One of the biggest obstacles to the expansion of renewable energy plants is virtual grid congestion, i.e., the reservation of grid capacity by plants that are not approved and implemented, thus blocking grid capacity that would otherwise be available for plants with better implementation prospects.

To address this problem, Article 1 of the draft decree proposes a series of corrective measures. In particular, it provides that TERNA (the central Italian grid operator) shall publish the maximum additional capacity that can be fed into each part of the grid and update this quarterly with 1) the permits granted for the construction and operation of the plants and 2) the applications for grid connection. Offshore plants are exempt from this mechanism.

This is to ensure that the objectives of the Italian recovery plan PNRR, the Italian energy plan PNIEC, and national and European energy policy can be achieved.

The decree also amends Legislative Decree 190/2024 (the so-called Consolidated Law on Renewable Energy) and mandates the Regulatory Authority for Energy, Networks and Environment (“Autorità di Regolazione per Energia Reti e Ambiente – ARERA”) to establish new technical and economic rules for the connection of renewable energy plants and storage systems (except offshore plants) to the TICA within 180 days of the decree coming into force. The upcoming changes are based on a microzonal approach and the principle of load sharing. TERNA is authorized to carry out open season procedures for the high-voltage grid, even for areas whose theoretical maximum capacity has been exhausted. The feed-in capacity will be allocated to bidders who already have the necessary permits.

As for distribution system operators (medium voltage), they will also be able to issue connection solutions for the networks they operate, again through open season procedures, relating to a connection point, even if the maximum allowable capacity at that point has already been reached.

Once the update by ARERA comes into effect, the connection solutions already granted for projects that have not yet been approved and validated by the network operator will lose their validity. However, the parties concerned are entitled to a refund or reassessment of the connection costs already paid, without prejudice to the possibility of participating in the new procedures. Excluded from this and therefore still valid are connection solutions for projects with approval procedures for which screening prior to the environmental impact assessment (EIA) or a positive EIA or a positive environmental impact statement (EIS) has already been granted.

The planning and approval of network expansion measures, such as connections or substations, will be centralized and carried out by Terna using simplified procedures.

Remedial measures against so-called pancaking on the wholesale natural gas markets

The introduction of measures to promote competition and integration in wholesale gas markets is intended to avoid the so-called pancaking effect, i.e., the mechanism by which the price of gas increases with the number of gas transport systems crossed. In order to promote competition in the national market and its integration into the European market (also due to the disadvantageous difference in the wholesale price of natural gas compared to the Northern European markets), it is envisaged that ARERA will take at least one of the following measures:

the setting of capacity charges that eliminate the distortions caused by the accumulation of transport costs to cover fixed infrastructure costs (with reference to deliveries at the Passo Gries entry point on the border with Switzerland);
introducing a “liquidity service” aimed at offering gas on the Italian market at prices in line with those in Europe, in particular those of the Dutch Title Transfer Facility, with provision for SNAM (the largest Italian natural gas transmission company) will enter into contracts with operators selected through tender procedures that meet the criteria established by ARERA, including the right of the selected operators to receive a premium paid by SNAM itself upon completion of these procedures.

Of particular interest with regard to the integration of geographically adjacent markets is the forecast that, within 90 days of the decree coming into force, ARERA will submit a proposal to the Ministry of the Environment and Energy Security (MASE) for the full integration of the Italian and German natural gas markets with regard to transport infrastructure on Swiss territory, in order to limit the phenomenon of pancaking of transport costs incurred by operators for crossing the three countries concerned.

Simplifications for the approval of data centers

In addition, a uniform procedure will be introduced for granting permits for data center projects, which are generally understood to be energy-intensive infrastructures. The approval procedure will be simplified overall to ensure more efficient and coordinated management of data centers and the corresponding networks for user connections. A uniform procedure will be introduced for the approval of data centers in Italy and the corresponding connections to the electricity grid. The approval, which will be granted by the region (or the province, if delegated) for data centers up to 300 MW or by MASE for data centers with a capacity above this threshold, will include all approvals to be obtained from the competent authorities. The approval process must be completed within 10 months – which can only be extended in exceptional circumstances and for a maximum of 3 months – and the deadlines for the environmental impact assessment will be reduced by half.

The decree-law will be discussed by the government in the coming weeks and is expected to be adopted shortly. It cannot be ruled out that the final text of the decree will differ from the draft published in July and contain further amendments.