Executive summary 

Italy’s long-term competitiveness and energy transition will depend on the strength of its transmission grid. Renewable generation is expanding rapidly, but without sufficient network capacity, electricity cannot consistently flow from where it is produced to where it is consumed. Congestion, curtailment and regional price differences are no longer marginal issues; they are structural constraints. In this context, grid investment is not discretionary. It is an initial requirement.

As Italy’s transmission system operator, Terna S.p.A. sits at the centre of this challenge. Operating under a regulated framework and supported by a stable ownership structure, the company benefits from strong revenue and cash flow visibility, which supports its capacity to invest. Its role has evolved beyond maintaining infrastructure. It is now responsible for enabling renewable integration, strengthening energy security and supporting market integration at both national and European levels.

Grid bottlenecks persist. Renewable production is concentrated in southern regions and on the islands, while demand remains anchored in the industrial north. The resulting congestion limits exports of clean power, increases system costs and widens zonal price spreads. The case for reinforcement, particularly through new high-capacity links and modern transmission technologies, is necessary. Without timely delivery, renewable integration will slow, curtailment will increase and system inefficiencies will persist. 

Over the past decade, Terna has steadily increased investment to modernise the network. The investment cycle ahead is substantial, reflecting physical system needs. The focus is clear: strengthen north–south corridors, reinforce island connections and expand cross-border interconnections. 

With €16.6 billion of planned grid investments over 2024-28, the company will need to scale capital expenditure (capex) well above historical levels while maintaining its investment-grade credit profile. While the shortfall between internally generated cash flow and total investment requirements is significant, Terna has a diversified funding strategy to bridge this gap. The company has demonstrated strong market access through the successful issuance of €1.6 billion of senior and subordinated debt under the European Green Bond Standard (EUGBS), supported by robust investor demand.

The success of its investments will depend on sustainable funding through regulated cash flow generation without placing undue pressure on network tariffs or energy affordability. Despite the scale of required investments and the resulting increase in transmission charges, the impact on electricity bills is likely to remain manageable. IEEFA estimates that Terna’s transmission charges could stay close to its recent 4% of total customer electricity costs throughout the current investment cycle to 2028. To ensure long-term energy affordability while enabling the necessary expansion and modernisation of grid infrastructure, regulators should implement complementary measures such as decoupling of gas costs from electricity prices and adjustments to system charges and taxes.

Terna should deliver its investment programme in a timely and efficient manner while maintaining sound operational efficiency and disciplined financial management. The deployment of innovative and sustainable financing tools, including the exclusive use of EUGBS, together with targeted public funding to limit additional debt needed particularly for high-value projects, will be critical.