Rows of solar panels similar to those found in Chile’s Atacama Desert.
On February 25, 2025, a 500 kilovolt (kV) transmission line disconnected between Vallenar and Coquimbo, Northern Chile. The Coordinador Eléctrico Nacional reported loss of supply from Arica in the far north to Los Lagos region in the south; the distance spanning over 3,100 km. The largest blackout in the country’s history affected 98.5% of its population.
The event demonstrates the key structural element of the Chilean electricity system. The country’s strongest solar resource is the Atacama Desert, its best wind resource in the far south, and its principal demand centre sits in the middle. Italy’s transmission geography shares similarities, at a smaller scale. Most Italian solar and wind potential is in the continental south and the islands, with the heaviest demand over a thousand kilometres to the north. A single dominant axis moving bulk power over long distances is common to both countries.
Both countries are committed to net zero emissions by 2050. Chile’s target is set in national legislation, and the International Energy Agency (IEA) treats it as a legally binding obligation, whilst Italy’s commitment derives from European law rather than a national climate statute.
The two economies differ in scale. Italy is several times larger in population, energy demand and GDP, and operates inside the EU single market. Though there are important distinctions to be made, there are also useful parallels to be drawn in the outcome drivers of the energy sector: resource quality, market design, and climate policy.
Chile restructured its electricity market in 1982, decades before the climate question was widely considered. Generation, transmission and supply were separated, and generators were dispatched in order of short-run marginal cost. Two rules shaped the sector from this point: first, the cheapest available generation is dispatched first, and second, long-term supply contracts are allocated to the lowest bidders at regular auctions.
The Atacama Desert in Northern Chile is recognised as one of the very first places in the world where utility-scale, unsubsidised solar energy began winning on price, outcompeting fossil fuels.
Solar and wind together now supply more than a third of Chilean electricity, with hydropower contributing close to another third, while the share generated from coal has fallen from 43.6% in 2016 to below 16%.
Chile, with its unique natural conditions, did not generate this shift towards renewable sources through subsidies. Instead, these changes have been enabled by favourable economic fundamentals; strategic policies implemented to allow the emerging technologies to develop and to compete. However, this is not the case across all sectors; the decarbonisation of the energy grid has proceeded alongside continued fossil fuel dependence in transport and heating, costing the country around $14 billion in 2024.
Throughout the 2010s, most of Europe, including Italy, relied heavily on imported natural gas, and the renewable share of generation remained flat; this reliance continues. In 2022, energy prices spiked, exposing the vulnerability of external dependence. For Italy, with three-quarters of energy imported, price volatility fed immediately into industrial and household costs. This coincided with binding EU climate objectives under Fit for 55, and the combination accelerated renewable deployment.
Italian policy reflects dual drivers with equal weight: energy security and EU decarbonisation mandates. The mechanism differs from Chile, which built machinery to find the lowest price. Comparatively, Italy built machinery to stabilise prices and improve project bankability, with the intention of making renewable investments more attractive to financing institutions.
The resulting volumes are substantial. In December 2025, the energy agency GSE awarded 7.7 GW of solar and 940 MW of wind under FER X, the first major competitive auction round. The scale was partly due to pent-up pipeline capacity that had accumulated.
Wholesale power markets settle at marginal cost, so every generator running in a given hour receives the price set by the most expensive plant dispatched. In Italy, that plant is, for most of the 24-hour cycle, gas-fired.
Paradoxically, Italy’s low renewable generation costs do not reduce consumer prices. The country maintains Europe’s most expensive retail electricity market despite massive renewable deployment. This pricing dynamic is evident across Europe: the larger the gas share of generation, the higher the average wholesale price. Electrification lags behind because gas-linked prices weaken the economics of replacing gas boilers and internal-combustion vehicles. Italy’s automotive manufacturing sector is still locked into internal combustion engine (ICE) production and slow to move toward electric vehicles, which creates industrial and political resistance to the broader shift away from gas.
Chile uses the same mechanism, with remarkably different results. Zero-marginal-cost solar generation entering a marginal-cost dispatch lowered the clearing price directly, and the IEA projects household energy bills will fall substantially by mid-century. 
Where renewable entry reduces consumer bills, public support is self-sustaining. Where it does not, as in Italy, policy faces an additional challenge: the absence of visible consumer benefit drives local opposition to new projects. NIMBY, or “not in my backyard,”  resistance to both transmission infrastructure and distributed generation has become a binding constraint on deployment, requiring intensive stakeholder engagement. 
In February 2026, the Italian government issued Law Decree 21, known as the Decreto Bollette. Article 6 provided for reimbursing gas-fired generators for their compliance costs under the EU Emissions Trading System, with the intention of reducing the marginal price paid by consumers. The measure was conditional on European Commission approval under state aid rules.
That authorisation did not follow. The Commission’s temporary state aid framework of April 29, 2026 set conditions incompatible with the measure, so Article 6 will not enter into force. Renewable and storage investors were identified as the parties most exposed had it taken effect.
The Chilean total net effective carbon rate, priced roughly at $36/tonne, is among the lowest effective rates compared to other Organisation for Economic Co-operation and Development (OECD) nations, but the country is focused on decarbonising the energy sector regardless. Italy, operating inside the most developed emissions trading system globally, met 41% of its power demand from renewable sources in 2024, the resulting carbon cost offset by the power price.
Carbon pricing was neither necessary for Chile’s outcome nor sufficient for Italy’s, and relative technology costs and market structure explain considerably more of the difference. This is the case specifically for electricity; carbon pricing remains the principal available instrument in transport, heating and heavy industry, where no lower-cost substitute has emerged.
Both countries deployed generation, but neither has solved the infrastructure and consent challenges that follow. The binding constraint has shifted from generation capacity to transmission and storage. In Italy, there’s an additional problem embedded in this: despite deploying 40 GW of renewables, the country still maintains Europe’s most expensive retail electricity market.
Chile’s principal response is the Kimal–Lo Aguirre link, a 600 kV transmission line of approximately 1,500 kilometres running from Antofagasta towards the metropolitan area of Santiago, due in service in 2029. The 2024 Energy Transition Law additionally allows fast-track priority for transmission works with a simplified permitting process.
Italy’s response is a €23 billion, ten-year programme from Terna, whose 2025 development plan targets an increase in exchange capacity between market zones from around 16 to 39 gigawatts. 
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Permitting presents an important constraint in both markets, with no efficient mechanism in sight to address permitting timeframes for individual solar photovoltaic (PV) or battery energy storage systems (BESS) projects, nor for transmission lines. Both Chile and Italy are exposed to uncertainty around the timing and viability of large-scale projects and the transmission capacity necessary for their operation. While individual projects utilise a limited, carefully selected plot of land, transmission lines can traverse hundreds or even thousands of kilometres, and create a different set of challenges.          
Italy’s northern demand centre neighbours France, Switzerland, Austria and Slovenia; their electrical systems are mutually interconnected. As of 2026, Chile has no operating cross-border interconnection. Chilean adequacy must therefore be secured domestically.
Both countries are in vital need of BESS storage; the most recent technological innovation and the key to unlocking continued decarbonisation. Italy treats it as regulated grid infrastructure. Under MACSE, the capacity market for electricity storage, Terna procured 10 GWh of battery capacity in 2025 across southern Italy and the islands under fifteen-year fixed-premium contracts for 2028 delivery, oversubscribed four times and priced well below reserve premium. Chile is currently operating around 1 GW of batteries, most of them added to existing PV plants. A smaller portion operates as stand-alone systems, relieving a congested grid at peak solar hours and reinjecting electricity at night when spot prices peak. 
The remaining asymmetry is financial. Chile has historically demonstrated high fiscal discipline but pays emerging-market prices for capital. Italy’s deep capital markets and EU support compensate for a high sovereign debt relative to GDP. 
The renewable energy assets are financed over 15- to 20-year horizons. The assumptions that applicable rules will remain in force present an ongoing risk. While banks and investors value stable, predictable cost and revenue flows typically associated with mature industries, the dynamically evolving renewable energy/BESS market innovates at a much faster pace. 
The differences set out above are differences of method rather than of destination. Chile and Italy play with different cards — each has advantages the other lacks, whether created by nature, historical context, institutional support or economic realities. What transcends the comparison is the shared objective: carbon neutrality by 2050. It may seem a distant future; however, it will be achieved within the operating life of the assets both countries are financing today.
Editor’s Note: The opinions expressed here by the authors are their own, not those of Impakter.com — Cover Photo Credit: K.
Cristiano Spillati is the Managing Director and Co-Founder of Limes Renewable Energy, an international developer of solar, wind, and battery storage projects. He brings nearly 30 years of executive experience across consulting, telecoms, and clean energy, with the past two decades dedicated entirely to renewables. Before founding Limes, Cristiano was Managing Partner at Koralion Partners, advising major renewable energy investors, and helped expand global solar PV projects at SkyPower Global. Since 2004, he has played a key role in advancing clean energy initiatives across 17 countries on four continents. Cristiano holds a law degree from the University of Bologna and an MSc in Economics from the University of Warwick. He has lived and worked internationally, bringing a global perspective to renewable energy development.
Martin Libra is Managing Director for LATAM at Limes, an international renewable energy developer active across Latin America, Europe, and Asia, focusing on solar and energy storage. Previously, he has held senior operational and commercial roles in Chile’s photovoltaic sector and served as Commercial Attaché at the Czech-Chilean Chamber of Commerce. Martin holds an MSc in Financial Risk Management from The University of Glasgow and is a Certified Expert in Climate & Renewable Energy Finance from Frankfurt School of Finance & Management.


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