Solar FiT Fizzles in Italy

Ciao for Contro Energia as Solar FiT Fizzles in Italy.

Italy’s Industry Minister Paolo Romani burned the solar power industry with a new decree on renewable energy rolling back the incentives adopted only two months ago, an action made necessary he said to assure Italy’s compliance with European Union’s policies on climate change.  But there was more local politics in the decision with demands to slow the rise in Italian power bills, restrict the use of farm land for solar projects, and get the skyrocketing cost of the renewable subsidies under control in the Italian budget.

The ”conto energia” as the renewable energy plan is known was to run through 2013, the solar industry has been lobbying hard to remove a proposed 8,000 MW final cap on production to enable the industry to keep growing faster than other EU countries—and they got their wish.  But what they did not see coming was a dramatic and sudden cut in feed-in-tariff subsidies that give them only until May 31, 2011 to get solar projects on line to win the subsidy instead of the contro energia plan date of 2013.  The minister said there would be an annual cap for feed-in-tariff subsidies for the future but the cap had yet to be set adding more uncertainty to the entire affair.

What spooked the Italians?

The surge in solar PV projects driven by the feed in tariff subsidies literally swamped the boat as developers scrambled to install PV at industrial sites to scale market share. The Italian energy agency, Gestore Servizi Energetici (GSE) recently revised its forecast of year-end 2010 installed photovoltaic capacity.  Why revise a forecast for 2010 in 2011?  Because the surge in demand for transmission interconnections swamped the system so the Government agreed to count new PV project in serve by June 30, 2011 as meeting the requirements for the 2010 feed in tariff expecting about 3,000 MWs to qualify for 2010 an increase of 1.850 MWs or 160% above 2009 levels. But instead 4,000 MWs will qualify pushing total capacity at end of 2010 to an expected 7,000 MWs compared to 1142 MWs a year ago.

Solar industry players and their bankers responded like jilted lovers scorned by the Italian sudden change of heart pointing out that the solar industry paid 2.5 billion euros in taxes and account for about 2% of Italian GDP.  The problem is the feed in tariff subsidies they lust for are estimated to cost the Italian government about 4 billion euros this year and 35 billion euros ($48.60 billion) over 10 years according to Minister Romani.  As in Spain and Germany before, the cost of the subsidies has become an unsustainable budget and political problem for the government.

The Italian action hits the world largest solar PV manufacturers hard including China‘s Suntech Power Holdings Co (STP.N), Trina (TSL.N), and Yilgli Green Energy (YGE.N) and at least one US solar firm, First Solar (FSLR.O) all of whom are major suppliers to the Italian market and count on it to propel their market share growth.  Italian politicians running for cover find few reasons to save these foreign mistresses when the Euros are flowing to Chinese bank accounts.

There were also fears that the consequence of this action by Italy could produce a painful oversupply of PV panels and panic selling similar to the reaction to Spain’s cut in feed in tariff subsidies. This decision split the Italian Cabinet with Environment Minister Stefania Prestigiacomo arguing that “Solar incentives weigh on Italy’s energy bill less than the CIP6 refinery incentives or nuclear decommissioning costs. And besides, he argued, “German renewables incentives are about 10% compared to Italy’s 3-5%”.  His cabinet colleagues were having none of it and the coup d’grace was delivered swiftly and effectively.

Unsold PV panels from Italy are expected to flood the market driving down PV prices in the US and other markets over coming months and another lesson in the unintended consequences of feed in tariffs is learned the hard way.

Gary L Hunt

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Gary Hunt is a global business executive with 20+ years experience as a “C’ level trusted adviser on corporate strategy, M&A, and recurring revenue business model strategies.

His focus is information technology and energy vertical “sweet spots” where IT and OT converge to offer scalable growth opportunities to leverage data and analytics into advanced predictive analytics solutions using recurring revenue business models.

Comments

  1. really? to be negotiated. You present an absolute worse case scenario. fit is extremely generous in italy. it can be cut and still the solar sector is incentivized. oil 106. euro 140.

    • The Italian government says it will have a new FiT cap formula by April so there is uncertainty about how much it will be cut. FiT experiences in Spain and Germany are similar to this newest experience in Italy. FiT is not sustainable when it is too far removed from the natural market price. Yes it can produce spikes in production but they are market manipulation not real sustainable growth.

  2. the fit cut in germany was not the same as in spain. fit cut in italy is more likely to be similar to germany. fit is sustainable until grid parity is achieved. italy seeks to understand the market how it is performing and based on what they learn they will adjust the fit accordingly. They already stated they do not want to harm the solar industry by creating another spain situation. We know from the beginning that fit reductions will be part of the framework for creating a solar energy industry. In 20 years all electricity will be from solar. It is a revolution. Which is also why there is no such thing as an absolute cap. Italy also has to address possible fraud from the Mafia before adjusting fit.

  3. avatar Joseph Hiddink says:

    Minister Romani should have a look at the Canadian invention of Gravity Control.
    It is based on the technology of the Flying Saucer and patented.
    Offered to Nasa, so that the Shuttles could be powered to fly without the use of rockets, it was rejected. It would make the Rocket Industry obsolete.

    A weight of one thousand tonnes (or more) can be lifted 300 meters (or more) with a little bit of energy, using the technology.
    When that weight comes down, it can be used to generate thousands of Kilowatts or Gigawatts at the most economical price.
    The structures needed are two silos, side by side.
    They can be buried up to ground level and at anysuitable location
    Inside the weights can slide up and down.
    The Gravity Control Units (GCU’s) are mounted under the weights and powered by a battery.
    They will push the weights up to maximum height.
    In silo #1, the battery will be disconnected and will allow the weight to slide down, powering the generator(s)i
    When it is almost on the bottom, silo#2 will start up.
    The GCU’s will be LEASED, to give the investors and tax man their due.
    It is still more economical than solar, wind, water or nuclear power, does not need water for cooling and can be built anywhere to supply electric power at massive amounts. and at the lowest possible price.
    Italy will need thousands of electricians to istall the heating/cooking devices in homes and other places., alleviating the unemployment rate.
    Look at the invention at >One Terminal Capacitor Joseph Hiddink<

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  1. […] UK is late to the party, France, Spain, Germany and Italy have all slashed FiT subsidies to stop the rot of rising energy costs before the damage becomes too […]

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