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 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.
- Spain Slashes Solar FiT didn’t Fix the Problem (insightadvisor.wordpress.com)
- UPDATE 3-Italy sets new incentive rules for renewable energy (reuters.com)
- Italian Solar Subsidies Endangered (SOL, TSL, STP, YGE, SPWRA, FSLR, TAN) (247wallst.com)
- How Do You Say “Colossal Solar Mistake” in Italian? (greentechmedia.com)
- Solar Panels on Sale at Supermarket (treehugger.com)
- Did Italy Just Make A Huge Solar Mistake? (solarfeeds.com)
- FITs Drive Nearly 2,000 MW of Solar PV Development in Italy (renewableenergyworld.com)