Italy to Enforce the Controversial Conto Energia V from August

The bill requires all PV plants above the 12kW capacity to register with GSE, except those that are installed on public buildings

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The Italian solar industry has been openly vocal against the new energy bill, Conto Energia V. It has even caused a protest when in April, approximately 1,500 people gathered in front of the Italian parliament to voice their concerns against the bill. Conto Energia V, however, could not be enforced until the national PV industry reached a benchmark amount. All the industry stakeholders were well aware that sooner or later, the government funding would reach the threshold and the controversial legislation would be imposed.

All this uncertainty, however, was lifted this week when Gestore dei Servici Energetici (GSE), the national energy board, officially notified the Autorità per l‘energia elettrica e il gas (AEEG) that the country’s PV industry has reached the cumulative annual $7.35 billion (€6 billion) support limit, equivalent to 14.3GW, or more than 400,000 solar systems. In other words, the government can now launch the controversial bill starting 27^th August. AEEG later confirmed that Conto Energia V will be launched from the said date.

Analysts had earlier predicted that the new law would come into play between 5^th and 10^th September. The $7.35 billion limit was crossed on 12^th July, which gives the government 45 days to launch the new bill. In the meantime, as the change in legislation takes effect, the previous version of the bill, the Conto Energia IV, will remain in force. Further details of the bill are currently being released. Any plant owner who wishes to take incentives under the previous bill should ensure that the plant is operational before 27^th August.

Italy had witnessed a solar boom in the previous year. The European Photovoltaic Industry Association (EPIA) had ranked it as the top PV market in the world in 2011. Massive developments in the Italian solar sector had completely dwarfed other regional markets. In fact, the country accounted for more than 82% of the total European market in 2011. It is still the second largest market, after Germany. The developments in the solar sector were led by extremely generous incentives from the Italian government. All the leading players of the global solar industry, including Chinese manufacturers such as Suntech Power (NYSE: STP), Trina Solar (NYSE: TSL) and Yingli Green Energy Hold. Co. Ltd (ADR) (NYSE: YGE) have established their regional offices in the country.

Then in April, the draft of Conto Energia V, the fifth version of the national energy bill, was released. The legislation aimed at slowing down the accelerated pace of the Italian solar industry by reducing solar energy production incentives by 35%. The bill had allocated an annual amount of approximately $612 million for the renewable energy sector, including $245 million for photovoltaics. The country’s solar industry had requested nearly $857 million just for photovoltaics; they would be getting less than one-third of the requested amount. The director of the Italian renewable energy association, Associazione Produttori Energia da Fonti Rinnovabili, Marco Pigni, has said, "It is very disappointing. We hoped to have 700 million euros ($857 million) for photovoltaic power and even more for other renewables."

The country’s solar sector was responsible for creating thousands of jobs and attracted billions of dollars in foreign direct investment; therefore, the move came as a surprise to many. The government argued that this will make the market economically sustainable in the long run. Then, about a month ago, the European Union energy commissioner Günter Oettinger came out in support of the Italian solar industry. He sent a strongly worded letter to the Italian government in which he severely criticized Conto Energia V, which, the commissioner thought, was creating hurdles “for independent manufacturers to gain any access to funding.” President Valerio Natalizia of Italy’s PV association Gruppo Imprese Fotovoltaiche Italiane’s believes that it is “ironic” that the government is going ahead with the anti-solar bill when this sector contributed nearly $2.45 billion in taxes in 2011. Pigni also believes that "with the new incentives, there is a risk that many jobs would be lost and capital would flee abroad."

The bill requires all PV plants above the 12kW capacity to register with GSE, except those that are installed on public buildings. The cost of registration will be between $2.45 and $3.68 per kW, depending upon the capacity of the plant, and $0.06 per kWh will be charged during operation. However, plants with capacity between 12kW and 20kW can get an exemption from registration if they give up their feed-in-tariffs for 20% of the electricity they generate. Systems of up to 50kW may also be eligible for exemption if they make sure that the rooftop has been completely cleaned of asbestos. Furthermore, systems using “innovative technologies” and installed in the public sector are also exempt, provided they do not request funding in excess of $61 million.

The registration process can act as an unnecessary barrier for smaller PV plants. Natalizia argues that such actions only introduce more red tape and will make the system more bureaucratic. EuPD Research has also shown that this process will create an indirect barrier into the solar market and could come at an additional cost of $3.68 per kWh for businesses. All systems will have to register in order to receive funding, which is divided into different areas. After receiving criticism on the registration process, the government has assured that it will make it as simple as possible.

Interestingly, on Monday, GSE revealed that it has gone over the $7.35 billion benchmark as of 12^th July, and now stands at approximately $7.44 billion. The additional amount will be deducted from Conto Energia V’s budget. According to an estimate, Italy consumes about $16 million to $18.40 million of solar funding daily. If it continues to go at this rate then Conto Energia V will be completely out of funds by the beginning of September.