The Italian government is expected to present its fifth energy bill, Conto Energia – V, in the coming month, which will be enforced from 1st July, 2012. The final draft of that bill was recently published on a government website. According to the draft, the Italian government will reduce the PV budget to $651 million and all PV installations that generate more than 12kW will have to register with the relevant authorities. All such newly registered plants will be charged between $2.63 and $6.57 per kW produced while existing plants will be charged at $0.13 per kW produced.
According to Leonardo Senni, head of the energy department at the industry ministry, incentives have been slashed throughout the renewable energy sector. The solar energy production incentives have been reduced by 35%, whereas the non-solar renewable energy sector was cut by 10% to 15%. All new incentives have been capped at $651 million and cumulative annual spending is capped at $8.47 billion.
The EPIA’s new ‘market report 2011’ placed Italy in the first position, ahead of Germany, China and the US. Italy, along with France, has accounted for more than 82% of the European PV market in 2011. The incentives offered by the Italian government attracted billions of dollars into Italy from around the world. The US-based Pew charitable trust reported an increase of 38.4% in Italian solar energy investment to US$ 28 billion. Italy is now the second biggest solar market, after Germany. It has attracted major solar PV manufacturers from around the world including Chinese Suntech Power and US-based First Solar and SunPower Corp.
According to a report published by Reuters, the Italian Energy Giant ENEL Green Power predicted that its Italian PV capacity would reach between 3,000 MW to 4,000 MW by 2012. The solar sector in Italy has created thousands of jobs and attracted billions in FDI from around the world. An indication by the Italian government to impose restrictions on the PV market therefore came as a surprise to many. The stakeholders of Italian renewable energy gave a mixed reaction from welcoming the government’s move to outright rejection.
Francesco Starace, CEO of ENEL Green Power, responded calmly to the decline in the government’s renewable energy incentives by saying, “It's fine as it is.” The Solar Energy Association, however, reacted sharply by saying, “We call for intervention to put a stop to indiscriminate collapse of this industry.” Another analyst added “The measures appear to be more penalizing for the solar sector and fairly neutral for other renewable energy."
It is interesting to note that Germany has the largest installed PV capacity in Europe, and it produces more from home-based small installations than from large ground-based farms. Italy, it appears, is following the German model where strong infrastructure for smaller systems encourages self-consumption and relies less on government subsidy or larger installations.
The household PV market in Italy has immense potential for growth. Currently, small PV systems in Italy account for approximately 20% of the total PV demand, whereas in Germany the historical similar PV demand has been at 85%. Therefore, in spite of the decrease in government subsidy, the PV demand will continue to grow at approximately 2GW in 2012 (down from 6GW in 2010).
Italy is one of the leading solar energy producers in the world, but its consumers pay the highest energy bills in Europe. The government incentives make investments more attractive, but the burden of these falls on the industrial and household consumers who pay for them through increased billing. Between 2008 and 2011, the incentives have been increased by 200% while all other costs have increased only by 7%. This has caused a net increase of 25% for the consumer.
In its draft bill, the government reports that Italy has already achieved the targets set for 2020, eight years in advance. The Italian government set out to achieve 100TWh electrical energy from renewables in 2007. By late 2011, Italy had installed 94TWh of systems. The Italian government has therefore revised the “EU 20-20-20” targets upwards from 100TWh (26% renewable energy) to 120TWh – 130TWh (32-35% renewable energy).
The draft bill further reports that the dramatic increase in renewable energy in general, and solar energy in particular, during 2010-11, has caused an inefficient allocation of resources. If the costs that were allocated during 2010-11 were instead evenly distributed over six years (2010-15), then the actual output in the form of number of plants would have doubled. Generous incentives and lack of policies have resulted in a boom in renewable energy, which has increased the cost of energy for the end consumer.
Currently, incentives offered by Italy, especially in the solar sector, are far above the average European standard.
The current draft bill is considered a “worst-case scenario”. It will be debated upon by politicians and will need a final approval from the Italian Authority for Gas and Energy. It is expected that the cap of 10kWh might increase to 50kWh. However, in light of the Eurozone debt crisis and current austerity measures, a significantly favorable legislation is highly unlikely. Conto Energia – V aims at “cost efficiency and maximization of economic returns and environmental for the country”. Although incentives per unit will decrease, they will be on par with other European countries.
