Will Italy Deliver Solar Growth Going Forward?
Italy is faced with three very important considerations in determininghow to power the nation: Very modest domestic energy resources (itimports 87% of its electricity), resulting high electricity prices andabundance of sunlight. Consequently, over the last few years theItalian government has instituted a series of policies to promote solarphotovoltaic (PV) deployment. Growing from just 60MW in 2007, Italyinstalled almost 2GW of solar PV last year – making it the secondlargest market in the world.
Solar energy generation produces more jobs than any other form of energygeneration and each dollar of public money invested generates anadditional $4-6 in private investment. Solar is a particularly goodinvestment since it follows a proven and predictable downward costtrajectory that delivers more and more solar energy at a cheaper andcheaper price over the life of the government programs. Policies thatpromote growth of the solar industry act as a significant economic growth engine everywhere they are employed.
However, over the last few weeks, rumors have circulated wildly that Italy wasgoing to limit its solar market with a number of policy changes,including possibly a hard cap of 8GW on cumulative solar deployment – alevel expected to be met in 2011. Although the debate continues, lastweek the Italian Government announced that it would not impose a hardcap (at this time and likely not at all), but it would continue todiscuss feed-in-tariff (FiT) reduction to be implemented in June 2011.
Recognizing the disaster to the global market which resulted in Spain’s 2008 hardcap, the Italians have, at least for now, elected to evaluate FiTreductions as a method of insuring electricity consumers are getting the best value from their solar energy dollars. This model follows thesuccessful and ongoing FiT reduction schemes imposed by the Germanmarket – decreases which the industry has demonstrated it could absorbwhile continuing to grow and deliver reduced installed costs.
Thelooming question is what impact this announcement will have on theItalian market which was expected to reach 4GW in 2011. Analysts andcommentators disagree, but the fundamentals favor growth. The Ministryannounced that there were 4GW of projects in the pipeline forinstallation before June 2011.
Historically, announced FiTreductions have the effect of super-charging the market, withparticipants scrambling to get installed and connected to the gridbefore lower tariffs start. In Germany, this often presents thechallenge of trying to rush installations in December before January FiT reductions. In Italy’s case, however, installation conditions in thesummer are ideal and should enable a larger share of projects to moveforward before the FiT reduction. There is, however, potentialuncertainty around when projects built, in April or May, would getconnected to the grid and, therefore, which FiT level they wouldreceive.
Nonetheless, rates of return for Italian projects arehigh, allowing more headroom to profitably absorb a FiT reduction. As a result, we see every reason to be optimistic about the marketapproaching its predicted 4GW. With even more modest growth of theItalian market, we see little reason to fear a major Spanish marketcollapse.
Additionally, Italy’s solar policies are deliveringbenefits it other ways. One of Italy’s own companies is helping todrive down the cost of solar —Applied Baccini Cell Systems, in Treviso. It is the world’s largest manufacturer of screening printing and testing equipment for solar PV cells. For over forty years,Applied Baccini has been delivering solar PV solutions to manufacturersaround the globe and accelerating a technology roadmap that will enhance profitability while increasing cell efficiency. This is an excellentexample of Italian craftsmanship and technology leadership focused onsolving the problem of affordable, clean energy generation. And theItalian government’s ongoing support for developing solar generationensures that Italian citizens reap the benefit of this Italianinnovation in solar.
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