Italy Solar Market to Shine Despite FIT Cuts

Reuters) – Italy, Europe’s No. 3 solar market, will not lose its appeal to investors despite a cut in production incentives and is likely to add about 1,000 megawatt of capacity a year in 2010-2013, the industry body head said.

Italy will slash feed-in tariffs for solar power market in 2011-2013 to bring the incentives in line with falling costs of photovoltaic (PV) systems which turn sunlight into power, starting with major cuts next year.

This year, Italy is set to add 800 MW to 1,000 MW of new PV capacity helped by the existing incentive scheme, among the most generous in Europe, Gert Gremes, chairman of Italy’s PV association GIFI, told Reuters in a telephone interview.

Feed-in tariffs, which guarantee operators steady returns for every kilowatt hour of produced power for 20 years in Italy, will be slashed by up to about 30 percent in 2011 and by 6 percent a year in 2012 and 2013. A 3,000 MW limit will be placed on capacity to be covered by incentives over 3 years.

“I think in 2011 we can repeat a year like 2010, or even have a slight growth … A gigawatt (1,000 MW) a year is very realistic in 2012 and 2013,” Gremes said. “You’ll see that a 3 gigawatt (cap) will be filled easily in three years,” he said.

Investors and solar panels manufacturers have been concerned that the cut in incentives would slow down growth of the Italian PV market which has boomed since 2007 when the old incentive scheme was launched.

“I believe that with the new tariffs Italy will remain a country where an investment in a photovoltaic plant is among, if not the most interesting (in Europe). I think investors will go ahead with building plants,” Gremes said.

Under the new incentive scheme, the internal rate of return (IRR) keenly watched by investors, would remain attractive, Gremes said but declined to give estimates.

Italy has not given an official forecast of PV capacity growth under the new incentive scheme which sets a 8,000 MW goal for 2020. Italy’s total installed PV capacity stood at 1,137 MW, according to data from the state energy management agency GSE.

Gremes confirmed GIFI’s long-term goal of reaching 15,000 MW capacity in 2020 but said reaching such objective would depend on further government support plans.

Article by Svetlana Kovalyova, edited by James Jukwey, appearing courtesy Reuters.