BY Patrick Jonas

Due to the country’s ideal conditions, such as high solar radiation and comparatively high electricity prices, Italy was long considered one of the great hopes in European photovoltaics. However, in the recent past, investors have been dragging their heels with regards to the decision to invest in new solar facilities in Italy. This reluctance is brought on by a number of reasons. With the Conto Energia of 2005, a highly complex subsidizing system came into existence. In addition to this, large bureaucratic hindrances regarding the approval of systems have to be dealt with, as well as the often laborious process of connecting a solar facility to the grid. So, investors had to fight with a large number of applications. Beside this, a restrictive upper installed capacity limit existed. In the past, the long approval procedure led to a highly complicated financial plan and unclear predictions on the returns. In this way, many facilities which had been planned and installed in approximately a year were only connected to the grid in the following year--thus receiving much lower subsidies than had been planned. Moreover, this led to a delay in the repayment of loans taken on for the installation. These problems caused past development to stay far below the expectations of many market participants. However, the largest obstacles have been removed by the modification of the Conto Energia in 2007. Furthermore, the level of experience of all those concerned, including the responsible authorities, has grown, and Italy is becoming an ever more important sales market for the international photovoltaic branch.

Removing the Largest Weak Points of the Old Conto Energia

With the amendment of the directive which came into power in 2007, the market could be enlivened. Against the background of these changes, the annual promotion cap was relaxed and the limitation of the promotion for PV installations up to one MW was abolished. In addition, a significant weak point of the old ordinance was the obtaining of approvals for system operators. For large facilities, these were provided in the form of a call for bidding, and for smaller facilities on a “first-come, first-served“ principle. This led to the amount of filed applications becoming unmanageable, and many planned facilities were never even realized. The determining alteration in the law was that applications for feed-in tariffs are now filed after a system has been connected to the grid. This way, many proposals which were once purely speculative in nature fall away from the approvals process and no longer block the relevant areas. These changes, made to the Conto Energia in 2007, proved effective.

Interim Installations of 720 MW in 2009

While in 2007 just under 70 MW were installed, this was raised just one year later to 338 MW--nearly five times the original amount. According to data from 31 March 2010 of the Gestore Servizi Elettrici (GSE), which is responsible for the allocation of renewable energy subsidies, the newly installed capacity was around 720 MW in the previous year, which, thanks to the 1st and 2nd Conto Energia, have benefited from feed-in tariffs. However, there are many systems which also came into existence in 2009 which have not been declared. Since the registration of a system in Italy is still possible 60 days after startup, these can still receive feed-in tariffs and are therefore simply not yet accounted for in the statistics. The GSE announced that final data for 2009 will be available in May 2010.

As a result of its favorable remuneration and the considerably simpler approval procedure, the Italian feed-in tariff law provided a special boost in the markets for roof-mounted systems on residential and commercially used buildings. The approvals process is also considerably simpler. This way, only operators of a system up to one MW require an approval--the ‘Dichia-razione d‘Inzio Attivita“ (DIA), which is generally agreed within 30 days. Of the cumulated installed capacity of 1.2 GW, approximately 1.05 GW was accounted for by systems of under one MW. For the large facilities sector, the regulations are still considerably more complex. At the moment, all four existing steps of the allocations process still have to be carried out, which can last for anything between 330 and 390 days. According to market participants, it can take 12 to 14 months to connect (for example) an open space installation to the grid. One is still required to contact many different authorities in order to fulfill all the urban development, landscape protection and environmental criteria in the process.

Despite all this, the large facility sector is still beginning to take root, and some large projects were able to be realized by the end of last year. From the total of 115 MW installed, 101 MW were implemented alone in 2009. Solar parks were most notably installed in the regions of Lazio and Lombardy. Projects with larger capacities are already being planned for 2010. One of the largest of these projects is being developed for the Campania/Caserta area, near Naples.

In the last few years, both the high installed capacity and the realization of large, cost intensive solar parks have shown that the market can thrive in spite of highly changeable module prices and fears brought on by the recession, and that the appeal of the Italian market doesn‘t just lie in the small systems sector.

Apulia as Front-runner in Installed Capacity

The first place, in regards to installed capacity, is occupied by the region of Apulia in the southeast. In this region, an accumulated total of 215 MW has been produced--as seen in Figure 1. Even in the past, Apulia was always leading the race in terms of installed capacity. A simple process, introduced to the area quite recently, show applications can be sped up. In this method, all figures responsible for the application come together--which simplifies and shortens the running of the process considerably. This practice could function as a model for other regions in Italy--experts reckon with a slow development, however. Alongside Apulia, Lombardy is also in the lead when it comes to installed capacity--with an accumulated amount of just under 132 MW. Coming in at third place is Emilia-Romagna, which was calculated at the end of March to have an accumulated capacity of 101 MW. Regions with the lowest installed PV capacity are the Aosta Valley, Liguria and Molise, which according to the GSE can only boast one figure MW values. In the Aosta Valley just over one MW has been installed. However, this is most surely a result of the area? disadvantageous location in the Alps and its small size.

Uncertainty for Future Development

Despite the joys associated with the boom in Italy, uncertainties about the final enactment of the Conto Energiain 2011 are still causing a lot of headaches on the side of the industry. It is generally assumed that the government does not wish to stall the photovoltaic industry, especially since the domestic branch is constantly growing and developing alongside the boom in the industry in general. Although minister-president Berlusconi recently attempted to popularize the idea of nuclear energy, Italy has not operated any nuclear power plants of her own since the Chernobyl disaster. Besides this, Italy is also dedicated to meeting the EU’s environmental targets, in which renewable energies play a significant role. Nevertheless, the long period of silence on the part of the ministry has created uncertainty in regards to the mid- and long-term plans of the industry, investors and ultimately the citizens who are willing to invest in a system.

Aside from the concern in regards to further subsidies, fears are arising in parts of the branch that there will be a repeat of the occurrences in Spain. The market there was cut back from a record expansion of 2.5 GW in 2008 to just 500 MW in 2009, after a dramatic reduction in previously generous subsidies. The costs of solar energy became too great for the Spanish government, since unlike in Germany, solar power in Spain is not financed with a “pay-as-you-go“ system by the energy users. It was with this thought in mind that some branch representatives advocated over dimensional feed-in tariff cuts of around 30% at various Italian branch meetings last year. They consider the subsidies after such a substantial cut to still be sufficiently attractive to keep up Italy’s economic growth.

Operators of fully, partially and non-integrated small systems with an output of 1 kW-3 kW currently receive a subsidy of €0.47, €0.422 and €0.384 respectively--as seen in Figure 2. These values for the first two systems sit slightly under those for Germany, for example. Especially when taking into account that the sun’s radiation in most parts of Italy is much higher than in more northerly countries, it is clear that a highly appealing return on investment can be achieved.

Often, these demands were being set by foreign firms; the Italians were more cautious. The concern of these foreign companies can easily be blamed on their more strongly developed export structures, as well as experiences already made when caps were imposed in Spain, which in many cases led to dramatic sales collapses. Due to the still relatively manageable number of Italian PV manufacturing firms, there are still only a small number of products being produced. These can be sold without a problem on the domestic market: therefore export hasn‘t played such a significant role up till now.

In autumn 2009, this suggestion received prominent support from the Italian Photovoltaic Industry Group (GIFI)--the oldest Italian photovoltaic association. However, it met with resentment among some members of the association, and the proposal was watered down until a 15% reduction in tariffs was agreed on. A short while later; GIFI, Assosolare--the second largest Italian association--and the Italian Association of Renewable Energy Producers (APER) together agreed on a common position to be passed on to the government.

All associations called for a further simplification in regard to the various system types. The differentiation between those systems which are architecturally fully and partly integrated has been criticized--because how fully a system is integrated is the eventual decision of the GSE. This is problematic, in that the complete planning and financing of a PV system can become invalid when the operator has planned and calculated a fully integrated system with increased subsidies, but the GSE decides in the end that the system is only partly integrated. As a result of this, the system operator will now receive reduced subsidies for the next 20 years. Understandably, many market players have advocated the removal of this differentiation and support a distinction between only two types of systems: those attached to buildings, and any other systems. The size classifications proposed by the associations should also be expanded from the current three, to six. The suggested degression levels vary between no degression for ground-mounted systems of 3 kW-6 kW to a maximum of around 25% for systems mounted on buildings with a capacity of more than 1 MW. The life span of the Conto Energia should also be increased from 3-5 years, and the extension cap lifted to 1.6 GW per annum. Last but not least, a special tariff should be introduced for systems which are particularly architecturally pleasing--such as BIPV systems--those which replace roofs containing asbestos and systems located on undeveloped or contaminated land. The sponsorship rules for after 2016 should also have been developed by 2014.

New Draft of the Conto Energia

After the responsible authorities had long kept quiet about further subsidies after 2011, a new draft of the renewable energy law was announced at the beginning of February 2010--as seen in Figure 3 and 4. Although there is now a sole differentiation between systems mounted on buildings and those that are not (for example, open space facilities), the new draft has included further differentiation between the various types of systems. In the class ‘installations on buildings‘, there are separate subsidies for systems mounted on porches, pergolas or shelters. Feed-in tariffs of these system types are the arithmetic average of ‘installations on buildings‘ and ‘other plants‘. As well as these, there is also a separate tariff class for ‘integrated and innovative‘ systems of up to five MW in size--as seen in Figure 4. Integrated and innovative systems with a maximum output of five MW will be covered by the standard tariff. Small systems with an output of 1 up to 20 kW receive the highest subsidy, with 44 cents per kilowatt hour produced.

Operators can also receive a bonus for building-mounted systems. For systems with an output of 20 kW to 10 MW with a foreseeable feed-in program, there is a bonus of 20%. However, the possibility to temporarily store the energy must be available, so that the operator is able predict the amount of electricity being fed in between 8 am and 8 pm of the next day for at least 300 days in the year (with a margin of error of 10% maximum) and report this to the GSE. Beside this, a further bonus is available if the solar system improves a building’s energy efficiency. The scaling for this is based on the degree of energy loss reduced by the system. The loss reduced is multiplied by 0.5 to calculate the percentile bonus to be awarded.

Facilities such as open area systems fall under the category ‘other plants‘. Operators can also receive various bonuses for these. As above, a 20% plus is also available here for a foreseeable feed-in program. Alongside this, there is also the possibility of an extra 5% if the system is mounted in an industrial or trade area, an abandoned mine/quarry, on contaminated ground or at a waste disposal site. A maximum bonus of 25% is available if both of these variants are combined--that is, a system mounted on one of the above mentioned areas with a feed-in program. There are also various other policies to combine feed-in tariffs with regional subsidizing programs, in which extra one-off payments can be received.

The text draft also includes plans for three distributed steps of degression for the year 2011. Here, the tariff for ‘installations on buildings‘ from 3 to 20 kW will be reduced from the original €0.372, first to €0.357 and finally to €0.342. Compared with the 2010 tariffs of €0.442, this amounts to a degression of almost 23%. Open area systems of more than 1 MW will face one of the most significant cuts. When the subsidy level in 2010 still comes in at €0.346, it will be periodically reduced throughout 2011 to just €0.257: a quota of more than 25%. The draft proposes a further degression of 6% respectively for the years 2012 and 2013 for all system types. The installation cap should be set at 3 GW for the time between 2011 and 2013. A further cap for ‘integrated and innovative plants‘ should be set at 200 MW.

A specific tariff has also been planned for concentrated photovoltaics. According to this, systems of 1 kW up to 200 kW in size will receive €0.32; and larger systems €0.28. The degression for this sector will also be lower: 2% in 2012 and 2013. Feed-in tariffs will be available for a maximum installed capacity of up to 150 MW.

In the end, some of the proposals put forward by PV organizations were accounted for in the draft--such as the bonus for systems on contaminated ground or with innovative architectural concepts. If the new draft is actually comes into implementation, operators can still receive high subsidies for their PV systems by utilizing certain variations of the tariff. For example, with an energy efficient renovation in which a solar system plays a fundamental part. This way, a small system of up to 3 kW, receiving the maximum bonus of 30%, can notch up the standard tariff from €0.401 to €0.5213. Or an open area system of more than one MW in size, installed on one of the above mentioned areas and with a foreseeable feed-in program with a basic subsidy of €0.298 can, by taking full advantage of the 25% bonus, receive a maximum of €0.3725. The draft also provides special incentives for integrated and innovative systems of up to five MW, which should help further promote the Italian BIPV sector.

Whether or not this newest amendment will prove to be the last word on the subsidy laws and revision of the Conto Energia is still written in the stars. Meanwhile, Italian market players remain waiting with baited breath on the publication of the final draft.

Patrick Jonas studied business economics at the University of Applied Science in Koblenz, Germany, and holds a degree in business administration. Jonas has been employed in the communications department of EuPD Research (www.eupd-research.com).

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