Italy: support for solar grows

Jul 23, 2007 -- Datamonitor

The Italian government is expected to confirm that its 2008 budget will provide continued support for renewable energy. In line with this, Italy, which currently produces around 14% of its gross electrical consumption from renewables, primarily hydropower, will boost its domestic solar industry with measures to bolster domestic photovoltaic production, in a bid to achieve its renewables target.

Italy is currently not projected to achieve its 2010 renewable energy target, along with a number of other EU countries. In the face of this, and growing security of supply concerns, the Italian government is considering further renewable support programs.

Italy's current support regime has promoted the importation of photovoltaic technology into the country, but the government wants to develop indigenous production capacity along the lines of the German wind industry. The Italian government has suggested that with direct subsidy of the production of solar panels, capacity by 2016 could reach 3,000MW.

The question is whether this direct subsidy of the production of solar panels will fall foul of the EU competition commission. While guaranteed returns for investors via feed-in tariffs have been successful in raising renewable capacity in both Spain and Germany, it is highly questionable whether direct production subsidies would not be seen as a distortion of the marketplace.

The Italian government currently runs a green obligation certificate that pays out a set price for each kWh produced, a mechanism is not too dissimilar to the Renewable Obligation Certification scheme in the UK. The move to direct subsidy, however, indicates that this mechanism is unlikely to be effective in enabling Italy to achieve its 2010 target and, as in the UK, which is pursuing banding of renewable technologies and obligation certificates, another way is being actively explored.

Since R&D subsides are exempt from EU competition rules, this initiative by the Italians is dependent on them being able to demonstrate to the bureaucrats in Brussels that the investment and support is truly of a research nature and not simply an exercise in supporting an existing but fledgling industry.

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