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Lessons Learned: Italy's Solar Rise and the Path Ahead

Two years ago, solar was little more than a romantic notion in Italy. There was a total of about 1 gigawatt of capacity that had been installed over the previous four years. Everyone loved the idea of solar, but it gained relatively little traction compared to other parts of Europe.

Then markets elsewhere slowed down and policies within Italy changed. Suddenly, it became the hottest market around, and the nation’s installed capacity shot up to 3.4 GW by the end of last year to a shade under 9 GW by the end of July. Now a country that had implemented a target of 8 GW of solar by 2020 has rewritten its target to achieve 23 GW by 2016.

The sudden rise to become the world’s second largest solar market behind Germany has not come without some headaches and many lessons learned, and it has many countries with big solar ambitions watching intently. But, ultimately, Italy has been a success story even though its growth has coincided with deep economic troubles that continue to grip the nation. So it was with those considerations that SEPA led a group of American utility executives to Italy this past spring on a fact-finding mission.

The goal: Look, learn and take home a clearer vision of how the U.S. could mirror some of the growth while avoiding some of the pitfalls. The U.S. currently has just under 1 GW of utility-scale solar currently in operation. And like Italy before it, it has plans for exponential growth.

While Italy may be on the leading edge of development, industry leaders within the country are asking many of the same questions bouncing around corner offices across the globe. How will these installations be implemented into the broader picture, and exactly how do we get there?

“A couple of years ago, renewables were a niche sector, but now volumes are increasing and its important to have a systems approach to its development,” said Daniele Agostini, the Head of Renewable Energy Regulation and Energy Efficiency at Italian utility giant Enel. “They’re great. We’re all for them. But we need to change the way we think about renewables. It’s no longer a nice, romantic thing to have. Once you get significant volumes, you need to change how you manage it. Once you start to incentivize 23 GW, every cent that you move moves a lot of costs. And it’s important that customers are aware of those costs.”

How Italy Grew

Unlike the U.S., Italy has little in the way of fossil fuel resources and its residents have a different perspective on energy security. Italy relies heavily on imported natural gas, and the population has come out strongly against nuclear power. So that has left a void that a source like solar is striving to fill. Right now, solar represents as much as two percent of the country’s energy capacity. If targets are met, that could hit double digits fairly soon.

Italy has for a while had a strong feed-in tariff program, but it didn’t really translate into a hot solar market until slowdowns began occurring in traditional strongholds like Germany and Spain. When that happened, panels originally directed to those hotter European markets instead found their way into Italy.

That shift coincided with changes happening at the local level that were implemented to free up bottlenecks in the permitting process. In the Puglia Region in southern Italy, local authorities were swamped with permits for large solar developments. To streamline the process, officials introduced a change in the law, allowing developments smaller than 1 MW to move ahead without an explicit permit from the local authority. Instead, developers needed to simply communicate the intent of the project, and if they didn’t receive an objection within a certain number of days, they moved ahead. Soon, larger projects were being divided into installations just under 1 MW, which in turn lured new developers and more inventory into the region.

The market sizzled, and for Enel it meant a whole new set of considerations. How would they handle the requests for connection, how would they ensure quality and how would they manage the integration issues associated with intermittent sources?

So far, the utility that serves 85 percent of the country has been able to keep up. But as the country’s share of solar power increases, so do the stakes.

The Challenges They Faced

The Italian government knew it had an emerging industry on its hands, but it also knew it needed tighter controls to manage the growth. First was the lack of accountability on some of the projects. The more lax rules allowed some questionable projects to move forward when they otherwise would have been halted during the review process. In some cases the problem projects could be chalked up to inexperience and incompetent installation. In other cases, it was downright fraud.

Much like in the U.S., there were concerns about land use and conservation. But in a place like Italy, which has much less open space and far more sites of historic value, the worries were heightened.

Many of these concerns were addressed with the release of the fourth Conto Energia – the law that sets the country’s energy policy. The divide facing the country at that time would be easily recognizable in America, which has a fractured view of its energy future.

“When the Conto Energia came out, there was a hard political debate between those who worried about economic impact of support versus those who didn’t want to derail a developing sector,” said Agostini.

The outcome was more generous in terms of development targets as the country set out to hit 23 GW of installed capacity in just the next few years. On the other hand, it was a lot more stringent on policy and process.

Today, the country must reset itself on a sustainable path forward. At end of 2012 and 2013, incentives will start to be indexed to growth, and the expectation is they’ll begin to be reduced gradually. The question is, will the eventual cuts in the feed-in-tariffs spell the end of the solar boom in Italy, or will the country mature to the point where it will continue to expand despite a less aggressive government support system.

Lessons for the Rest of Us

For American utility executives, the trip to large ground-mounted sites in Rovigo near Venice and the Lazio Region north of Rome gave insights about everything from weed abatement – they use sheep – to maintenance and security. And the visit to a small rooftop installation that helps power Vatican City pointed to the country’s ability to transparently add solar power to even the most sensitive historic sites.

“The real advantage of the trip was the access we received to the people who are actually watching it happen,” said Russell Harding of Southern California Edison’s Solar Photovoltaic Program. “Through all those interactions, we had the ability to see how they were going about it.

“There was also the recognition that they’re really not that much further ahead. They’re grappling with distribution and interconnection. They’re studying it. There are no real solid answers yet in how much circuit saturation is acceptable. How do we integrate the technology of PV, and particularly inverter technology, into either helping us or hurting us in running the systems, especially in times of system instability?”

Italy is dealing with a host of issues that it hopes to iron out over time, all while building up even more capacity.

The impact on electricity rates is of great concern for a country that has struggled with stagnant growth. How much will the bottom line be impacted by incentives, and what are the costs – both in money and reliability – in displacing conventional power systems with renewable sources?

Connecting to the grid also remains an area in which a lot more work needs to be done. Agostini said they are still having problems processing all the requests to connect, and he said they are still slowed down in trying to weed out the many questionable projects from the relatively few solid ones.

Permitting and connection have certainly defined how Italy got to where it is, but network strategy is likely to determine how far it can go, and at what price.

“The key challenge is to manage technologies that evolve very quickly.” said Agostini. “You can install a project in six months. But most networks need longer timeframes of five or six years to reduce bottlenecks. We need to increase capacity of our transmission lines. There’s lots of power produced in the south and used up north. It’s important to have a systems approach that looks at how systems as a whole have to adapt. We need to focus on a smart grid. We need to align the development of renewables with the development of a system for distribution.”

For Bob Gibson, Vice President Market Intelligence at SEPA, the biggest lesson has less to do with technology and more to do with attitude.

“What we came away with was, ‘Wow, they have this massive growth – it has to be disruptive.’ Yet the attitude from Enel was that, “We’ll figure it out. We’ll deal with it.”

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