In places like Africa and India, solar energy has long been hailed for its ability to raise standards of living and boost developing economies. For two established members of the European Union, it may have the power to restore international confidence.

Greece and Italy remain in deep fiscal trouble as both nations embark on uncertain paths to cut costs and rebuild struggling economies. Austerity measures pushed by leaders in both nations have created a fork in the road — should they invest in a burgeoning sector or should they abandon costly government programs?

The two countries have vastly different solar portfolios. In Greece, it’s an industry that has barely gotten off the ground, but one that offers huge promise. In Italy, it’s a market that has achieved enormous growth, yet one that has raised significant concerns over its stability. So they come at this bridge from different directions. But in both cases, they see the solar industry as a key component of an economic revival.

For Greece, this means investing in solar generation in a move that could make it a major energy player across Europe. For Italy, this will likely mean difficult cuts that could help it emerge as a long-term solar power rather than a boom-and-bust has-been.

Greece

The nation wants to convert its abundant solar resource into an export business. Greek Prime Minister Lucas Papademos has called solar energy a national priority and he hopes to make a $25 billion investment that would help his nation one day become 100 percent powered by renewable energy. More than that, though, it would help power much of Europe. The Helios solar project would cover 77 square miles and it would increase the nation’s solar capacity from a meager 206 megawatts (MW) in 2010 to 2.2 gigawatts (GW) by 2020. Ultimately, the project is envisioned to have a capacity of up to 10 GW by 2050.

Germany, the chief potential customer of that project, indicated limited interest during a recent energy conference in Athens. Still, Papademos is adamant that the Helios project could make solar a cornerstone for the nation’s renewal, and that it could serve as a valuable asset for European nations.

"Energy should be produced where it costs less," Papademos said in a story published by UPI. "Were the same investment to take place in Central Europe, where sunshine hours are fewer, it would cost [$7.9 billion] more. In a period of austerity we cannot afford such a luxury."

Günther Oettinger, EU Commissioner for Energy, indicated that the Helios project has enormous potential and some very real challenges. Now, he said, it’s up to Greece to figure out how to make the system work, both financially and politically.

“Greece now has to demonstrate that it is possible to exploit the many hours of sunshine that it enjoys and to translate that into an economic benefit for Greece and those European regions that are not quite as sunny,” said Oettinger, speaking directly to the country’s leaders during a speech on April 3. “I encourage you to continue this path and to refine the project, to talk to European partners that can help you to make this a success.”

For Helios to be the energy and economic catalyst the nation’s leaders envision, major changes must first be made. According to Oettinger, Greece’s current grid would not be able to handle the massive power that such a project would produce. To get there, Greece must significantly beef up its grid capabilities — an endeavor complicated by its numerous islands and its disconnect from major European population centers. Under the right conditions, the country could prove to be the key to a trans-European electricity grid, with the Helios project serving as a major driver of power.

Italy

For a country that has been teetering on economic disaster, the affirmation of a long-term commitment to renewable energy should be enough to keep the solar sector moving along, albeit at a much slower pace.

The country is looking to push its renewable energy target to 35 percent by 2020, a number well beyond the current 26 percent target. And falling solar module prices will continue to play an important role in hitting that number.

The recent concern over Italy’s solar market has been in its runaway speed. The country’s rise as the world’s second biggest solar market after Germany evolved out of very generous incentives and rather lax rules. The country has tried to address some of the boom-and-bust issues while creating a more sustainable framework.

Some analysts are predicting that the country will install as little as 2 GW of solar in 2012, well below its 2011 levels. According to Citi analyst Timothy Arcuri, there’s plenty to like about the discussions underway in Rome.

“Solar stocks were up significantly on the announcement that the two most influential Italian bureaucracies, the Ministry of Environment and the Ministry of Economic Development, have agreed on revisions to the current Renewable Energy Plan (Quattro Conto Energia). The two ministries have fought publicly over previous iterations of the Energy Plan, and the market found the new-found solidarity as a sign that government support for solar in Italy can be transformed from its boom and bust pattern to a more sustainable policy.

This event also marks the first revision to the Energy Policy under the new cabinet of Prime Minister Mario Monti and helps to alleviate fears that the Monti government may cut funding all together for solar subsidies. We expect final details of Quinto Conto Energia to be officially announced very soon.”

Here are some of the provisions likely to be included in Italy’s final plan: An annual subsidy limit of €200 million for solar projects over 6 kW; unlimited net metering for solar projects under 6 kW; and an adjusted Feed-in Tariff (FiT) of €0.17/kWh.

The cuts in FiT are in line with what was expected, and the continued drop in module prices should bolster the Italian market, which is considered by some to already be at grid parity. The cost considerations are key when considering how the nation will move forward with less generous subsidies. According to Pew Charitable Trusts, Italy’s solar investments during the past five years have reached $28 billion, the highest in proportion to gross domestic product of any of the G20 nations. The organization has urged the country to craft long-term stable policy that would continue to attract investment, even “in times of fiscal austerity.”