Beyond Capacity: Why Italy Changed Its PV Strategy

Reducing costs is essential to achieving broad acceptance of solar energy and lessening dependence on fossil fuels. However, the latest episode in Italy’s PV incentives drama has proven that grid parity alone is not enough to drive widespread adoption.

In addition to cost, both urban and rural Italians are carefully considering how to integrate PV into their environments in a way that is compatible with their daily lives and broader energy sourcing goals. In the short-term, they are prepared to pay higher incentives and accelerate permitting for certain PV configurations that reflect these goals, such as building integrated (BIPV), rooftop, and CPV.

The previous version of Conto Energia succeeded in driving record PV adoption but at an unforeseen price. The runaway success of Italy’s 3rd Conto Energia resulted in a boom of PV installations that far exceeded anyone’s expectations. Today, Italy has a total installed capacity more than 7.2 GW, enough to be considered a world leader alongside Germany. The nation also boasts some of the largest PV plants in the world.

However, the expected cost of the program raised alarms in the government and led to the suspension of the 3rd Conto Energia law only five months after it was enacted, far short of its intended three-year duration. Further concerns over land use, aesthetics, a loss of critical agricultural lands, and insufficient local content and job creation have led to a ‘pushback’ from regional governments, industry groups and consumers.

Even before the government got involved, individual regions were already fighting PV speculation by placing restrictions on the size and type of plants installed. For example, the Puglia region, the leader in total and per-capita PV installed in Italy, blocked many permits and authorization requests to limit the consumption of precious land, especially due to its rich tradition in olive orchards. Sicily resisted giving up its land to foreign speculators to install PV plants without a clear, long-term return on this investment. 

Instead, the regional government focused on programs whereby local jobs and factories are created as part of an overall package to promote both solar energy and local economic development. A successful example of this policy is the recent opening of the 3Sun factory in Catania, Italy’s largest PV panel factory with over €200 million investment and immediate creation of 280 jobs.

Changing priorities

To remedy the unintended problems with the previous statewide policy, the government approved the 4th Conto Energia law in May. While generally reducing incentives across the board, the revised law specifically discourages deployment of PV plants based on flat panels. Incentives for these plants are being reduced every month with cuts as high as 20 to 30 percent by the end of year, depending on plant size. 

Additional size restrictions for large plants aim to reduce land consumption.  ‘Large’ plants are defined as any ground-mounted plant greater than 200 kW and any rooftop installation greater than 1 MW. These large plants have an installation cap of 2,690 MW and an incentive budget of €580 million ($824 million) between now and the end of 2012.  Further, there is a complex system of access restrictions to ensure that the expense budget for large plants is respected.

There are also restrictions on use of agricultural lands for PV. In order to be eligible to receive incentives, an installation must not exceed 1 MW, occupy more than 10 percent of the crop-producing land, and must be at least 2 km from another plant. This design not only avoids destruction of productive land but also prevents the visual destruction of Italy’s beautiful countryside. It is no secret that huge PV plants or wind towers can be quite an eyesore and destroy the panorama for miles. 

In contrast to the above restrictions, incentives for CPV and innovative building-integrated PV have remained virtually untouched. The new law precisely promotes PV systems that are innovative and aesthetic in their design, installation and integration. Further, it encourages smaller plants that are harmonious with broader land use strategies.

Grid parity, Italian style

With the announcement of the 4th Conto Energia law, Italy has declared its intention to continue its drive to renewable and clean energy sources. It has re-affirmed its commitment to PV by targeting 23 GW of installations by 2016 and voting against nuclear power development in a recent national referendum. Further, the PV incentives have been maintained despite the passage of the recent austerity budget cuts.

Italy has evolved its tariff policy not only to help usher PV into the age of grid parity (estimated to take place by 2015/2016, the point after which all incentives will be phased out), but also to guide the manner in which PV is deployed. The tariff program encourages self-consumption of the energy at the point-of-use rather than just feeding electrons into the grid indiscriminately. It leverages the fact that the sun’s energy is available everywhere and therefore lends itself to distributed generation as opposed to fossil fuels that must be transported to large, central power plants.

Italy’s new alternative energy vision reflects the fact that the country lacks the spare land or open deserts that can be carpeted with utility-scale PV like in the United States or Australia. Instead, it has a rich and varied terrain filled with precious agricultural lands, orchards, dense urban areas, tourist attractions, and archaeological treasures that must be preserved. 

Despite the past construction of some of the world’s largest PV plants (often by foreign multinational developers), going forward, the integration of PV must better reflect the nations’ needs and available resources. This requires PV installations that maximize efficiency and energy output in constrained spaces and flexibly respond to the particular integration requirements of each location. Emerging technologies such as CPV and BIPV respond to these requirements and at the same time are quickly working their way down the cost curve toward grid parity.

Italy is still one of the most-lucrative markets in the world for PV developers. Now, they will have to adapt and align their offerings with the more mature and demanding specifications of this unique market.

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Yoav Banin has 15 years' operating experience in leading technology teams that create and sell innovative high-tech products. Prior to co-founding Solergy, Mr. Banin was Director of Products at Mercury Interactive (sold to HP for $4.5B) where he invented and launched new enterprise software products that generated over $50 million in revenue within three years. He holds a Master's degree in Materials Science & Engineering from Stanford University and a Bachelor’s degree with High Honors in Applied Mathematics from UC Berkeley.

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