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Italy facing solar power rush, but hurdles remain
by Ian Simpson

Reuters Translate This Article
8 October 2008

MILAN, (Reuters) - Italy is lighting up as a solar power hot spot with 17,000 plants tapping its plentiful sunlight and fat photovoltaic subsidies, but bureaucracy and a connection backlog are putting a shadow on growth.

With prices jumping for prime sites, investors are betting that solar power can boost its tiny share in Europe's priciest electricity market as laggard Italy tries to meet European Union renewable energy targets.

Italy leads an emerging European solar power market as expansion tapers in world leader Germany and fast-growing Spain ratifies proposals to set a new limit on subsidised sun power.

'It seems to me that Italy should look to be one of the top, if not the top, country in terms of photovoltaic development in the next few years,' said Domenico Inglieri, a board member at the GIFI association of Italian photovoltaic companies.

Since the end of 2006, Italy has nearly quadrupled its solar energy capacity to 197 megawatts, enough to power about 100,000 homes, according to the GSE power management agency's website (www.gsel.it).

With 12,200 new producers online since early 2007 alone, GSE estimates output will reach 450 megawatts by the end of 2009.

The surge coincides with the launch of a government policy early last year that allows subsidied tariffs and eases the way for market operators.

TOP OF THE MARKET

Italy, Europe's third-biggest solar power producer, is paying out in effect 43 euro cents a kilowatt hour for large-scale plants that produce more than 20 kilowatts, according to Emerging Energy Research, a U.S. consultancy. The payout is just below the top of the European market.

The tariff's 20-year guarantee is just one of the factors putting Italy ahead of rivals Portugal, Spain and Greece in Europe's second wave of solar development, said Dean Cooper, head of alternative energy at Ambrian Partners Ltd. in London.

He said Italy led in the combination of sunlight hours, tariffs, government backing and links to the power grid.

'For each one of the others, they will probably fall short in one of those areas,' Cooper said.

Supporting electricity produced by sunlight is expected to be part of the centre-right government's new energy policy, set to be unveiled next spring.

Italy imports about 87 percent of its energy, most of it fossil fuels. It has the highest power costs in Europe, at just over 16 euro cents a kilowatt hour last year, according to European Union figures.

The high costs mean Italy could be the first market to achieve grid parity, possibly by 2012, Cooper said. Grid parity means the electricity that households get from solar power is as cheap as that from conventional sources.

'The Italy government sees that opportunity to advance investment ... so they are no longer reliant on oil-sourced generation,' Cooper said.

SLOW DOWN

Two factors are braking growth the—notoriously slow bureacracy and a backlog to connect plants to the power grid.

With rules differing from region to region and a welter of jurisdictions, approval of a large-scale project could take six months at least, said Stefano Neri, chairman and chief executive of solar power company TerniEnergia SpA.

'The local impact of a big plant is looked at with much, much tension,' he said.

The wave of requests for hook-ups to the grid has swamped utilities like former monopoly Enel SpA, leading to complaints and months of delays.

An ongoing investigation launched last year by the national power authority showed that it took 97 days on average to hook up renewable energy plants, including solar, in the period from May 2006 to October 2007.

Nearly a quarter of hook-ups for renewables were listed as delayed, according to a report on the inquiry this year.

The situation is worsened by land speculators who want to connect to the grid quickly as a way to improve the plot's value.

The demand for prime zoned sites is so strong that prices for some tracts have more than doubled in the last 18 months, said Alberto Mezzini, general manager of Uni Land SpA, one of Italy's major solar project developers.

Inglieri, of the GIFI industrial group, said the crush of projects in such prime regions as Puglia, at the heel of the Italian 'boot', might lead to a moratorium on construction.

'It's not a certainty, but it is a potential risk,' he said.

(Reporting by Ian Simpson)

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