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New Legislation on Renewable Energy

New provisions regarding the photovoltaic industry have been enacted on March 3, 2011.  Legislative Decree No. 28/2011 implements in Italy EU Directive 2009/28/EC on the promotion of the use of energy from renewable sources, which establishes for each Member State national targets to be reached within 2020.  According to the Decree, power plants using renewable sources that will become active starting from January 1, 2013 will be subject to a new system of incentives that entails the following:

1. Stricter Technical Requirements.  Starting from March 29, 2012 incentives may be granted only to plants complying with specific technical requirements, which shall be subject to periodical amendments by the Ministry of the Economic Development.  In particular, solar modules shall be guaranteed for at least 10 years.  Specific restrictions are already applicable to photovoltaic plants located in agricultural areas.
2. Incentivizing Mechanisms.  Incentives will be granted by means of an agreement to be entered into between GSE S.p.A. (the Italian Manager of the Grid) and the relevant plant.  According to the Decree, incentives shall ensure an adequate compensation of the investment and running costs, shall cover the medium life period of the plant and shall not be modified over such period. 
3. Other Incentives.  Further incentives are possible in addition to those described above, such as other public incentives not exceeding 40% of the investment costs for plants with a capacity of less than 200 kW, 30% for plants with a capacity of less than 1 MW, and 20% for plants with a capacity of less than 10 MW.  Incentives may run up to 60% of the investment costs for plants installed on public schools, hospitals and administrative offices of local authorities.

New Tariffs

On May 5, 2011 the Italian Government has also amended the existing tariffs for photovoltaic energy.  The new tariffs will apply to photovoltaic plants that will start to generate power between June 1, 2011 and December 31, 2016.  Such tariffs may only be granted to plants that have not benefitted from previous legislation on this matter.  Pursuant to this new regulatory framework, further public incentives may be granted to specific plants, such as plants installed on buildings having a nominal power not higher than 20 kW, installed on public schools, public hospitals, military or penitentiary buildings, on buildings owned by non-profit organisations offering social services, on areas which are subject to redevelopment works, or plants having innovative characteristics. 

Where Is the Solar Industry Headed?

As the new regime enters into force, incentives to photovoltaic plants will be decreased on a biannual basis until 2016.  Such a policy choice is based on the assumption that previous Government subsidies have adequately enabled the Italian photovoltaic industry to grow and that the market of such renewable energy is now ripe to develop without the need for public support.  As a consequence of the new legislation, it can be expected that in the future investors will be more interested in financing existing plants, which may benefit from the former, more favourable, tariffs for a 20-year period, while investments in new projects may be expected to turn less lucrative under the new incentive mechanisms.  Nonetheless, due to their specific regime, smaller plants will remain profitable even after the enactment of the new provisions.
In addition, a recently held referendum has overturned the Government plans concerning the construction of new nuclear plants in Italy.  Companies active in the renewable energy industry are expected to greatly benefit from the outcome of such consultation, as more emphasis is likely to be given to renewable sources in the future national energy plan.