Italy’s struggle to re-join the gigawatt club

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Though the PV section of the latest Key Energy trade fair in Rimini has not grown appreciably from previous editions, Italy appears to be on the path to solar recovery, even if the renaissance the industry is expecting is taking longer to materialize than anticipated.

The nature of the Key Energy area put aside in the larger energy and cleantech event staged by Ecomondo ensures several visitors to the PV company stands are energy generalists but the annual event nevertheless offers a useful opportunity to take the pulse of Italian solar.

Preponderance of inverter makers

With attendance figures unavailable as yet, one notable feature of last week’s show was the sizable presence of inverter makers, with Growatt, Sungrow, Ingeteam, ABB (now in the process of becoming Fimer), Huawei, SolarEdge, Zucchetti and Fronius all demonstrating residential and commercial products.

Module manufacturers were more difficult to find, reflecting the nation’s lukewarm large scale solar sector at present. The sole Chinese big beast was JA Solar, which was surrounded by small Italian residential PV manufacturers such as Trienergia and Futura Sun, as well as a module maker from neighboring Albania – Soltech Energy.

Rooftop still the growth driver

The makeup of the rest of the Key Solar exhibitors – an ecosystem of small Italian tracker and mounting system providers, PV product distributors, installers, consultancies and cable and electronics manufacturers – demonstrated the sector is still focused on the rooftop business which remains the backbone of Italy’s renewable energy landscape and its main market driver.

With reliable growth figures of around 30 MW of new generation capacity per month for the past four years, rooftop PV has regularly delivered 300-400 MW annually during that time. That was helped by well-established fiscal breaks and by a net metering program for installations with generation capacities of up to 200 kW.

There may be a cloud on the horizon for smaller installers, however, thanks to a regulatory change introduced by the former Lega and Five Star Movement (M5S) government which was replaced by a PD-M5S coalition in September.

A new shadow

The Growth Decree (Decreto Crescita) introduced at the end of June included a measure which enabled the tax deductible allowance related to the purchase of residential solar and energy storage systems to be claimed by installers and product suppliers. Previously, the Irpef (personal income tax) deduction applied only to the owners of such residential systems, enabling them to remove up to half the system cost from taxable income up to a maximum of €96,000.

The legislation was amended in the expectation system suppliers and installers would slash the price of household PV and storage as they would be able to claim back the Irpef deduction. However, with the tax allowance taking up to 10 years to process, small and medium-sized distributors and installers fear they will not have the financial resources to take advantage of this subsidy and will be priced out of the market by a select number of big brands.

Alberto Pinori, president of the Anie Rinnovabili renewables section of the General Confederation of Italian Industry (Confindustria), said companies unable to apply the credit transfer will be driven out of the market and claimed bigger entities are already taking advantage of the law change.

“The small and medium-sized companies that are implementing the credit transfer mechanism will be increasingly exposed financially because they are financially sustaining the discount offered to the customers and because this exposure is recoverable in 10 years through the compensation of the tax credit,” Pinori told pv magazine.

Paolo Rocco Viscontini, president of PV association Italia Solare agrees. “The current credit transfer mechanism is certainly wrong as it has created a clear market imbalance which is favoring a few large companies able to financially support the purchase of personal income tax by collecting sums from customers that do not even cover the costs of the PV system,” he told pv magazine. Viscontini said Italian antitrust authority AGCM has called on the authorities to introduce changes which will enable small and medium-sized companies to benefit from the tax break.

Large scale PV

Construction of and/or financing for a series of utility-scale, grid parity solar projects with private power purchase agreements (PPAs) has offered hope of a recovery in large scale PV on the peninsula, even if the approvals process remains demanding.

Both Pinori and Viscontini believe Italy may see 600 MW of new solar capacity this year, growth which may be boosted by larger volumes driven by the Decreto Crescita but also by grid-connection of a smattering of ground-mounted, grid-parity solar plants.

Both men were bullish about the immediate future for Italian solar, with Pinori anticipating 1 GW of new capacity next year and double that in 2021 while Viscontini predicted 1.3-1.8 GW next year and more than 2 GW the year after.

Those new capacity expectations excluded any generation assets procured under national renewables auctions, the first of which opened last month and which is expected to be complete by February. The reticence of the two solar industry figures may reflect the advantage wind power is expected to hold in the national procurement program, given PV cannot be deployed on agricultural land.

Italia Solare’s Viscontini is convinced solar has reached market parity in Italy and says the private PPA segment may provide significant growth. “Honestly, we wouldn’t even need the FER [Renewable Energy] decree, which introduced the auction scheme,” he said when asked how Italy would achieve the new capacity levels he has predicted. “But those who govern us have, and unfortunately for years have always been, one step, or even more than a step behind the solar energy sector. It is questionable to give incentives when they are not needed. If they wanted to give real support they would have had to incentivize PV linked to asbestos removal and storage more effectively.”

A hesitant government

Formed with the commitment to push a ‘green economy’, the second coalition government led by law professor and non-aligned prime minister Giuseppe Conte has thus far made little attempt to deliver on that pledge. However, that may be about to change, with a second FER said to be on its way.

The contents are unknown and Viscontini said the solar industry would benefit more from clear frameworks to operate under than from tinkering with incentives.

“Clean energies are unfortunately more and more a slogan than a real interest, and it is clear that the primary objective is to defend in every way the dominant position of the great fossil energy groups in the country,” he said. “In addition to the regulatory changes, all of which are always in the usual direction, the fact that no representative of the Ministry of Economic Development – the real decision maker on the country’s energy policy – has even appeared at the Rimini speaks for itself.”