(Reuters) – Italy, Europe’s No. 3 solar market, will not lose its appeal to investors despite a cut in production incentives and is likely to add about 1,000 megawatt of capacity a year in 2010-2013, the industry body head said.

Italy will slash feed-in tariffs for solar power market in 2011-2013 to bring the incentives in line with falling costs of photovoltaic (PV) systems which turn sunlight into power, starting with major cuts next year.

This year, Italy is set to add 800 MW to 1,000 MW of new PV capacity helped by the existing incentive scheme, among the most generous in Europe, Gert Gremes, chairman of Italy’s PV association GIFI, told Reuters in a telephone interview.

Feed-in tariffs, which guarantee operators steady returns for every kilowatt hour of produced power for 20 years in Italy, will be slashed by up to about 30 percent in 2011 and by 6 percent a year in 2012 and 2013. A 3,000 MW limit will be placed on capacity to be covered by incentives over 3 years.

“I think in 2011 we can repeat a year like 2010, or even have a slight growth … A gigawatt (1,000 MW) a year is very realistic in 2012 and 2013,” Gremes said. “You’ll see that a 3 gigawatt (cap) will be filled easily in three years,” he said.

Investors and solar panels manufacturers have been concerned that the cut in incentives would slow down growth of the Italian PV market which has boomed since 2007 when the old incentive scheme was launched.

“I believe that with the new tariffs Italy will remain a country where an investment in a photovoltaic plant is among, if not the most interesting (in Europe). I think investors will go ahead with building plants,” Gremes said.

Under the new incentive scheme, the internal rate of return (IRR) keenly watched by investors, would remain attractive, Gremes said but declined to give estimates.

Italy has not given an official forecast of PV capacity growth under the new incentive scheme which sets a 8,000 MW goal for 2020. Italy’s total installed PV capacity stood at 1,137 MW, according to data from the state energy management agency GSE.

Gremes confirmed GIFI’s long-term goal of reaching 15,000 MW capacity in 2020 but said reaching such objective would depend on further government support plans.

Article by Svetlana Kovalyova, edited by James Jukwey, appearing courtesy Reuters.

Photo: Flackjack

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With Intersolar taking place in San Francisco this week, solar professionals from all over the world are coming together to network and exchange ideas. The Intersolar organizers have chosen the right city for this conference: The city’s mayor Gavin Newsom is actively pushing towards renewable energy sources. Under his leadership, the City and County of San Francisco started the first local solar energy incentive program in July 2008. Since launching GoSolarSF, there has been a 450% increase in applications for solar installations in San Francisco, from 200 to 850. Last week, Newsom announced plans to install three new solar installations with over 365 kw power on the San Francisco Housing Authority as part of the GoSolar initiative. According to a report issued by Environment California last week, San Francisco ranks third in number of rooftop solar installations in California. On a per-capita basis, San Francisco leads the state’s large cities for rooftop solar.

California is leading the US solar energy efforts with 67% of total installed PV capacity (530 MW) in the United States. On average, PV is growing at more than 30% per year – with 2008 having shown more than 150% growth. Californians are thought leaders and progressive thinkers, and much what happens in this state later happens in the rest of the country, according to Gary Gerber, President of CalSEIA (California Solar Energy Industries Association). In a presentation he held at the 5th Germany California Solar Day held by the German American Chamber of Commerce on June 16, he highlighted eight critical factors driving solar in California:

1. Relatively high electricity prices, Time of Use tariffs
2. Increasing electricity demand, especially at peak
3. Electrical infrastructure weakness / grid congestion
4. Strong state rebate program, net metering
5. RPS requirements (Renewable Portfolio Standard)
6. Federal investment tax credit
7. A variety of new incentives
8. Innovative financing (Power Purchase Agreements)

Hurdles to take
Compared to Germany, the cost of installing a solar system in California is more than 30% more expensive. While the average residential system in the US state costs $8 per kw to install, it only costs $6 in Germany. Other challenges Californians are facing include the fact that the installed cost of systems is not (yet) competitive with retail electricity rates without subsidies ($.15 -$.20/kWh), California Solar Initiative incentive levels continue to drop and are now at less than $2/watt, and burdensome paperwork. Gerber during his recent presentation illustrated the latter by the following comparison:

Typical amount of paperwork for one project in California		Typical amount of paperwork for one project in Germany

Germany has been at the forefront of solar PV installations worldwide, accounting for almost half of the global solar power market in 2007. Much of this goes back to the country’s feed-in-tariff, part of the Renewable Energy Law (Erneuerbare-Energien-Gesetz, or EEG) enacted by the German government in 2000 (a similar incentive program is still being debated in California). In 2008, Germany installed more than 300,000 new solar systems with a capacity of 1.5 megawatts, according to the BSW (Bundesverband Solarwirtschaft). Solar power now meets about 1 percent of Germany’s electricity demand and is expected to reach 25 percent by 2050.

Germany is represented at Intersolar with numerous companies, and the German Consul General Rolf Schuette is hosting a reception at 1:30 at the German pavillion today – hope to see you there!

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