Despite last minute mixed-signals by the Berlusconi government, it now appears that Italian tariffs for the remainder of 2011 and 2012 are fixed.
As Italy–like Spain and Portugal before it–faces a pubic debt crisis there were fears that the recently implemented Quarto Conto Energia (the 4th Energy Plan) would become a victim of budget-cutting excess. However, the danger appears to have receded and the government has reaffirmed its commitment to honor the plan introduced in mid-May.
The new plan, though more robust than most solar PV policies elsewhere, is extremely complex. As French renewable expert Bernard Chabot commented after reviewing the new policy, “you’ll need an attorney by your side every step of the way.”
As a consequence, the following summary just scratches the surface of Quarto Conto Energia. Links to other interpretations of the new policy are presented below.
Most significantly, the new policy tries to bring some order to what some observers described as a chaotic market. The policy sets out caps on installed capacity and spending for what the program calls large systems.
The caps are set out in semi-annual increments beginning in 2011.
In 2013 a German-style “growth corridor” will be introduced to adjust tariffs automatically by the rate of installation.
The capacity limit on large systems varies from 1,500 MW in 2012 to 2,500 MW in 2016. The total spending cap for large systems over the life of the program is €2 billion.
Small systems are excluded from the cap. The definition of “small” plants include rooftop installations less than 1 MW and groundmounted systems less than 200 kW that use the net-metering payment. Rooftop systems for public agencies are also defined as “small systems” and, thus, are not limited by annual capacity or spending caps.
Thus, the total amount of capacity installed per year could be substantially greater than the program’s posted capacity limits. For example, the cap for 2011 is 1,200 MW. However, this is only for the last half of the year and only includes large systems. If the past is any guide, Italy could easily exceed 2,000 MW of total installations, small and large, in 2011.
Altogether, Italy is targeting 23,000 MW of solar PV by 2017. Italy officially installed nearly 1,900 MW of solar PV in 2010, but final figures for the year are not complete. Many expect that number to rise substantially once the final tally is in.
Italy was the world’s second largest market for solar PV in 2010.
For comparison, the US installed nearly 1,000 MW of solar PV in 2010–its best year ever–bringing total installations to only 2,150 MW. The US is the world’s largest economy and supports more than 300 million people. Italy is the world’s seventh largest economy with 60 million inhabitants.
The definition of small plants excludes green-field groundmounted systems less than 200 kW. The requirement that the system be used to offset on-site consumption implies that an existing meter already be present. This limitation will preclude farmers from developing their own groundmounted, green-field systems less than 200 kW. Nevertheless, the tariffs are so robust that there should be ample opportunity for developing groundmounted, green-field projects.
Tariff Tables
As if the tariff tables are not complicated enough, the posted tariffs do not include all the payments under the program. There is also compensation for the cost of electricity offset by the solar generation–at least through 2012.
Italy’s program pays a “premium” on top of the electricity price. It does not pay a true feed-in tariff like that in Germany, France, or Switzerland.
However, the new Quarto Conto Energia institutes a true feed-in tariff in 2013. Beginning in 2013, when a portion of the electricity is used to offset on-site consumption that portion receives the reduced tariff noted here as a “net-metering” tariff. This differs from the British system where an “export” tariff of ~€0.035/kWh is paid for all electricity “exported” to the grid and not used on-site, plus the posted tariff.
The tariffs for 2011 degress or decrease monthly.
Tariffs are differentiated by six different size classes and two different applications: rooftops, and all others. There are also tariffs for Concentrated Solar PV and Building Integrated PV (BIPV).
A novel development is that structures other than rooftops, such as carports, receive the average of the rooftop and the “other” tariff category.
In addition, there are a number of bonus payments. These are similar to the community and aboriginal bonus payments in the Ontario, Canada feed-in tariff program.
There is a bonus payment of 5% for small municipalities installing systems, and for groundmounted brownfield sites. To encourage replacement of asbestos shingles common in parts of Italy, there is a bonus of €0.05/kWh for rooftop solar PV systems that replace asbestos roofs.
Politically significant in an era of high unemployment worldwide except in China and Germany, there’s a bonus of 10% when 60% of the material costs of an installation are from products manufactured in the European Union.
The bonus payments are not additive.
In 2012, the tariffs begin a semi-annual degression regime.
Beginning in 2013, the tariff program offers tariffs for six size classes, two applications (rooftops and all others), and for whether the electricity generated is fed to the grid or used on-site.
Italy’s new program also sets a target for BIPV and concentrated solar PV. By 2015, the target is 320 MW for each technology.
As in Germany, there are no inflation adjustments to the tariffs within a contract. However, where there is value added through the retail rate, as in net-metering, as electricity rates increase, the value to the system owner will also increase. In effect, a portion of the total value earned by the solar PV system is protected from inflation in energy costs.
Small Systems Exempt from Caps
In a novel twist that may be useful to policymakers elsewhere, Italy has effectively shielded small installations from any limits on total capacity. Semi-annual and annual caps are not applied to “small systems”.
Many policymakers in North America are concerned about the cost of solar PV programs and want to limit installations by placing restrictive program caps. At the same time, they fear the programs will be overwhelmed by commercial speculators swallowing up available capacity, leaving nothing for homeowners and small businesses. Political support of renewable programs from just this very market segment is necessary for programs to be politically stable. Thus policymakers want to insure that homeowners and small businesses have an opportunity to participate. Italy may have shown one way this can be done.
Tariffs Relatively Higher than in Germany
While some in the media have reported that the new Italian program dramatically cuts the tariffs for large groundmounted systems, the tariffs remain 50% to 70% higher than comparative tariffs in Germany when adjusted for Italy’s greater insolation.
It’s unlikely that the domestic content requirement for the 10% bonus explains the higher tariffs. ClearSky Advisors estimates that the domestic content requirement of Ontario’s feed-in tariffs adds 15%-20% to the cost of solar PV. Whether this is true in Italy or not is unclear. Regardless, the bonus only applies to those systems that qualify. The base tariff does not require domestic content and it is the base tariff that is relatively higher than in Germany.
Though the program in Italy differs markedly from that in Germany, some of the new tariffs introduced can be compared to those now used by their northern neighbor. For example, Italy’s new tariffs for rooftops in the size class from 3 kW to 20 kW can be compared to the German rooftop size class of less than 30 kW. Similarly, the Italian rooftop tariffs from 20 kW to 200 kW can be compared to the German rooftop tariff class of 30 kW to 100 kW, and so on.
Germany receives approximately three-fourths the insolation of Italy. Thus, current German tariffs would be reduced by an equivalent amount in Italy to provide the same return on investment as in Germany, everything else being equal. There is a further complication. Quarto Conto Energia includes payment of the wholesale rate on top of the feed-in tariff for the remainder of 2011 and for all of 2012. Recently this amounted to an additional €0.07/kWh that’s not shown in the tariffs.
Italy’s new tariffs remain at least 50% greater than the current tariffs in Germany.
Renewables in Italy More than Just Solar PV
Though the world’s focus has been on solar PV in Italy, the country’s renewable policy also includes a premium payment system for distributed generation from wind, geothermal, wave and tidal power, biomass, biogas, landfill gas, and sewage treatment gas.
It remains to be seen whether the tariffs for other forms of distributed generation besides solar PV have also been updated.
Complex but robust, the Italian Quarto Conto Energia will likely keep Italy in the limelight as one of the world’s largest markets for solar PV through 2011 and 2012 and possibly beyond.
