After months of debate, the Italian Ministry of Economic Development proposed a new schedule of feed-in-tariffs (FITs) that will likely lead to continued growth in the Italian solar market for the foreseeable future but with a small dip in 2013. The FITs vary by size of installation, whether the installation is on rooftops or not, and installation completion time. This new FIT schedule is shown below.
The FIT decline for small (mainly residential) installations amounts to 5.5-10.3% in 2010 and 2011. Similarly, commercial installations will decline by 9.8-15.3%, and large utility-scale installations will see a fall in FIT support of 14.0-15.5% in these two years. The Ministry also proposed an additional FIT reduction of 6% per year in 2012 and 2013.
Moreover, Italian FITs are currently capped at 3.0 GW of cumulative installations. According to Pike Research analysis, we expect new installations in Italy to exceed 1.3 GW in 2010 alone and that cumulative installations will be exceed the FIT cap in about mid-2011.
Not surprisingly, the effect of the FIT reductions combined with the looming FIT cap has caused concern with respect to the financial viability of solar installations in Italy in the next three years.
Despite the reductions in Italian FITs and the 3.0 GW cap, we believe that Italian installations will continue to show strong growth, through 2012. Italy is dependent on imported energy sources, and, as a result, its power costs are high. Because of this and excellent solation in the southern regions, IRRs of installations in Italy, including utility-scale installations, will continue to attract investment through 2012 as module ASPs continue to shrink to $1/W or less in 2012. Additionally, even when the 3.0 GW cap is reached in 2011, Italian FIT rules permit a 14-month grace period for new installations.
Consequently, Pike Research forecasts solar growth by segment (residential, commercial, utility) as depicted below.
Note that the dip that we currently project in 2013 could reasonably be avoided if the 3.0 GW cap on solar cumulative installations is lifted or increased in late 2011 or 2012. As many regions of Italy approach grid parity in 2013, an increase in the FIT cap is, in our opinion, realistic.