By Stephen Jewkes
MILAN, April 19 (Reuters) - Italy plans to introduce a cap on state incentives for solar power generation as it seeks to curb costs, according to a draft decree obtained by Reuters on Tuesday.
Italy's solar sector, among the biggest in Europe, has boomed since 2007 when state-backed production incentives were first launched.
But the Italian government has decided to scrap the existing generous solar incentives from June 2011 and has been drafting a new support scheme for solar power generation that would pay less per unit of installed capacity. The incentives are paid for by consumers through their energy bills.
According to the latest version of the new decree, Rome wants to cap subsidies for solar developers at between 6 and 7 billion euros ($10 billion) per year by the end of 2016, when installed capacity is expected to be around 23,000 megawatts.
Under existing norms, solar incentives cost around 3.5 billion euros per year as of 2011 based on forecasted installed capacity of 8,000 megawatts.
Feed-in tariffs for solar power in 2011 will be decreased by 26 to 42 percent depending on the installation type as the government seeks to factor in the fall in technology costs, the draft decree said.
Gianni Chianetta, president of industry body Assosolare, said incentive cuts in 2012, compared to 2010, could be over 60 percent.
'We are very disappointed... The steep cut in incentives envisaged by the draft decree... are unsustainable for the industry and will continue to block the sector,' Chianetta said in a note on the draft decree.
Shares of U.S.-listed solar panel makers, who have benefited from sharp growth in the Italian solar market, fell Tuesday on the news. Analysts said the program was worse than many in the industry had anticipated.
Declining subsidies in Italy, combined with increases in manufacturing capacity of solar panels globally, will lead to a flood of panels in the market and force manufacturers to slash prices to sell more panels into markets like Germany.
'The hope was that they would be able to install more in 2011, and it looks like that is not going to be the case,' Wedbush analyst Christine Hersey said. 'There is definitely a significant amount of volume that needs to go somewhere.'
Shares of U.S. panel maker First Solar Inc closed 2 percent lower on Nasdaq, while SunPower Corp's lost 0.5 percent. Shares of Chinese solar company Trina Solar ended down 1.1 percent.
TRANSITION PERIOD
Under the draft decree, a special transition period will run from June this year to end 2012 to safeguard investments under way.
In the second half of 2011 another 447 million euros are available by way of subsidy, equating to around 1,350 MW of installed capacity, the decree said.
'Trouble is this includes grandfathering for projects not connected before May 31, projects under construction. That's something negative that I wasn't expecting and will significantly limit demand in 2011,' said Gordon Johnson, head of alternative energy research at Axiom Capital Management.
The decree has been discussed by representatives at the Industry and Environment Ministries on Tuesday.
'The aim is to present a final version to the Conferenza Stato Regioni (key meeting of regional representatives) on Wednesday,' a government source told Reuters.
(Reporting by Stephen Jewkes; Additional reporting by Nichola Groom in Los Angeles; Editing by Tim Dobbyn) ($1=.6984 Euro) Keywords: ITALY/SOLAR (stephen.jewkes.thomsonreuters.com; +39 02 6612 9695; RM: stephen.jewkes.thomsonreuters.com@reuters.net) COPYRIGHT Copyright Thomson Reuters 2011. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.
MILAN, April 19 (Reuters) - Italy plans to introduce a cap on state incentives for solar power generation as it seeks to curb costs, according to a draft decree obtained by Reuters on Tuesday.
Italy's solar sector, among the biggest in Europe, has boomed since 2007 when state-backed production incentives were first launched.
But the Italian government has decided to scrap the existing generous solar incentives from June 2011 and has been drafting a new support scheme for solar power generation that would pay less per unit of installed capacity. The incentives are paid for by consumers through their energy bills.
According to the latest version of the new decree, Rome wants to cap subsidies for solar developers at between 6 and 7 billion euros ($10 billion) per year by the end of 2016, when installed capacity is expected to be around 23,000 megawatts.
Under existing norms, solar incentives cost around 3.5 billion euros per year as of 2011 based on forecasted installed capacity of 8,000 megawatts.
Feed-in tariffs for solar power in 2011 will be decreased by 26 to 42 percent depending on the installation type as the government seeks to factor in the fall in technology costs, the draft decree said.
Gianni Chianetta, president of industry body Assosolare, said incentive cuts in 2012, compared to 2010, could be over 60 percent.
'We are very disappointed... The steep cut in incentives envisaged by the draft decree... are unsustainable for the industry and will continue to block the sector,' Chianetta said in a note on the draft decree.
Shares of U.S.-listed solar panel makers, who have benefited from sharp growth in the Italian solar market, fell Tuesday on the news. Analysts said the program was worse than many in the industry had anticipated.
Declining subsidies in Italy, combined with increases in manufacturing capacity of solar panels globally, will lead to a flood of panels in the market and force manufacturers to slash prices to sell more panels into markets like Germany.
'The hope was that they would be able to install more in 2011, and it looks like that is not going to be the case,' Wedbush analyst Christine Hersey said. 'There is definitely a significant amount of volume that needs to go somewhere.'
Shares of U.S. panel maker First Solar Inc closed 2 percent lower on Nasdaq, while SunPower Corp's lost 0.5 percent. Shares of Chinese solar company Trina Solar ended down 1.1 percent.
TRANSITION PERIOD
Under the draft decree, a special transition period will run from June this year to end 2012 to safeguard investments under way.
In the second half of 2011 another 447 million euros are available by way of subsidy, equating to around 1,350 MW of installed capacity, the decree said.
'Trouble is this includes grandfathering for projects not connected before May 31, projects under construction. That's something negative that I wasn't expecting and will significantly limit demand in 2011,' said Gordon Johnson, head of alternative energy research at Axiom Capital Management.
The decree has been discussed by representatives at the Industry and Environment Ministries on Tuesday.
'The aim is to present a final version to the Conferenza Stato Regioni (key meeting of regional representatives) on Wednesday,' a government source told Reuters.
(Reporting by Stephen Jewkes; Additional reporting by Nichola Groom in Los Angeles; Editing by Tim Dobbyn) ($1=.6984 Euro) Keywords: ITALY/SOLAR (stephen.jewkes.thomsonreuters.com; +39 02 6612 9695; RM: stephen.jewkes.thomsonreuters.com@reuters.net) COPYRIGHT Copyright Thomson Reuters 2011. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.