Italy Expects Exponential Growth of Solar Capacity

Svetlana Kovalyova/Genoa, Italy/ March 5, 2009

Sunny Italy may see an exponential growth of solar power capacity to 16,000 megawatt (MW) in 2020, spurred by government incentives and European renewable energy targets, a senior industry official said. But the global financial crisis, which has dried up funds for industrial projects, may slow down the expected growth, Valerio Natalizia, board member of Italy's photovoltaic body GIFI, told Reuters on Thursday.

Capacity of photovoltaic installations, which turn sunlight into power, is expected to rise to 600-650 MW in Italy this year from about 280 MW in 2008, and shoot up to 1,200 MW in 2010, making Italy one of Europe's solar energy leaders, he said. "We will see a continuous growth," Natalizia said in an interview at the photovoltaic energy conference in the north Italian port of Genoa.

"But the financial crisis may have an impact on our sector, first of all on big projects of 1 MW and bigger because they definitely require external financing," Natalizia said.

GIFI unites 67 companies representing about 70 percent of in the photovoltaic business in Italy, from making of solar panels to developers of project and utilities. Investors piled into the Italian photovoltaic market after the government approved generous incentives for the sector in 2007. It got an additional boost after the European Union set a goal to make 20 percent of all energy from renewable sources in 2020.

Incentives, especially the "feed-in tariff" which guarantees operators about 0.49 euros per kilowatt hour of produced power for 20 years, remained a strong magnet for investors despite the economic downturn, the conference delegates said.

"The photovoltaic sector is a safe investment ... Risks are lower there than with other renewable energy sources, but returms are lower too," said Carlo Buonfrate, energy desk coordinator at bank Mediocredito Italiano, part of Intesa Sanpaolo group.

GIFI's Natalizia said there was a risk of oversupply of photovoltaic projects in Italy, especially in the southern region of Puglia and "some of them will not see the light." However, Italy is unlikely to follow the path of Spain where the photovoltaic market has practically frozen this year after the government slashed incentives to the sector which caused a spike in new installations last year, Natalizia said.

"I don't think we will see such an explosive growth like in Spain which has destroyed the market ... We have such a lengthy authorisation process in Italy, we have a different pace here" he said.

Italian government is expected to set a new incentive scheme for the photovoltaic sector after the current limit for incentives set at 1,200 MW is reached as expected in 2010.

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