Italy introduces new renewable energy incentive scheme

The Italian government has approved legislation for a new renewable energy incentive scheme that will see subsidy cuts for solar power.

There is also included a competitive auction system for feed-in tariffs (FIT) for renewable energy installations above 5 MW, according to Industrial Info.

The new law will kick in first for solar photovoltaic (PV) power projects.

Solar power subsidies in Italy will be cut by about one-third once total spending on existing and new equipment this year has reached €6bn ($7.9bn), which is expected to happen between July and October. The cuts will vary from 32-36 per cent, depending on installation size.

Subsidies for large ground-mounted installations will go down by about 32 per cent from €236 ($310) per megawatt-hour (MWh) to €161 ($212) per MWh. The feed-in tariff for small installations will fall by 36.4% from €352 ($463) per MWh to €237 ($312) per MWh.

The decree also introduces an annual cap of €6.5 bn ($8.55 bn) for subsidies spent on existing and new installations, and a 2-3 GW annual cap for capacity with all medium-sized projects forced to go through a six-monthly registry that will take into account new price dynamics.

The government predicts that the subsidies will not be needed after 2015 when solar power is likely to reach cost parity with other energy sources used for electricity production.

The new legislation is due to come into force on 1 January 2013 for other renewables technologies, including wind, biomass and geothermal. The ministry has hypothesized that a 10 MW onshore windfarm could receive an incentive of roughly €124 ($163) per MWh with the new scheme, compared with a current level of about €148 ($195) per MWh.

Despite incentive cuts, the government said Italy will exceed 2020 targets. Indeed, Italy plans to raise its target for electricity from renewable energy sources to 32-35 per cent from a current 26 per cent. The government argues the new system is simply more economically sustainable.

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