Italy Green Energy Incentives To Be Scaled Back

* Green incentives to hit 9 bln euros under current scheme

* Investments on hold pending incentive regime changes

* Foreign investors exit could hurt Monti government

By Stephen Jewkes and Svetlana Kovalyova

MILAN, April 5 (Reuters) - Italy's plan to scale back its generous renewable energy incentives will cut energy costs for families and industry but companies in the sector say the move will deter investment that is urgently needed by the government to create jobs.

Italy's green power industry has boomed in recent years as investors from around the world poured billions of euros into the sector, lured by the support measures.

But with state incentives ballooning to 9 billion euros ($11.81 billion) this year, Rome has decided to cut the support, which has further burdened household and industrial consumers who pay for it through power bills that are among the highest in Europe.

Solar incentives alone are expected to hit the 6 billion euro mark this year, four years earlier than expected. Rome says the average Italian family would have to pay 120 euros in 2012 to support renewable power, up from 30 euros in 2009.

Companies in the renewables sector say, however, that the latest decision, one of repeated changes in the system that have caused uncertainty, will pour cold water on inward investment.

"There is zero interest from foreign investors in greenfield renewable projects (in Italy now). The new cuts will block decisions to invest since there's just no certainty," Pietro Colucci, chairman and chief executive of Italian renewables operator Kinexia, told Reuters.

Funds into big renewable energy plants with capacity over 0.9 megawatts came in at 7.84 billion euros, or about 0.5 percent of gross domestic product(GDP) last year, according to energy consultancy Althesys Strategic Consultants.

An exit by foreign investors would deal a blow to the government of Prime Minister Mario Monti, who has been trying hard to regain trust of foreign investors shaken by the rule of his predecessor, Silvio Berlusconi.

"How can you expect foreign investors to invest? It's embarrassing trying to explain to our partners Climate Change Capital why the rules keep changing so often. There's just no certainty," said Giorgio Pucci, chairman and chief executive of Italian solar energy company Enerqos who attended an industry conference in Milan this week.

With generous incentives in place since 2007, Italy's solar market has become the world's second-biggest after Germany and attracted major solar module makers such as Chinese group Suntech Power Holdings, Trina Solar, Yingli Green Energy Holding and U.S. firms First Solar and SunPower Corp.

Berlusconi's centre-right government cut solar power incentives last May but the new support scheme had been meant to run until 2016.

Industry Minister Corrado Passera said on Thursday the government would very soon present details of the new support scheme for renewable energy. Separate bills on solar and other green energy incentives are expected in early April, sources familiar with the situation said.

The Monti government estimates that under the current scheme incentives could cost 11-11.5 billion euros a year by 2020 with overall costs in a 15-20 year period - the duration of incentives - of over 150 billion euros, too heavy a burden.

Major industry users are grateful for the government action.

"It's a good initiative (by Passera) and I hope it works out. Energy accounts for around 30 percent of our industrial costs. We're not against renewables but we pay for it dearly through the bills. We need a rebalancing to help us gain competitivity on the industrial front in Europe and globally," Massimo Medugno, managing director of paper makers association Assocarta, told Reuters.


INVESTMENTS ON HOLD

Rome's reluctance to unveil details of how it is going to modify the incentives schemes has thrown the sector in disarray.

"Investments have stopped. Banks have closed financing taps," Gianni Chianetta, chairman of Italian solar industry lobby Assosolare, said, adding that the actual scale of damage would only be known once the new plans were unveiled.

Cuts to solar power generation can slash the closely watched internal rate of return (IRR) to 2-3 percent in the north of Italy from more than 7-8 percent at present, making investments into the sector unprofitable, some industry operators said.

Green energy supporters also point to the benefits in terms of jobs. According to a study carried out by research group OIR-AGICI, if renewable energy development is not slowed, jobs in the sector will rise to 266,000 in 2020 from today's 130,000.

Foreign investors are focused on brownfield renewable projects, where plant is already hooked up to the grid and incentives locked in. The government has said on several occasions the new rules will not be retroactive.

But uncertainty on tariffs and the regulatory framework has virtually stopped project financing by banks, already impacted by the credit crunch, raising the likelihood of an end to the green energy boom of the last five years.

"The renewable business is living a big impasse for the time being. On solar, the financing of new construction is frozen due to uncertainty of tariffs and there is a good deal of concern from foreign banks over long-term funding," says Massimiliano Battisti, head of project finance at SocGen.

Even bringing the European Investment Bank on board with its favourable funding rates is now more difficult.

"Because of the bank downgrades in Italy the EIB is asking for cash collateral of 100 percent to help fund projects but the banks are using all their collateral to tap cheap money at the ECB's LTRO," Colucci said referring to the institution's three-year, low interest loan programme.

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Comments

[Addicted2Italy]

10:07 PM on 04/26/2012

It's a tough situation to support now in light of the current Euro crisis. It'd be good if they could support renewable energy research. In fact, the whole world could use it. We need to get away from fossil fuels.

[Genders]

09:44 PM on 04/07/2012

But the fossil and nukes breaks continue? what a joke.

[Nick Hatch]

03:43 PM on 04/10/2012

Well except for fossil and nukes doing all the heavy lifting.

[maslin]

04:02 PM on 04/10/2012

Mostly fossil from Italy's profile.

[idyl]

07:36 AM on 04/12/2012

Italy shuttered the last of it's four nuclear plants in 1990. They currently have a moratorium on new development.

http://en.wikipedia.org/wiki/Nuclear_power_in_Italy

[maslin]

04:02 PM on 04/10/2012

Last I checked, Italy was importing nuclear power from France.

They get almost 20% of their electricity from hydro. The remainder is fossil, almost 80%. Their non-hydro renewables and all other power contributes less than 3%.

[idyl]

03:09 AM on 04/26/2012

In Italy, renewables currently contribute 24.5% of electricity consumption (hydro, wind, and solar).

http://en.wikipedia.org/wiki/Renewable_energy_in_Italy

Between 2000 and 2011, wind and solar went from 0.16% of annual consumption to 6.2% (or 19.5 TWh), which is equal to the amount of electricity imported from all other countries (at 19.6 TWh).

http://www.eia.gov/countries/country-data.cfm?fips=IT

Amazing how quickly things can change, eh!

[fireofenergy]

03:47 PM on 04/07/2012

There is ONLY one way for RE to succeed...
Everyone collaborating to build the machines needed to make most all the parts. Then (and only then) would it be cheap enough to provide millions of installation jobs (and actually do any good at displacing fossil fuels).
Obviously, next to impossible given the global political landscape (in which machines are used to displace jobs instead).

[TomDi]

11:29 AM on 04/06/2012

There are no jobs or profit in this phoney science. Here's the rest of the story:

According to Bernstein, the Administration didn't realize before the stimulus money was being allocated that operating solar or wind plants doesn't really employ a large number of people. In other words, the promised green jobs turned out not to really exist.

Full quote from Bernstein is below:

BERNSTEIN: I was very active in the implementation of the Recovery Act, and one thing we found about clean energy was that you build a solar plant, you're gonna hire a lot of people. You run a solar plant, it doesn't take a ton of people to run some of these plants. Some of these firms don't employ as many people as you might hope.

Even if the companies don't go bankrupt, Bernstein has admitted that they don't employ that many people once operational. That's a pretty stunning admission. And one would think that if anyone at the White House had bothered to do some adequate research before doling out the billions, they would have realized that solar power plants have consistently employed small numbers of employees over their entire history. Why would President Obama have to spend billions of dollars to figure out such a basic concept?

[NorthEasternEE]

06:37 AM on 04/06/2012

Renewable energy, wind in particular, is an intermittent resource. It is only available when there is wind which is constantly changing. You cannot run anything on wind without fossil fuel backup. This makes wind a supplement to fossil fuel power plants. As a supplement, the cost of wind energy will always be an add-on. As an add-on wind will never result in cost reduction.

[fireofenergy]

03:55 PM on 04/07/2012

Machines are used to build cars from thousands of parts (also machine mass produced). If machines were (allowed to be)developed and used for the mass production of the LiFePO4 battery, we would have cheap electric vehicles, not to mention much cheaper solar panels.

On a vastly larger scale, post mounted mirrors (that don't require grading of the deserts) would direct heat into molten salt storage... for about 10x less costs than batteries.

The renewable energy future was just another thing buried by politics as usual far back in the past.

[trailerguy]

10:24 AM on 04/09/2012

The are plenty of locations were wind is predicable or at least constant. Both solar and wind maybe will not totolly replace coal and othe fossil fuels, but they couild keep from new palnts being built and reduce our dependency on them, Imagaine even burning 20 percent less coal. This of course has the coal people concerned.
Also look at the envirronmental cost of coal, the huge waste slag the destruction of mountions, the damage to water not to mention the co2. any reduction in its use should be welcome.

[VikingQuest]

08:51 PM on 04/05/2012

Take away the subsidies and the entire market disappears since nobody actually wants to buy solar panels unless someone else is footing part of the bill.

[Genders]

07:31 PM on 04/05/2012

Bet nukes and fossils still get the 500M$ per reactor.plant per year they do in the USA....

[oil patch]

05:04 PM on 04/05/2012

"Green incentives to hit 9 bln euros under current scheme"
they are not even trying to hide it anymore:
incentives (tax payer money)
scheme (liberal plan)
Stop stealing our money for your ridiculous technology that helps you sleep better at night.

[Genders]

07:31 PM on 04/05/2012

Compared to what for fossils an nukes? Or is perspective out of your vocabulary?

[Mason Mayne]

01:08 AM on 04/06/2012

"Stop stealing our money for your ridiculous technology that helps you sleep better at night."

What in God's name are you talking about? Scheme? How is incentives (tax payer money) going to companies that make record PROFITS better than incentives toward companies trying to make better, cheaper technologies? Your logic makes no sense.

Stop stealing our money for your outdated industries and corporate profit hoarding. It sucks when the world changes, I know, but you can't keep it the same forever just so "you sleep better at night."

Why is everything only Liberal and Conservative to neocons? What a sad, small way to look at the world...

[Nick Hatch]

03:46 PM on 04/10/2012

Wait, if the companies are making record profits, then why do they need further tax incentives?

[farmilyman]

04:25 PM on 04/05/2012

I wish there would be one country in the world that could break away from oil money and set an example.

[oil patch]

05:08 PM on 04/05/2012

you know why they don't?
because oil, natural gas and coal are the only economical sources of energy that work. period. Invent a different source of energy if you feel morally superior to a natural resource (never understood that, sounds a little insane), until then please stop complaining.

[mothergrace]

06:11 PM on 04/05/2012

Nothing is more natural than the sun and the wind.

Unlike fossil fuels, they will never run out either.

[Genders]

07:33 PM on 04/05/2012

Because big fossil and big nukes have 100 times as much money to bribe politicians. duh.

Solar cheaper than nukes, wind and waste half that cheap as gas and oil,

and efficiency half that again.

No contest.

[grappler1987]

04:19 PM on 04/05/2012

"Rome says the average Italian family would have to pay 120 euros in 2012 to support renewable power, up from 30 euros in 2009."

Ouch! I wonder if wealthier folks are installing solar panels and essentially billing the cost to poorer folks through the incentive process. Government incentives are often trickle up economics.

[sheila]

03:24 PM on 04/05/2012

Here's what reporters continue to ignore about European costs of renewables vs. American costs of renewables - in Europe, the vast majority of the money flows STRAIGHT into the pockets of the people. Not to Chevron Solar, BP Wind and Goldman Sachs. Gianni and Gina Public put panels on their rooftops and get a check every month. Their son gets a good job. Their property value increases. Their energy bills drop.

Compare this to the idiocy we have here (loudly supported by Big Enviros) - Chevron, BP, Morgan Stanley and Goldman Sachs get tens of billions of taxpayer dollars, tens of thousands of taxpayer-owned acres of wilderness, and then billions of ratepayer dollars for industrializing our healthy open spaces, jacking up our tax rates, and jacking up our energy bills. Our property values languish, hardly anyone gets a job (and the commutes are 2+ hours each way to most of the jobsites), our built environment gets hotter and hotter thanks to urban heat islands, and our species get killed off at astonishing rates.

So when we talk about the cost of something, we need to talk about the value of it. Every Euro spent on small solar in Italy is HUGELY valuable Every dollar spent on Big Solar here is wasted, and destructive.

[grappler1987]

04:22 PM on 04/05/2012

"Their energy bills drop."

But their energy bills went up.

"power bills that are among the highest in Europe"

[Gebby]

05:20 PM on 04/05/2012

power bills are among the highest because the cost of energy is higher in Europe. Not because the cost of solar pushed it up. this is how journalism sometimes misleads. in fact since the cost of energy is so high in europe solar is desired as an alternative. Cost of electricity has dropped in Germany thanks to solar. Peak demand costs in Germany are down drastically hurting utility company profits which is why they want to slow down solar. Big money still equals big political power.

[sheila]

07:32 PM on 04/05/2012

the people producing the power tend to use less because they are aware and engaged on the energy market, unlike passive consumers, so their bills usually drop. bills aren't dropping for any of us non-producers anywhere in the world, LADWP is raising bills another 10% this week and not even for any renewables, just because.

did you get the point of my post, which is that money poured straight into the community, instead of sucked out of it to Big Energy conglomerates is money much better spent, or are you just trying to nitpick?