Italian Photovoltaic Installations Poised To Soar This Year

Italian Photovoltaic Installations Poised To Soar This Year

Italy’s solar market “went into overdrive” in the fourth quarter, according to U.S. industry analyst iSuppli, prompting its prediction of photovoltaic (PV) installations to double in 2011. Based on interviews with leading project developers and energy performance contractors in Italy, the analyst expects the country will install 975 megawatts (MW) worth of PV solar systems in the fourth quarter, doubling the 487MW in the third quarter, and rising 239% from 288MW during the fourth quarter of 2009.

This fourth-quarter surge will cause installations in 2010 to rise to 1.9 gigawatts (GW), up 100% from 720GW in 2009. The rise in installations will set the stage for another doubling of the market in 2011, with installations rising to 3.9GW.

Installations finished by the end of the year and connected to the grid by June 30, 2011, will still be able to benefit of the 2010 feed-in tariff (FIT) tariff of Italy’s Second Conto d’energia.

Under the current FIT, and with installed system prices of 2500€ to 2800€ per kilowatt-peak units (kWp), a highly attractive internal rate of return (IRR) of 15% to 18% is possible in Italy.

Italy’s IRR is alluring to solar investors, given the depressing news about caps or severe reductions of solar FITs in France, the Czech Republic, and Spain. Consequently, investors are flocking to Italy, leaving behind the closing Czech market and even the safe harbor of Germany.

Nonetheless, some signs of potential trouble may be on the horizon, says iSuppli. For one, there’s a potential risk to the positive market outlook because the Italian government may reduce the FIT more quickly than scheduled. Still, it’s unlikely that authorities will be able to change the FIT before the third quarter of 2011.

Moreover, official data from the state-run power-management agency GSE could be delayed by as much as six months. This would ultimately defer any formal assessment, leading to FIT adjustments.

For their part, regional governments also might try to limit the amount of land used for solar. Any such limitations must pass Italian federal law, though.

Finally, the grid connection in Southern Italy will certainly prove more challenging than elsewhere, posing additional headaches. 

Just the same, if fourth-quarter 2010 figures for PV installations can rise at such healthy rates, project developers more than likely will be able to overcome difficulties in 2011.

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