Italy to Levy Carbon Tax, Cut Solar FiT in Wake of Record-Setting Growth

When Italy’s been the subject of international news reports recently, it’s usually been related to its sovereign debt problems, economic woes and its struggle to restructure its political economy. Much less prominent has been its success in developing its renewable energy resources and markets– solar energy in particular– as well as its efforts to reduce carbon dioxide and other greenhouse gas emissions.

Italian Prime Minister Mario Monti’s government intends to take these efforts a step further. Yesterday it announced it will introduce a carbon tax, proceeds from which will be devoted to financing renewable energy production, according to a Reuters report. A tax on the carbon content of fuels, the new tax follows Italy last week raising its 2020 renewable energy targets and revising a plan to reduce incentives for solar and other forms of renewable energy production.

Italy was already part and party to the EU’s 20-20-20 goals of reducing carbon emissions 20% and obtaining 20% of energy from renewable resources by 2020. It’s also committed to the EU’s controversial air travel emissions tax.

In line with EU plans, the new carbon tax, which needs to be approved by Italy’s Parliament, would see the imposition of excise duties on energy products based on their carbon content. Instituting a market disincentive for fossil fuel energy sources, the government aims to boost the Italian economy by supporting the transition to a “green,” “zero carbon” economy, while also helping it reduce its deficit and debt levels.

Italy’s Remarkable Solar Energy Success

Solar PV and renewable energy development are proving to be a much sought after way forward for Italy, and other EU nations, in helping solve persistent economic and employment problems. Italy depends on imports to meet 87% of electricity demand. Solar PV and renewable energy resource development not only lessens its imported energy dependence, thereby enhancing energy security, it also adds to GDP and generates jobs. Distributed generation lessens strains on the grid and actually enhances the overall reliability of electricity supply. And it’s doing so at sharply declining cost. And let’s not forget the very substantial environmental benefits: cleaner, healthier air, land and water.

There was around 1-gigawatt (GW) of solar power capacity installed in Italy in 2009. Today, it’s a world leader in a globalized, rapidly growing solar PV market. The introduction of a Feed-in Tariff (FiT), along with a streamlining and refocusing of the regulatory permitting process, led Italy’s solar energy capacity to more than triple to 3.4-GW by the end of 2010, making it the second-largest solar PV market in the world. Moreover, applications for another 4 GW were submitted to Italy’s electricity regulator, meaning that Italy had sufficient installed and planned solar PV capacity to meet its 2020 target a decade ahead of schedule.

The job creation potential of government support for solar power isn’t to be overlooked either. “Solar energy generation produces more jobs than any other form of energy generation, and each dollar of public money invested generates an additional $4-$6 in private investment,” Applied Materials’ Cathy Boone noted on the solar PV industry materials and equipment supplier’s blog in March 2011.

Revising Italy’s Solar Feed-in Tariff

The Italian government’s looking to ease the burden on consumers by cutting back on its FiT rates, changes included in the country’s Fourth Conto Energia. Through the FiT, Italy’s electricity consumers pay for growing installations of solar PV and renewable power systems, though the additional cost can be offset by home, property and business owners installing their own solar PV and renewable power systems, as well as by increasing energy efficiency.

With the Fourth Conto Energia, Italy’s Parliament in June 2011 significantly reduced the country’s solar FiT between 22-30% in 2011, by 23-45% in 2012 and by 10-45% in 2013 depending on how much solar PV is actually installed.

Drafts of the fifth Conto Energia circulating on the Web state that the Italian government will reduce its solar PV budget by some $800 million and require all projects over 3-kW to be registered with relevant authorities. Slated for enactment in July this year, priority is to be given to solar PV plants built in areas in need of economic stimulus and those designed to minimize environmental impacts.

Solar PV participants worry that additional cuts would drastically reduce their revenues and profits, supporters fretted that it would derail progress towards a zero-carbon economy while detractors latched on and touted the changes as evidence of a failed policy.

Fortunately, solar PV is proving resilient, showing vitality and growth by holding its own in the face of cutbacks in incentives, while delivering on the promise of more affordable solar and renewable energy, jobs growth and reductions carbon dioxide emissions and environmental degradation.

Italian solar PV growth accelerated in 2011, with much of the growth coming in the last seven months of the year. Some 9-GW of solar PV capacity was installed in Italy in 2011, surpassing that in world solar PV market leader Germany for the first time. Nearly 4-GW of new capacity was installed from June through December. Taken together, Italy and Germany accounted for nearly 60% of global solar PV market growth in 2011.

Centralized, mass market electric utilities have been equivocal, at best, in their support of solar PV. Though far below 2011’s record-high level of solar PV installations, Enel, which controls around 85% of Italy’s electricity market, expects Italy to add another 3-4 GW of new solar power capacity in 2012.