Post-crash austerity weighs on Italy


August 10, 2015

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Italy is the dark horse of European wind.

The southern European nation does not get the same attention as the likes of Germany, Spain, the UK or France, but is still Europe’s
fifth-largest market
, with installed capacity of 8.7GW. Between 2008 and 2012 it was growing at an average of 1GW a year.

But since then it has been through similar troubles as other nations.

The country was in the grips of the global financial crisis, and the government wanted to find a way to rein in subsidies to reduce the impact on consumer energy bills. In 2012, it switched to a regime whereby developers had to win their subsidy support through a feed-in tariff auction, but this added uncertainty to the system and made it financially unviable for many schemes to proceed.

The result is that annual installations dropped to 437MW in 2013, and then to just 108MW in 2014. Italy’s renewables association ANIE Rinnovabili released figures last month showing that 190MW of wind farms were completed in the first half of 2015, which is good progress from the previous year.

Even so, those regulatory changes are still causing problems.

It is not as bad as Spain, where nothing was installed in the first half of this year, but it is still not good. The Italian government has also sowed similar uncertainty among investors as Spain did, by making retrospective changes to the subsidies for solar farms.

Now, though, the Italian government appears to be recognising the problem and, later this year, it is poised to introduce a new ‘green act’ that promises to support sectors including wind.

The proposals include new laws to tax the largest polluters; eliminate subsidies for fossil fuels; introduce clear and transparent rules to approve renewables projects; and make it easier for communities, companies and individuals to install renewable energy technology. The devil will be in the detail but the plan, which is being driven by Prime Minister Matteo Renzi, looks as though it is going to put renewable energy on a more certain footing.

But we are not heading back to the days where annual wind installations topped 1GW. The reason for this is that the country has almost met its nationally-binding targets.

For instance, Italy is in touching distance of the 2020 target, set by the European Union, of generating 17% of energy from renewable sources. At a national level, it is still a way off the target set in 2008 of 12.7GW of installed wind power by 2020, but that target was set in the heady days before the global financial crash. Since then, Italy’s leaders have focused on the more urgent priority of stopping Italy from going the same way as Spain or Greece.

Investors should still be able to find opportunities in Italy. Firms are winning consent for projects, and there will be opportunities in repowering existing projects in order to improve returns. It has also thus far avoided the mistakes of nations like Spain.

Italy will not be top of the list of prospects for many investors, but this dark horse might still be worth a bet.

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