Jefferies report: installs will decline in Italy but market will remain economically sustainable

Financial bank Jefferies has announced that it believes the Italian government’s revised renewable energy legislation will not have as much of a detrimental effect on the industry as first thought. Alongside lawyers, industry associations and relevant parties within the political process, the report states that the revisions to Conto Energia IV will make the market economically sustainable and plays to the strength of solar PV as an easily distributable energy source.

Jefferies is of the belief that incremental revisions of this draft may be a possibility, but this will not have any effect on the previous estimate of 2GW proposed for this year.

From a market loss and spot price perspective, larger ground systems will be the biggest losers in Conto Energia V, but favourable towards small rooftop systems up to 10kW, uncapped and with no restrictions. It is important to note that the vast majority of systems in Germany are small installations. The report also states that this will encourage self-consumption, with PPAs becoming the norm.

The new subsidy will take effect from either July 1, or 30 days after the €6 billion cap from Conto Energia IV has been reached.

The report concludes that over the next two and a half years, the market should remain at a stable 2GW. However, it also asserts that, “The law is as expected. Solar installs in Italy will decline sharply in 2012, but demand may be more stable in the longer term.”

On a positive note, Jefferies maintains that Italy could grow once a more definite infrastructure for smaller systems is in place.

However, solar industry association Comitato IFI has said that cutting the local content bonus would allow foreign companies to dominate the Italian market. This is affirmed by data from IMS Research which states that expansion of PV outside Europe offers a more optimistic view of the global solar industry. According to IMS, at least 23 countries will install 100MW or more this year, up from just 17 last year as well as tracking installations being seen in around 60 countries. The research firm assert that global installations will reach between 27.8GW and 32.6GW in 2012, compared to its latest figures for 2011 when installations were said to have reached 26.9GW.

Enviromental organization Legambiente and WWF Italia have suggested that the new legislation will hinder further development of the solar sector in Italy.

The draft has now been submitted to the state region conference and the Italian Authority for Gas and Energy. The opinion of these parties is compulsory but not binding. However, Jefferies is of the opinion that some politicians are pushing for more favorable revisions and this draft is most likely the worst case scenario.

To access the full Jefferies report please click here.


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