As expected, the Italian cabinet signed off on a solar policy without a 8GW annual cap, but did institute a 1MW cap on farmland projects. Under the new policy, projects are required to be connected to the grid before May 31 to benefit from the current feed-in tarrifs. Any new FiT decision for projects beyond May would likely be made by April 30, according to published reports.

Barclays Capital believes the decision “to be worse than expectations as it increases uncertainty with respect to 2H11 fundamentals and likely increases risk to financing of several ongoing projects.” The firm expects “this policy to result in a significant slowdown in the Italian market in Q2 until pricing expectations are reset for a potential 30%-50% FiT cut in 2H11.”

In a letter to its contact list about the decision not to cap the market, EuPD Research noted that “further agreement by the representatives of the industry association GIFI as well as representatives from the Ministry for the Environment and the Ministry for Economic Development on the reductions was not reached today. The main reasons for a timely intervention can be found in the installed capacity of recent months along with the high prices of solar components.”

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“The continued existence of solar finding in Italy has been subject to intense deliberation for a number of days,” the EuPD note continued. “Representatives from the Ministry for the Environment, the Ministry for Economic Development along with the Gruppo Imprese Fotovoltaiche Italiane (GIFI), the PV industry association, have just reported that further talks have been postponed to April. Although the comprehensive market cap, demanded by the ministries at the start of the week, is no longer an option, cutbacks will nonetheless come into action in June 2011.”

“It is claimed that these adjustments should prevent an overproportional burdening of private and commercial electricity customers,” according to EuPD. “Objections to a comprehensive market cap were not only voiced by market experts and analysts but also by legislators. Market intervention to such an extent serves only to constrict the market. An example of which can be seen in Spain.

“Making adjustments to funding is the right step,” according to Markus A.W. Hoehner, CEO of the Bonn-based market research and consulting company. “Prices in the small rooftop system segment in Italy are, on average, 4,300 Euro, and peak at 6,000 Euro. These prices are much higher than those in other European countries, such as Germany, Spain, or France.”

“The scope of these future cuts has to be decided on with a sense of proportion,” he said. “Otherwise, they are likely to pose a considerable challenge not only to domestic companies but also to the international PV branch that, until recently, had a promising sales market in Italy.”