Solar FiT Crisis Continues in Spain and Italy

Solar Energy Potential in Italy

Spain was for a while the darling of the renewable energy industry worldwide and Italy sought to mimic its use of feed-in-tariffs to jump start a nascent renewable energy industry.  But the generous feed-in-tariff produced a staggering 10 times the goal for solar photovoltaic systems by 2010 in Spain and much of that subsidy money went to China for the purchase of cheaper PV panels than Spain could produce at home.

Add to that embarrassment the ravages of a global recession and the budget deficits it caused and Spain began slashing its feed-in-tariff last year.  Spain’s solar photovoltaic subsidies were €2.6bn in 2010 and both the government and the largest Spanish utilities complained the costs are unsustainable. The utilities are still waiting for the Spanish Government to repay the €20bn advanced to cover the subsidies they paid out for approved solar and wind projects in 2010.

Now in another round of retrenchment after cutting its FiT subsidy in 2010, Spain is expected to reduce its solar renewable energy target from 22.7% of electricity consumption to 20.8% by mid-2011 according to a recent Bloomberg report because Spain can no longer afford the fiscal impact of the subsidies.

Meanwhile, the Italian Government which had also approved reductions in the solar FiT to take effect in June 2011 relented allowing them to continue for an additional three months until August 2011 under pressure from regional officials but Italy said it could afford no more than a 90 days extension before fixed caps and cuts of up to 60 per cent take effect. Italy plans to cap solar subsidies at €6bn to €7bn a year by the end of 2016 to support an estimated 23GW of installed solar capacity by that date.

Across Europe politics is giving way to fiscal realities and the subsidies that created such a spike in wind and solar capacity installed is falling back to earth forcing the industry to compete on much less advantageous terms.