Italy must double reneawbles capacity to hit target

MILAN (Reuters) - Italy will have to double its renewable energy capacity and invest 50 billion euros ($73.29 billion) to meet the European Union's climate change targets for 2020, chairman of Italy's renewable energy body said on Monday.

EU leaders agreed in December 2008 that their countries would make 20 percent of energy from renewable sources such as wind, sun and waves by 2020 aiming to cut greenhouse gas emissions by a fifth below 1990 levels.

"To reach the 2020 targets we need to double Italy's total installed capacity ... So from now to 2020 we need to add about 20,000 new megawatt," APER Chairman Roberto Longo told Reuters in a telephone interview.

Italy's total renewable energy installed capacity amounted to 24,400 MW in June 2009, or about a quarter of total power generating capacity in the country, according to data from APER and Italy's power grid operator Terna.

Longo said Italy would be able to reach the targets and would need to add another 8,000 MW of wind power and 4,000 MW of photovoltaic (PV) installations which turn sunlight into power.

In June, wind power installed capacity was just above 4,000 MW and PV capacity stood at about 500 MW, which is enough to meet power demand of 210,000 families, according to APER data.

Longo said investors and energy operators need to be reassured by the government that Italy really intends to meet the climate change targets. But they have been receiving contrasting messages from politicians so far, he said.

"We need to see if there is a political will to reach the targets," he said.

Prime Minister Silvio Berlusconi has asked the European Commission to renegotiate the caps on Italy's carbon emissions, an Italian government official said last week.

INVESTORS, OPERATORS WANT CLEAR RULES

"There are resources, there are funds available for it, we have industry's will (to meet the targets). We only need to have regulatory instruments to do it," Longo said.

Banks and private equity funds were ready to invest about 50 billion euros needed for Italy's clean energy sector to meet the 2020 targets, but investors wanted to see clear and long-term government policy to plan their strategies, he said.

"From the point of view of incentives, Italian market is very interesting ... We have higher incentives than other countries. But it is offset by problems with building plants: bureaucracy and grid connections," he said.

One of the main unknowns for investors is how the government would change its existing incentive scheme for the booming PV sector. It offers steady returns for 20 years but should come under review once installed PV capacity covered by incentives hits 1,200 MW. It is widely expected to happen in 2010.

Longo said renewable energy operators were ready to accept cuts in solar subsidies because costs of solar panels fell sharply in the past months, but they wanted to see stable and long-term targets to be able to adjust their strategies.

"We prefer a fair return on investment with a low risk rather than high returns and high risks," Longo said.

Italy's Industry Undersecretary Stefano Saglia told Reuters on Monday the government was planning to cut PV incentives gradually and was considering introduction of annual subsidy caps to control the market growth.

APER, which unites more than 450 companies with a total installed renewable energy capacity of more than 6,200 MW which can cut annual CO2 emissions by more than 5 million tons, wants to discuss the regulatory regime with the government.

($1=.6822 Euro)