Solar industry sees boom in sunny Italy

By Svetlana Kovalyova - Analysis

MILAN (Reuters) - Italy may soon become Europe's next frontier for solar energy as new incentives prompt investors to bet on higher returns than in Germany, which has less sun but is currently the hub of a growing global market.

Italy is trying to catch up in a worldwide race to find alternatives to the fossil fuels that arouse worries about security of supply and planet-warming carbon emissions.

Earlier this year, the Italian government approved new incentives to boost photovoltaic (PV) energy, which turns sunlight into power. It ordered all new buildings to have solar panels on roofs, aiming to exploit fully its abundant sunshine -- about 30 percent more per square meter than in Germany.

"Italy must be more aggressive," said Winfried Hoffmann, president of the European Photovoltaic Industry Association (EPIA). "We in Germany have installed 3,000 megawatt (MW) over several years, and there is much more sunshine in Italy."

One megawatt (MW) -- a million watts -- is enough electricity to power about 1,000 homes.

As a result of its new incentives, Italy aims to boost installed photovoltaic capacity to 3,000 MW by 2016, nearly 60 times more than last year.

Uwe Krueger, chief executive of Swiss technology group Oerlikon, said interest in solar power was rising as improved technology and high oil prices meant it was closer to being able to compete with traditional fossil fuels.

"It gets economically viable in areas of the world where there is a lot of sunshine: southern parts of the United States, areas in Asia, the Middle East, Italy, Spain, Greece," he said.

"No wonder we experience a lot of demand coming specifically from these areas. We are talking about billions and billions of dollars of investment which are lined up there for solar parks."

Italian sector specialists expect costs of solar energy generation to become competitive with traditional generation in Italy in the next 10-15 years.

German solar company Conergy, which aims to expand in Italy, expects this goal to be reached within the next 10 years, the same timeframe as in Germany.

Southern Italy is where it will happen quickest, with solar power output nearly double that of further north -- at 1,500 kilowatt hours per year per every KW of installed capacity versus 900 KW hours a year.

INCENTIVES

To lure investors, Italy in February amended its solar energy law to align it with a German incentive scheme called "feed-in tariff", which guarantees above-market prices for generating solar power.

"Without subsidies, solar is nowhere near conventional utility energy rates," said analyst Paula Mints of Navigant Consulting.