MILAN Italy approved a long-awaited decree that cuts spending on generous solar power incentives, ending a period of uncertainty that had irked international investors and weighed on shares of major global solar companies.
Italy's solar market, the world's second-largest after Germany, has boomed since 2007, when the government boosted production subsidies, but Rome has sought to cut incentives to help consumers who support the scheme through power bills.
Industry Minister Paolo Romani and Environment Minister Stefania Prestigiacomo signed the decree on Thursday, the industry ministry said. To become law it needs to be published in the "Official Gazette."
"This important document finally gives stability and long-term prospects to the market until it reaches technological competitiveness," Romani said in a statement.
Differences of opinion between Romani and Prestigiacomo had slowed its signing, which was originally expected at the end of April, and protracted regulatory uncertainty prompted investors to downsize their plans for the Italian solar market.
Under the new solar decree, a transitional period with gradual cuts in incentives will start from June 1 and run to 2013, after which the incentives will automatically be linked to reaching a certain level of installed capacity.
The decree aims to cap subsidies for solar developers at 6-7 billion euros ($8.9-$10.4 billion) per year by the end of 2016, when installed capacity is expected to be around 23,000 megawatts.
The decree is published in Italian on the industry ministry website (www.sviluppoeconomico.gov.it)
INVESTORS, OPERATORS UNHAPPY
"Our general opinion is negative," Gianni Chianetta, chairman of Italian solar industry association Assosolare, told Reuters after the decree was published.
"Budget caps for 2011 and 2012 are too low, a new registry mechanism for big plants is too complicated and bureaucratic and investments under way have not been respected," he said.
Rome has tightened the planned cap on the money it intends to spend from June to end-2012 compared with an earlier draft of the decree.
A cap on incentives and a registry for big installations only (above 1 MW on rooftops and 200 kilowatts on the ground) will help eliminate speculation, the industry ministry said.
Chianetta, who is also chief executive of BP unit BP Solar Italia, said the new rules would slash investments in the sector, especially from operators who need bank financing, and would reduce the number of new big installations.
BP Solar Italia will review its strategy in the light of the decree, he said.
A group of foreign investors said they had asked the state for 500 million euros to cover damages expected from regulatory changes under the new decree.
"Long term, the overall euro cap (including small systems) looks slightly negative against previous expectations as the market size should not exceed 2-3 GW per year," UBS Investment Research said in a note after the decree was signed.
The industry ministry said the decree would allow the solar industry to reach grid parity -- when solar power becomes competitive with fossil-fuel power generation -- by 2017.
Italy's booming solar sector has attracted the world's biggest photovoltaic module makers such as China's Suntech Power Holdings Co, Trina, Yingli Green Energy and U.S. firms First Solar and SunPower Corp.
(Additional reporting by Alberto Sisto in Rome, editing by Anthony Barker and Jane Baird)