Italy's solar market heats up

Francinia Protti-Alvarez
04 February 2010

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Earlier this week UK-based investor Amplio Group connected two solar PV plants in Italy and plans to connect an additional four by the end of the month – all in all a €13m deal.

Solar plants are hot across Europe: Just last week HgCapital acquired two plants in Spain with 12MW operating and 8 MW under construction. Germany, Scandinavia and Spain have been developing their renewable energy capacities for quite some time now, but until very recently it has not been the case in Italy.

The country has set a target for solar-generated energy at 1,200 MW, with a tariff of €360/MW in place until the end of this year. According to rumours, the target could be increased to 3,000 MW while the tariff could be extended to April 2011 –albeit at a lower €260/MW rate. "Italy currently offers a favourable incentives framework to investors wishing to invest in solar developments, This will change if tariffs will go down to E260/MWh as the cost of the panel will not continue to decrease as it has done in the last 18 months" observed Riccardo Segat, CEO at Amplio Group.

Opportunities for renewable investments don't stop at solar: last year AXA Private Equity took a 45% stake in TRE & Partners, a company designed to invest not only in solar but also in wind and hydro projects in Italy.
Despite the enthusiasm around the renewable energy sector, several challenges remain. While the tariff scheme in place is conducive to solar investments, the lack of clarity at the administrative level and the constantly changing nature of Italian legislation add some uncertainty.

Project financing for solar projects is also becoming more difficult for investors to obtain. With the likes of Royal Bank of Scotland less active in foreign markets, local banks such as UniCredit, Mediobanca, and Banca Intesa have been tasked with filling the gap. "Banks are becoming more selective backing projects with an average portfolio size between 20-30MW; what this means is that smaller independent projects are unlikely to find the financing required for development which is often close to 80% of the development and construction cost," noted Segat.

Such challenges create opportunities for private equity. Add to this the fact that Italy's energy mix reveal renewables account for less than 10% – well below the European target of 20% set for 2020 – and the growth potential becomes immediately apparent.