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Category — Italy

Italy’s Solar Bust: Just Another Data Point

“Intermittent generation may be consistent with a liberalized market, as long as generators are required to bear all the direct and indirect costs of their production. Otherwise, competition is doomed to become an irrelevant feature of a system that becomes more and more politically driven.”

Can an intermittent source be integrated into a liberalized electricity market?

Yes, it is technically feasible, but no otherwise. If subsidies enter into play, intermittent generation might undermine the very design of the market. This is what happened in Italy with the boom of solar power, which last year alone skyrocketed from 3.47 GW to 12.75 GW, with the annual cost of subsidies increasing from 800 million euro in 2010 to 3.9 billion euro in 2011 (about $975 million to $4.75 billion at today’s exchange rate).

These very generous incentives (which have been cut back in the last year for complex legal reasons) led to an over-investment in solar power in the country.

Perfect Storm” for Malinvestment

Italy’s perfect storm of so little electricity at so much cost had three causes: [Read more →]

July 20, 2012   5 Comments

Solar Energy: Tough Love in the EU

Across the European Union, solar energy is facing tough love conditions as its feed-in-tariffs (FiT) face déjà vu in another round of reduction.

Like in the classic Tale of Two Cities, the world of solar energy today seems filled with the excitement of seeing its revolutionary potential realized by rapid growth, while fearful that falling prices, changing feed in tariff subsidies and looming government deficits will overwhelm it first.

There is no denying solar energy’s promise and potential.  Its rapid growth is a worldwide phenomenon.  Lately I have been catching up on the news reports and changing solar situation in Europe.  A recent report prepared by Ernst & Young for UK’s Solar Trade Association confirmed what we already knew that solar PV prices are falling so fast that by 2013 they will be half of what they cost in 2009. But keep in mind for for on-grid applications, conventional power sources fueled by shale gas in particular are improving too.

New EU Realities

The EU’s big aspirations for a clean energy, low emissions future had run up against government budget deficits. Consequently, the mother’s milk of feed-in-tariffs for qualifying renewables is vulnerable to rapid modification.

Across the EU countries, feed-in-tariffs are being reduced or at least re-evaluated for affordability about every six months.  France is the latest country to announce changes in its feed-in-tariff regime. The UK is scheduled to follow suit slashing its feed in tariff rates in August 2011. [Read more →]

August 17, 2011   3 Comments

Italian Green Jobs: Where’s the Spaghetti?

(with Luciano Lavecchia)

Mr Lavecchia is a fellow and Dr. Stagnaro the research and studies director at Istituto Bruno Leoni. This post follows the release of their recent analysis for Italy showing that for every ‘green’ job created by government, 4.8 ‘gray’ jobs are lost in the private sector.

Tradeoffs: if you chose this, you can’t chose that. In economics this is called opportunity cost, which is the next-best alternative to what is actually chosen.

The proverb in popular culture for this is “you can’t have the cake and eat it, too.” The Italian translation is “you can’t have a full barrel and a drunk wife.”

Apparently, politicians are less familiar with such a everyday-life concept. To some extent, they are right: they can get a full barrel and a drunk wife at the same time, provided that taxpayers and/or future generations will pay for it. Yet, even politicians are subject to constraints. That is particularly true in a period of crisis like now: shrinking public budgets and a slowing economy force even the politicians to make choices.

EU Retrenchment

This brings us to the crisis of climate politics in Europe where most EU countries are considering cuts to the green subsidies.

The Socialist government in Spain dwarfed its support to solar power, causing a collapse in investments and thousands people to lose their jobs. In Germany, the conservative chancellor Angela Merkel proposed a similar reduction and is facing a huge Parliamentary opposition.

Italy decided as well to pare green incentives. How is that possible? After all, virtually every official EU document claims  that the “green deal” will make us not just more sustainable, but also economically better off.

We will not deal with the environmental side of the issue in this post, leaving it to the wise words of Dr Gwyn Prins, for example, and perhaps a future post.

Uneconomic RES

But what about the claim that renewable energy sources (RES) are good for the economy?

There is no spaghetti on this plate. If green sources are really cheaper than fossil fuels, there is no need to subsidize them, because households and businesses would have a built-in economic incentive to rely on RES, rather than on supposedly dirty, more expensive, energies. [Read more →]

June 11, 2010   4 Comments