Feed-In Tariffs Boost Renewables in Italy, Elsewhere

Solar PV panels in Furth, Germany

Solar PV panels in Furth, Germany, image courtesy of Siemens

In an article published Monday, renewable energy expert Paul Gipe documents the rapid advance in Italian solar photovoltaic (PV) installations, noting that Italy’s total PV capacity has now outstripped that of the United States. Despite the current economic crisis, Italy is expected to add 1,500 megawatts of solar PV in 2010 alone, more than doubling its installed capacity to 2,648 megawatts.

The dramatic growth began after Italy introduced a solar feed-in tariff in 2007. New PV capacity increased by five times that year and has doubled annually since. Growth has been dominated by small installations, with distributed rooftop panels making up 93 percent of the country’s capacity.

Feed-in tariffs guarantee that renewable energy generators can sell their electricity for a fixed rate, assuring them a market and enabling them to compete with cheaper sources. Due largely to this policy, Italy’s solar PV market is now second only to Germany’s, where renewables were boosted by feed-in tariffs for solar as well as wind power. Feed-in tariffs have seen similar success in Spain, which generates nearly a quarter of its electricity from renewable sources and has an especially strong wind power industry. (China, Japan, and Germany remain the world’s largest producers of solar panels, however.)

Usually, feed-in tariffs are phased out over time as renewable technologies become cost-competitive with market electricity prices. Italy is considering proposals to incrementally reduce its tariffs by 6 percent in each of the first three quarters of 2011. Despite these reductions, the government still aims to install 3,000 megawatts of new generation from 2011 to 2013.

Germany and Spain’s feed-in tariff programs are facing greater strain, with major cuts likely. The cuts could slow investment, but they reflect the assessment that wind and solar can soon compete without governmental subsidies. (This could occur even more rapidly if the hidden subsidies for fossil fuels, including the externalization of their environmental costs to society, are abolished at the same time.)

Feed-in tariffs have proven to be one of the most effective ways of creating a vibrant market for renewable energy sources, especially those that need temporary support to compete in electricity markets while technology advances and economies of scale are realized. In the United States, Representative Jay Inslee (D-WA) introduced a feed-in tariff bill in 2008, but it failed to make it out of committee. In the absence of a federal feed-in tariff, a few states have taken the lead and implemented programs of their own. California and Vermont have feed-in tariffs and several more states including Indiana, Minnesota, and Michigan are considering adopting them.

Feed-in tariffs should be explored further to boost an already rapidly growing renewable energy market and prevent the U.S. from falling further behind its global competitors in renewable generation and technology production.

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