As usual France has followed Italy in boosting solar manufacturing industry by giving a 10% FIT bonus for solar products manufactured in Europe. Note Italy had given this FIT bonus a year ago, however that has not helped the European solar manufactures. Even the biggest solar panel producers like Solarworld are near bankruptcy, as high cost solar panel locations like Europe are nonviable now. Most of the solar factories in Europe have closed (Isofoton is the latest one). Even as the lowest cost factories in China are operating in the red, solar factories in the world have not got a chance to survive. Countries are trying to protect their manufacturing base by imposing duties on imports of Chinese cells and panels. However protectionist measures don’t work well as small US makers of panels have gone bankrupt while Chinese makers have found workarounds by using solar cells from Taiwan. Only the US consumer has been hurt while US solar panel makers have kept shutting down.

Read Solarworld Solar Panel reviews.

We don’t think that this 10% FIT bonus will help the failing solar panel makers in Europe. The trend of solar factory shutdowns in Europe will continue and almost all manufacturing will migrate to Asia. Like semiconductors and other products, Europe will have lost out to Asia despite the ad hoc attempts by its governments to protect whatever manufacturing that is left.

PVTech

This quarter, the government has set all 0-9kW installations at €0.3159.According to the government’s announcement, the FiTs for rooftop PV systems up to 100kW with simplified integration have been raised 5%, while the FiT for ground-mounted PV plants up to 10MW has received a 20% cut. Yesterday, it was announced that the government would offer an additional 10% under its domestic content allowance bonus in order to further aid the ailing French solar industry.

Ontario Canada has a comprehensive solar subsidy policy which mandates that a large percentage of solar components be manufactured in Ontario in order to receive the Feed in Tariffs. The province has managed to attract a lot of manufacturing investment as well due to its local content requirements, which requires around 50-60% locally produced parts. This has made Solar Module companies like Silfab and Canadian Solar to set up module plants while companies like Enphase, Schneider and SMA are setting up inverter plants in the province.

Italy First Country to reach Solar Grid Parity on a Large Scale

Italy’s high electricity retail prices and superior solar insolation makes it naturally attractive to solar energy generation. With solar insolation almost 50% higher than Germany and Feed in Tariffs equal to, if not higher than Germany, Italy saw a massive boom in solar installations in 2010. The project ROI for solar plants has made it a lucrative target for all solar companies leading to a scarcity of solar components. Expect this boom to continue forward as the the 20% cuts will fail to dent the enthusiasm of solar developers who are seeing 20%+ project IRRs in that country. Italy’s target  of 8000 MW by 2020, will be far exceeded in my humble opinion. Some parts of the country are already at grid parity and by 2012-2013 you should see the first unsubsidized solar projects.

The main features of the Italian Feed in Tariff Policy in 2011:

1. A 20% cut in Feed in Tariffs in 2011 to be rolled out in 3 phases with 4 months gap. So apparently a 6.66%  cut in January and so on.
2. A 30% cut in FIT for solar plants greater than 5 MW. This should not have much repercussions as most of the capacity is lower than 5 MW. The German experience shows that the market can easily adapt to lower solar project sizes.
3. A 3000 MW cap on the installations during this phase with a target of 8000 MW by 2020. This proposal seems weird. Italy with its huge sunny areas and high retail electricity prices is already approaching grid parity in some places. Expect the 8000 MW target by 2020 to be far exceeded.
4. 6% cuts in solar subsidy in 2012 and 2013. This might have to be changed if Italy sees a massive boom like Spain did in 2008 and Czech Republic in 2009.