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New crisis, same struggles


04 June 2020 by Marco Dorothal


As the COVID-19 virus sweeps the world, everyone has had to put their lives on hold. In Italy, the situation is no different. The development of solar photovoltaic (PV) plants has been put to a halt, with many contracted projects piling up in the pipeline. In order to assess the situation, ITALIA SOLARE surveyed 500 of its members including PV system installers, designers, distributors, material manufacturers, EPC/General Contractors/O&M and system developers. Two surveys were conducted - one in March (at the beginning of the pandemic) and one in May (in the midst of the pandemic) - with the aim to understand the impact of the COVID-19 virus on the entire solar value chain and the solutions available to deal with the post-lockdown environment.

A slide in new orders
The main findings from both surveys showed that the situation is getting more critical by the day. Both surveys highlighted that the pandemic has led to a significant drop in orders. However, the latest survey showed that almost a third of respondents (32%) reported a contraction in new activity between 75% and 100% compared to last year. Around 40% said orders had contracted between 25% and 74%, and the remaining 29% by up to a quarter

Shrinking workforce

The latest survey also showed that some businesses are currently going through alarming times, with 1 out of 5 businesses interviewed stating that their company risks closure or bankruptcy. As a result, this will have a serious impact on their workforce. More than two thirds (72%) of respondents stated that they will have to impose a reduction of up to 25% in staff numbers, while 16% expect a contraction of up to 50%, the remaining 12% estimate they will have to cut more than half of their workers.

Cloudy forecasts

The forecast for business performance in 2020 as a whole remains critical even though -compared to the March survey - there are fewer respondents who expect orders to fall almost to zero. An estimate of 70% of respondents have now stated that they expect a drop in orders between 25 and 75%, while there was a decrease in the percentage (5.2%) of those who expect a contraction in their business of more than 75%.

Actions needed

The current pandemic has brought many problems for market players. The main issues relate to the increased difficulty in completing current projects, the need to start constructing contracted projects (to meet deadlines) and the fact that inspections cannot take place. To overcome this crisis, solar businesses have called for the government to intervene with higher tax credits and tax cuts, as well as non-refundable grants and dedicated funding.  However, before these measures can have the required effect, the country’s government has to tackle the bureaucracy present in Italy. 

Paolo Rocco Viscontini, president of ITALIA SOLARE, stated that “The results of our second survey show that the solar industry is living through a major crisis, but at the same time we are confident that it can start again quickly, but only if action is taken quickly and effectively. More than incentives, solar businesses are calling for a reduction in bureaucracy, which is the real obstacle for the sector. Getting out of this difficult period is possible and must be done by focusing on green development, the real engine for the future of the country.” 

The Italian government responded to the Covid-19 crisis by issuing the Relaunch Decree. This new decree is a package of guidelines aimed at reviving the Italian economy, which also covers solar PV. The main benefit for PV systems will be the increase in government support for PV installations and storage systems associated with building-renovation projects - the so-called “eco-bonus” - from 50% of costs to 110%. “For the sector, the Relaunch Decree is certainly a great opportunity for the spread of photovoltaics on the roofs of Italian homes,” commented Vicontini. The country‘s eco-bonus and net metering scheme have been the main drivers for solar in Italy in recent years. 

Viscontini also highlighted the fact that provisions need to be maintained at least until 2025 for a stable market. Together with the reduction of the level of the tax breaks, the prolonged provisions will give companies the opportunities to invest in new professional resources. “This can happen if … at least five years are guaranteed,” Viscontini stated. “Only in this way do we believe that skills and above all stable jobs can be created.”

Waiting for the sun

Drastic times call for drastic measures, which is exactly what ITALIA SOLARE’s members are calling for to stimulate a revival of the sector. These measures include: removing authorization procedures for new ground-mounted PV plants on agricultural land; getting energy communities started; reactivating credit transfers focused primarily on the needs of small and medium enterprises; and facilitating (in terms of authorizations and GSE procedures) the refurbishing and repowering of existing plants. 

The most recent auction proved these measures are crucial for the further development of solar in Italy. Solar was only awarded a meager 4% of the auctioned capacity, while wind won the largest share of renewable energy capacity. The previous auction -which took place at the beginning of the year - yielded similar results, with solar only being able to take home 1% of capacity. Unfortunately, the requirements for the participation in the auctions are very strict, especially for ground-mounted PV plants on agricultural areas that cannot participate in the auctions. This has resulted in fewer and fewer large-scale solar projects, as well as a lack of interest from solar developers to participate in the country’s renewable energy auctions.
The main takeaway here is that bureaucracy remains a major obstacle for Italian solar projects. Market developments are also being obstructed by the inefficient procedures dictated by the country’s energy agency (GSE),  which ultimately should provide support for the development of PV projects rather than slow it down even further. The first measures issued by the Italian government have brought some life back to the market, but it is not enough. If the bureaucratic element of the solar PV market in Italy cannot be overcome, the crisis might be the least of the market’s worries for the coming years. 

 

References:

Bellini, Emiliano. May 2020. Italian homeowners can now install PV systems for free.
https://www.pv-magazine.com/2020/05/22/italian-homeowners-can-now-install-pv-systems-for-free/
ITALIA SOLARE. May 2020. Amid Covid-19 emergency, Italy’s photovoltaic sector grapples with sharp drop in orders; 1 in 5 companies at risk of closing.
https://www.globalsolarcouncil.org/covid-19-survey-italy/
Argus Media. May 2020. Wind continues to dominate Italian renewable auctions.
https://www.argusmedia.com/en/news/2109431-wind-continues-to-dominate-italian-renewable-auctions