ROME Italy plans to put a six-monthly or annual cap on solar incentive costs rather than power output under a new renewable energy support decree and aims to scrap incentives from 2017, its deputy industry minister said on Thursday.
Rome, which has decided to scrap the existing generous solar incentives from June, has been drafting a new support scheme.
Italy's solar sector, among the biggest in Europe, has boomed since 2007, when generous production incentives were launched.
It has attracted the world's biggest photovoltaic module makers such as China's Suntech Power Holdings Co, Trina, Yilgli Green Energy and U.S. firm First Solar.
"We're thinking about a cap on costs on the German model, seeing that the cap on power has been so unwelcome," said Stefano Saglia. He added that no decision had been taken on whether the costs would be calculated every six months or annually.
"Moreover, the new system foresees no incentives in 2017," Saglia said told reporters on the sidelines of a conference.
Solar sector operators and investors fear the government would introduce an annual limit on installed photovoltaic capacity saying such a move would put brakes on Italy's booming sector in a similar way to what happened in Spain.
Italy's biggest renewable energy association APER and the largest solar energy body GIFI favor the German model, under which incentives are automatically reduced once installed capacity reaches a certain amount.
Many solar energy sector operators believe that Italy will reach grid parity by 2017-2018 -- when solar energy is expected to become competitive with traditional power generation -- and the industry would not need incentives.
Solar energy production incentives are paid for by consumers in their energy bills and the government is seeking to lower these costs.
Saglia, who had expected the new decree to be ready this week, said it will be discussed by a state body including the heads of Italy's 20 regions on April 20.
"I believe we are reaching the end of works," Saglia said.
The decree needs to be signed by the Industry and Environment ministers before going to the state body of regional heads for its opinion, a government source has told Reuters.
Saglia declined to say by how much solar incentives would be cut under the new scheme but said the government aimed "not to penalize investments."
Italy's biggest renewable operator is Enel Green Power while utilities such as Edison and CIR energy unit Sorgenia have renewable businesses.
(Writing by Svetlana Kovalyova, editing by William Hardy)