Friday, January 22, 2010

Italy: About to Give Solar the Boot? (TSL)

If true this is bad news for Trina Solar. Approximately 25% of their revenues came from Italian operations. They have a 25% market share in Italy.*
The stock is down $1.38 at $21.28.
From The
...Many solar analysts are of the opinion that Italy will pay close attention to the moves made by other European countries, most closely to Germany, which has been the bellwether solar market, and that Italy is likely to follow suit with Germany's policy thinking on solar. France announced last week a solar tariff cut of 24%, hoping to stave off what France already saw as increasingly speculative behavior.

That doesn't meanItaly's tariff scheme will not be a boon in 2010 for solar, but it does mean that boon may be a bust by 2011.
Currently, Italy has among the most attractive feed-in tariffs in the world.
If Germany moves ahead with its proposed cut, Italy's tariffs will all of a sudden be way out of line with the situation in France and Germany.

"The disconnect in returns between Italy and the other countries could grow so wide that the Italians will have to ask themselves why they are providing solar with such high returns," cautions Navigant Consulting director Andrew Kinross.
Currently, Italy's tariffs are even more favorable to solar projects than tariffs in Germany.
Kinross said that in the immediate future, Italy will be one of the key solar growth drivers. "Three years ago, it wasn't even on the solar map, and now people are talking about passing the 1.5GW cumulatively threshold this year," Kinross noted.

Something else that Italy itself has been talking about is capping solar tariffs, as Spain did. The Italian government has already said that it will not put a cap in place before the end of 2010. That seems like a good thing, since the Italian government had made previous comments that once solar capacity reached the 1200MW mark a cap would be implemented.

The critical issue is that beyond 2010, no one knows what Italy will do in terms of a cap. "This is basically the same mistake that Spain made," Navigant's Kinross said.

What's more, the risk that with Germany planning such a drastic move, Italy could surprise solar and do a political about-face on its promise to not cap solar in 2010 cannot be discounted either...MORE

...Finally for investors in rent-seeking organizations there is the real risk that the politicians will change the rules. Heed the words of Sen. Simon Cameron (R&D!-Pa.):
"The honest politician is one who when he is bought,
will stay bought."
Our Hero
Simon Cameron

*Prior posts:

Sep. 28, '09: Solar: "Italy proposes policy changes: New FiT looms" (TSL)

Trina shareholders should keep an eye on this as TSL has an approximate 25% market share in Italy AND is not in the BIPV biz....
June '08: Solar: Arrivederci Germania, Viva Italia!
As the herd moves off in search of tasty subsidies...
July '08:
Trina, Suntech in supply deals with Italy's Enel (STP; TSL; ENEI.MI)
Trina had jumped ahead of the herd's movements, Germany, Spain, Italy, Greece by establishing a strong presence in Italy where they have a 26% market share. By being early they were able to make the connections and develop the relationships. Enel is a big dog*....
"Trina Solar Renews Contract in Italy, A Key Solar Market Now That Spain Is Sputtering (TSL)"

"SunPower: Italy Next Big European Solar Market, Trina Solar Contract Encouraging (SPWR;
In accordance with the prophecy "Solar: Arrivederci Germania, Viva Italia!".*
That concludes our pseudo-mystical moment for today, now back to our regularly scheduled programming....
Trina Solar in Three-year $158 Million Pact (TSL)

Nov. '09:
Trina Solar Trumps Them All (TSL)