Italy's solar sector, one of the biggest in Europe, has boomed since 2007 when the government boosted state-backed production incentives. But it will scrap the generous support from June to ease the burden on consumers, who pay for the incentives through power bills.
Italy's regional governments have said they would seek less severe cuts to state incentives for the solar power sector than planned by central government and they rejected Rome's draft proposals after a recent meeting.
Environment Minister Stefania Prestigiacomo said they had also asked for an extension of the current incentives, which are due to expire in June, for the whole of 2011. She said the government was prepared to offer a three-month extension.
"The decree will contain an extension until August 31," Industry Ministry Undersecretary Stefano Saglia, in charge of energy issues, told reporters after the regions expressed their opinion.
The government has to consult the regions before going ahead with the decree but is not bound by their view.
Prestigiacomo said an agreement on the new solar incentives scheme should be found soon, in line with Rome's commitment to complete the decree by the end of April.
The three-month extension of the incentive regime would help some investors to complete their projects but it would not trigger any new investment in the sector, said Jean-Francois Meymandi, analysts at UBS Investment Bank.
"It does not make any change in terms of new installed capacity and it just consumes more of the budget allocated to solar energy," Meymandi said.
Vasco Errani, the head of the regional governments' congress, said the regional conference unanimously decided to present amendments to the decree "requesting protection for current investments and softer cuts to incentives for the future."
The regions seek to raise a cap on solar sector production incentives to 450 million euros in 2012 from 373 million euros planned by the government, to double incentive caps in 2013 and 2014, according to regions' proposals obtained by Reuters.
They also would like to soften cuts in feed-in tariffs, a key incentive, planned for 2013-2016, according to the proposals.
Rome's new draft support scheme would in part cap subsidies for solar developers at 6-7 billion euros US $8.8-$10.3 billion per year by the end of 2016, when installed capacity is expected to be around 23,000 megawatts.
The scheme envisages a transition period running to the end of 2012 to safeguard investments under way when the new law is passed.
Sector operators and investors have said incentive cuts this and next year of up to an estimated 60 percent, as well as additional bureaucratic procedures were disruptive for their business strategies, would put brakes on the booming sector.
A group of foreign solar power investors said it had opened legal proceedings against Italy over the planned incentive cuts.
Italy's solar sector has attracted the world's biggest photovoltaic module makers such as China's Suntech Power Holdings Co, Trina, Yingli Green Energy and U.S. firm First Solar.