How (not) to Boost Solar Power: The Awesome and the Irritating Effects of Italy’s Eco-Bonus Program
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- In 2020, roughly 40% (21.5 GW) of Italy’s renewable energy originated from photovoltaic (PV).
- By 2025, Italy may source another 7.1 GW from solar power.
- To reach Europe’s Fit for 55 targets, the Italien “super bonus” program subsidizes residential investments in solar power by 110%.
- Smartly, only PV installed during energy renovations receives the 110% bonus. All other PV installments still qualify for a 50% bonus.
- While the program is generally well-received, it also inflates renovation costs, exceeds the renovation capacity of the building sector, and encourages fraud, says Reuters.
Green Deals: Rescuing the economy during Covid-19 while changing its trajectory
Governments identified green new deals as valuable in coping with the economic crisis during Covid-19 (Tooze, 2021). To incentivize sustainability, states subsidize investments that are not yet profitable on the free market and, thus, boost the economy by increasing the demand. One prime example of promoting the energy transition on the level of private households comes from Italy.
Between 2009 and 2020, Italy increased its photovoltaic (PV) capacities by factor 12. While 18.2% of Italy’s energy came from renewables in 2020, roughly 40% (21.5 GW) of renewable energy came from PV. According to solarpowereurope.org, Italy may add another 7.1 GW of solar power to its grid by 2025 if it applies comprehensive programs like the super bonus, covering residential investments in PV and energy renovations.
Italy’s policymakers acknowledge that energy renovations are often too expensive for private households, thus supporting consumers financially. That is, the Italian government spends an additional €59 billion between 2021 and 2026 to expand their renewable energy grid.
As a part of this program, Italy raised its subsidies of private PV investments from 50% to 110%. That is, residents receive money for applying solar panels to their roofs. The program aspires to continue through 2025 and was recently approved by the parliament for 2022.
Subsidizing PV investments: How and for whom?
However, Italian house owners do not receive a straight-up check. Instead, the program offers three ways of receiving financial support. According to balkangreenenergynews.com, residents purchasing PV can opt to:
- receive a tax deduction over five years,
- transfer the tax-deductible allowance to pay installers and product suppliers,
- or obtain the bonus through invoiced discounts.
Smartly, the 110% bonus only applies to PV installed during deep renovations that entail upgrading insulation and a new, low-emission heating and cooling system. PV installments not part of a deep renovation are not eligible for the 110% bonus but still receive the 50% bonus. Thus, the Italian government appears to comprehensively support buildings’ urgently required shift towards sustainability.
Read next: Climate-Neutral Buildings: The Booming Market of Energy-Renovations
Effects and criticism
The super bonus program is generally well-received and applied for by residents, and its scope exceeds comparable programs of wealthier European countries.
However, the program’s generosity also retains downsides, according to Reuters:
- It disproportionately benefits house owners who are already well off.
- Fraudulent applications for the bonus cost the Italian state already more than €1 billion during the first 1,5 years of the program’s run time.
- The energy renovation bonus also applies to gas heating. Thus, the program promotes fossil fuel heating, torpedoing its climate effectiveness.
- The rapid boost in demand found construction businesses unprepared. The sudden popularity of energy renovations inflates prices massively, and construction businesses do not have enough capacity to meet the demand. Thus, the rates at which buildings are being renovated barely increase, while the inflated prices place a heavy burden on the state’s budget.
Conclusion
While Italy’s super bonus program amazes in size and ambition, its potency is also its shortcoming. Making energy renovations and PV investments too attractive too quickly wrecked the renovation market and led to unnecessarily high costs for the state.
Therefore, although the state’s deficit is not the greatest concern for proponents of the Green Deals’ fiscal philosophy, other countries may find that a slow but steady increase in incentives may be more reasonable.
However, if Italian businesses react by hiring more employees, the state’s investments may reach both businesses and citizens in need of a stimulus to get back on track after the economic challenges of Covid-19. Then, the brute-force approach may ultimately become more attractive, particularly to states whose economies are struggling as much as Italy’s.
What’s up next?
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References
[1] Tooze, A. (2021). Shutdown: How Covid Shook the World’s Economy. Penguin Books.
[2] Statista (November 18th, 2021). Number of Photovoltaic Systems in Italy from 2009 to 2020. https://www.statista.com/statistics/787825/number-of-photovoltaic-systems-in-italy/
[3] SolarPower Europe (2021). EU Market Outlook for Solar Power 2021–2025.
[4] International Trade Administration (October 9th, 2020). Italy — Country Commercial Guide: Renewable Energy. https://www.trade.gov/country-commercial-guides/italy-renewable-energy
[5] Balkan Green Energy News (June 2nd, 2020). Italy Enables Homeowners to Install PV Systems for Free. https://balkangreenenergynews.com/italy-enables-homeowners-to-install-pv-systems-for-free/
[6] Bellini, E. (2020). Italy extends 110% fiscal break for rooftop PV linked to building renovations to 2022. PV Magazine. https://www.pv-magazine.com/2020/12/21/italy-extends-110-fiscal-break-for-rooftop-pv-linked-to-building-renovations-to-2022/
[7] Bellini, E. (2020). Italian homeowners can now install PV systems for free. PV Magazine. pv-magazine.com/2020/05/22/italian-homeowners-can-now-install-pv-systems-for-free/
[8] Jones, G. & Fonte, G. (2021). Analysis: Superbonus! Italy’s green growth gambit lines homes and pockets. Reuters. https://www.reuters.com/markets/commodities/superbonus-italys-green-growth-gambit-lines-homes-pockets-2021-12-09/
