On 7 March 2011, the President of the Italian Republic signed into law a new decree on Renewable Energy (the "Decree"). The Decree, among other things, introduces limits to the applicability of incentives under the old feed-in tariff of 6 August 2010. In particular, these limits affect photovoltaic power plants connected to the grid after 31 May 2011 and photovoltaic power plants located on agricultural land.

In addition, and most importantly for debt and equity investment in Italy, the situation regarding feed-in tariffs relating to Photovoltaic power plants connected to the grid after 31 May 2011 remains uncertain. The Italian government has until 30 April 2011 to issue another decree regulating this area. However, an earlier decision is expected due to increasing pressure from banks, photovoltaic companies and manufacturers.

On a more positive note, the Decree rejected the proposed 8,000 MW cap on photovoltaic production incentives. Nevertheless, an annual cap is expected to be introduced for Photovoltaic power plants connected to the grid after 31 May 2011.

The Decree also imposes limits on the application of incentives to photovoltaic plants located on agricultural land. Photovoltaic plants located on agricultural land will benefit from the feed-in tariffs where, save for all the technical requirements:

  1. The nominal capacity of each plant does not exceed 1MW and, in case the plants belong to the same landowner, the plants are separated by a distance of no less than two kilometers; and
  2. The surface designated for the construction of the plant does not exceed 10% of the overall agricultural surface held by the applicant.

The aforementioned limits do not apply to ground mounted plants located on agricultural areas authorised before the date on which the Decree comes into force. Also, the above-limits do not apply to plants for which the application to obtain the relevant authorisation was submitted by 1 January 2011, provided that the plant enters into operation within 1 year of the date on which the Decree comes into force.