Banks that are financing projects have already expressed dissatisfaction with some aspects of the law, while the current lack of details on the incentives is making it difficult for wind investors to finalise project financing.
Industry groups, including wind association Anev and renewables body Aper, claim that, in the absence of significant amendments, the new rules could cripple Italy's renewable-energy sector with a severe knock-on effect on the country's ailing economy. They are lobbying the government to speed up the approval of follow-up legislation laying out the details and to modify certain elements of the law.
According to the new rules, wind farms starting operation after 2012 will enjoy a guaranteed purchase price, a so-called FIT, rather than receiving green certificates as they do currently. The new regime aims to reduce incentives for renewables, but it is not clear how low tariffs would drop in value. Current incentives are EUR0.14-0.15/kWh, high by international standards but a reduction from as much as EUR0.20/kWh in 2008.
Wind farms online by 2012 will continue receiving green certificates until 2015 when the FIT system will take over fully.
State energy management agency GSE will buy back excess green certificates during the transition period at a level equivalent to 78% of a green certificate reference price. This is an improvement on earlier draft legislation setting the percentage at 70%, but still well below the 90% level Anev had been seeking or even the 85% suggested by the Italian parliament. Lobbying efforts to increase that percentage are likely to continue.
GSE buy backs have become crucial to prevent the price of green certificates from collapsing, given a structural oversupply on the market. Excess certificates are set to remain a feature in the run-up to the FIT system as the obligation for producers of electricity from non-renewable sources to purchase green certificates is phased out.
Larger renewable projects seeking to receive the FIT will have to take part in a competitive auction process. This is one of the most controversial aspects of the new law, with critics of the proposal saying that auctions of this sort have been unsuccessful in other countries.
Projects seeking a lower incentive payment will receive priority, but the law will set a minimum incentive price with the aim of guaranteeing an adequate return for investors. The threshold beyond which projects must compete for incentives in auctions will depend on the renewable-energy source, with a minimum size of 5MW.
"There is great uncertainty surrounding these competitive auctions," says Carlo Montella, a Rome-based partner with law firm Orrick, Herrington & Sutcliffe.
"The idea is to privilege industrial players and to prevent financial speculation - and that's a sound rationale."
If the process is run in a transparent manner, investors receive adequate guarantees about how the auctions will be run and there is a floor price for incentives, then the introduction of auctions could be positive, believes Montella. But he warns of possible pitfalls: "If that is not the case, it could be a giant mess."
Italy's renewable-energy associations are asking the government to set guaranteed incentive levels for projects already authorised or under construction, provide an adequate transition period before introducing market reforms, and stay away from retroactive changes.
Economic development minister Paolo Romani has said the government is willing to listen to industry concerns, and other ministers have voiced their support for the renewable-energy sector. The government's immediate priority is likely to be corrections to the FIT regime for solar photovoltaic electricity, as the new law introduces a May 2011 grid-connection deadline for projects in receipt of incentives originally set to last to 2013. But the wind industry hopes that gaps in its market framework will also be addressed quickly because uncertainty on the incentive front has hindered project-financing deals for most of the past year.