MILAN, Italy ( TheStreet) -- Italy is showing no signs of relenting on its plans to implement a cap on installed solar capacity that is not to the solar industry's liking.

The Italian market is expected to be the next boom market after the current German frenzy ends in the second half of 2010, with the reduction in Germany's feed-in tariffs. With Italy's planned solar support cuts to follow Germany's and be implemented for the beginning of 2011, the solar rush is expected to head due south through Europe.

Most big solar companies, including U.S. solar player SunPower ( SPWRA) and Chinese solar companies Trina Solar ( TSL) and Suntech Power ( STP), expect big things from Italy in terms of future installed capacity.

MEMC Electronic Materials' ( WFR) SunEdison unit indicated earlier this month that it would build what it described as the largest solar plant in Europe .

Trina Solar recently announced an increase in 2010 shipments to one Italian solar project player from a 2009 level of 2 MW to 23 MW in 2010.

Suntech, which increased its focus on Italy as far back as 2008 as a shift away from the boom-to-bust market of Spanish solar, constantly references Italy as a key growth driver. Suntech management noted in its recent earnings conference call that right now the anticipation of Italy solar project builds in the second half of 2010, combined with the current frenzy in Germany, has made it difficult to find electricians to perform installations in Italy.

Italy's Industry Ministry Undersecretary Stefano Saglia told reporters at a conference on Thursday that the changes to Italy's feed-in tariffs - among Europe's most attractive solar support schemes -- will be introduced as early as April.

The Italian minister told reporters that the feed-in tariff reductions would be "slightly below the reduction in solar panel costs," according to a Reuters report, but the Italian minister would not talk specific numbers.

Most importantly, the one number the Italian minister did provide was for the cap on installed solar, which he said would be 3 GW over a period of three years, from 2011 through 2013. The solar industry had been holding out for a 4 GW cap.

It is easy to see why the solar industry is holding out for more room under the solar cap. The annual estimates for Italian solar capacity vary, but the most aggressive estimates would place Italy on a path to reach as much as 1.6 GW of solar installed in 2010 alone.

A conservative estimate for Italy's solar growth trajectory from Lux Research -- which has a reputation for more conservative estimates than some consulting firms -- doesn't have Italy's solar market reaching above the 1 GW annual installed capacity mark until 2012. Lux Research forecasts close to 600 MW in 2010 and 800 MW in 2011 for Italy.

If the more aggressive estimates are borne out as the solar sector moves en masse to Italy once the German solar rush is over, solar could reach the 3 GW threshold a full year ahead of schedule.

Technical details of the feed-in tariff changes have been approved by the Industry, Environment and Culture ministries, the Italian official told Reuters, but approval was still needed from the state entity that coordinates with regional governments.

Italy is considering a cut off up to 18% in the feed-in tariff for large-scale solar. Germany is pushing for the elimination of feed-in tariffs on large-scale solar farmland projects and, more generally, has asked for the biggest cuts to be made on ground-mounted solar systems.

Assosolare, the European industry association that has vocally resisted the 3 GW cap, also believes a 14% cap should be the limit for large-scale solar feed-in tariff cuts.

The solar industry has also asked Italy to limit annual automatic reductions to feed-in tariffs at 4%, versus a government proposal for a 6% annual cut.

Of course, as the solar market has learned from the twists and turns in the German political theater related to its feed-in tariff cuts -- the solar equivalent of the gyrations in the U.S. health care battle -- it is wise for investors to wait for parliament to put pen to legislative paper before making assumptions that there won't be more changes.

At least it seems likely that solar will continue to battle the 3 GW cap.

-- Reported by Eric Rosenbaum in New York.


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