Retroactive changes to Italy’s feed-in tariff (FiT) are “illegitimate” and could face similar legal challenges to those seen in Spain, according to a major PV investor.

On Wednesday the Italian government proposed retroactive cuts to its FiT that could see plant owners lose 10% of their revenue from the scheme.

In a proposal from the Ministry of Economic Development, PV projects over 200kW and subscribed to the FiT will be asked to accept one of two changes. They can extend the term of their FiT payments from 20 to 24 years, effectively thinning them out or take a straight 10% cut.

Foresight, which has invested more than £650 million in solar assets in the US, Italy, Spain and the UK, said the changes could trigger legal action.

“The country where the most legal action has been brought is Spain where plenty of international investors have brought legal action under the Energy Charter Treaty. Investors are evaluating whether to do so [bring a case] in Italy as well, given that Italy is also a signatory of such a treaty,” said Federico Giannandrea, partner, Foresight and head of Foresight Italy.

Parties including the UAE’s Masdar and the local government of Murcia, have opened legal action against the Spanish government for breaching the 1994 Energy Charter Treaty.

“The treaty states that notwithstanding the legitimacy of certain changes in law in a given country, and we believe this one in Italy is not legitimate, in any case there is a liability for the signatories of the Energy Charter Treaty to treat foreign investors in a fair and equitable way and this is obviously undermined by a retroactive cut in the FiT,” added Giannandrea.

The FiT closed to new projects earlier this year with the industry focusing on commercial rooftop projects at grid parity or near grid parity. Despite the glimpse of a more stable future for Italian projects, potential retroactive changes have left a sour taste in the mouth.

“It is not helping our investment and it's not helping the confidence of international investors in the Italian market. It will create some financial tensions in our relationships with the banks because not only is there a reduction in the tariff, but also it will reshape the payment schedule from the GSE (Gestore del Sistema Elettrico) to the producers,” said Giannandrea.

“We're not happy about what is happening,” he added.

The new Italian proposal is part of a broader pledge to cut energy bills by 10% by 2015.

There is still no clarity on the role of the banking system, in particular the state-owned Cassa Depositi e Prestiti, and the producers.

PV Tech understands that a new draft of the changes indicates that the original 10% figure has been cut to 8% however there is no further clarity on these details at this stage. The revision from 10% to 8% could indicate that there is some resistance within the government to the proposals.