By Angelo Amante and Francesca Landini
CATANIA, Italy (Reuters) - At the foot of Mount Etna in Sicily's ancient city of Catania, utility Enel (BIT:ENEI) has begun work on a giant factory with the ambition of helping to end China's dominance of the solar market and to galvanise Italy's under-developed south.
The project to expand the capacity of Enel's 3Sun plant 15-fold is especially relevant as the European Union seeks to speed up the switch to renewables and end its dependence on Russian gas.
It also has support from Italy's Prime Minister Giorgia Meloni, who took charge in October, and has pledged to boost renewables in the south to try to tackle decades of under-development.
So far the practical help for a project that will create around 1,000 jobs, has come from the Europe Union.
It has given 188 million euros ($197.5 million) of the total investment of 600 million euros, with Enel providing the rest after Enel Green Power, the utility's renewable arm, decided to expand its Sicilian plant in January.
The company says Chinese production is likely to be cheaper, though it aims to close the gap. It also says its panels are better and that 3Sun will be the European Union's largest producer of high performance bifacial solar panels by 2024.
With the help of a new solar cell structure developed by Enel Green Power, the double-sided panels will be able to capture sunlight on two surfaces, and convert 30% of the sunlight that hits it into power compared with an average efficiency of around 20%.
"Our panels cost a little more, but have higher efficiency, a longer average life and a much lower degradation than Chinese technologies," Eliano Russo, the head of 3Sun in Catania, said.
The decision to base the project on an island on the southern tip of Europe was made, he said, because Enel had already developed expertise there.
"We have people who grew up here, some came back for this job and they are hugely motivated to show Sicily, for once, can be a place where something new arises," he told Reuters.
SICILY IS NOT ALONE
Analysts say factories such as Enel's are crucial to reducing Europe's reliance on Beijing and ensuring Europe's ambitions to increase its use of solar energy do not make it even more dependent.
Eurostat figures show around three quarters of Europe's solar panels are sourced from China.
Germany - for which the Ukraine crisis that exposed its over-dependence on Russian gas is a harsh lesson in the need for diverse supplies - is seeking to revive its solar industry that collapsed a decade ago after government subsidies to the sector ended.
The European Union as a whole aims to reach almost 600 gigawatts (GW) of solar energy by 2030 and the number of installations is increasing. Industry group SolarPower Europe estimates panels that would generate at least 40 GW have been installed this year and that growth will exceed 270 GW by 2025.
Russo says Europe needs to reach annual solar panel production capacity of 20 GW in the next three years if it is to avoid over-dependence on China.
The Sicilian plant's current production capacity of around 200 megawatts (MW) per year will rise to 3 GW by July 2024.
Enel is not limiting its ambitions to Europe, although it says at least 50% of its Sicilian production will be for the continent.
It will build a similar facility in the United States, as part of a broader initiative to expand its manufacturing capacity and benefit from tax credits granted under the U.S. Inflation Reduction Act.
It also sees Latin America as one of the most promising new markets for its panels.
CHINESE COMPETITION
So far, China is not manufacturing in Italy.
Chinese President Xi Jinping in 2019 visited the Sicilian capital of Palermo when Italy was the first industrialised nation to be considered as part of Beijing's Belt and Road Initiative for trade.
Subsequent Italian governments have been less open to China, including the current one.
China's embassy in Rome had no immediate response to a request for comment.
Giorgio Cuscito, China analyst at geopolitical review Limes, said China had favoured Sicily as "a strategic location in the middle of the Mediterranean and opposite Africa, where Beijing has important business and geostrategic interests".
He said the importance of Enel's factory and other similar ventures was in part to ward off projects, such as Chinese ones.
"Alternatives, such as the new gigafactory, should be provided to persuade people and companies in southern Italy to reject any future proposals which might be dangerous for the national interest," Cuscito said.
Italian Energy and Environment Minister Gilberto Pichetto Fratin also said China's dominance needed to be checked and did not rule out public support for Italian solar projects provided it complied with European Union rules on state aid.
"The benefits cannot all be foreign, in this case essentially Chinese," he told Reuters. "It is a major industrial segment and we should aim at least for European self-sufficiency."
($1 = 0.9517 euros)
(Francesca Landini reported from Milan; editing by Barbara Lewis)