Italy's biggest utility Enel SpA (ENEL.MI) expects the government to soften plans to cut public incentives for renewables, Chief Executive Fulvio Conti said Tuesday, after lawmakers shocked the sector last month with proposed austerity measures that could halt investment across the sector.

"I think the indication we got is that the government is seriously considering the modification of that article 45 [of the government budget law]," said Enel's CEO at a conference in Moscow .

The measure was packed into Italy 's austerity budget and relieves the state-run energy management agency, GSE SpA, from its role as the buyer of last resort for green certificates issued to support development of renewable energy.

Even though the decree introducing the change still has to be approved by parliament, prices have collapsed in the EUR7.5 billion renewables market since it was promulgated late last month.

The government plans are a "tough blow" to the sector, said Alessandro Marangoni, head of Italian energy consultancy Althesys Srl. "Growth in the renewables sector is now at risk."

Italy is among the latest European countries to announce measures to reduce subsidies for renewable energy. The governments' cuts seek to save public money amid broader budget cuts, or to lower energy costs in the hope of boosting consumer spending. Spain and Germany have taken such steps.

Enel has developed a "strong presence" in Italy 's renewables market, CEO Conti said in Moscow . "It would make send to maintain that."

The subsidies are also seen as necessary to allow Italy to meet an EU target of generating 20% of electricity from renewable sources by 2020.

The Enel CEO said he expects "intense discussion" on the issue as Italy needs to comply with EU carbon emission limits.

Still, Conti said he doesn't forecast any "specific worry" for its multibillion-euro initial public offering for renewables unit Enel Green Power SpA planned for October.

In the longer term, Enel expects government subsidies to decline as advances in technology allow the industry to produce cheaper power, Conti said.

Energy investors are also waiting for the government's new 2011-2014 incentives for solar power producers. The government has said a cut is expected to take in consideration lower costs for technology to generate electricity.

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