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Quick Look: Renewable Energy Development in France

Developers, manufacturers, investors and other renewable energy industry stakeholders need to know where the next big market is going to be so that they can adjust their business decisions accordingly.

Since 2003, global consultancy Ernst & Young has released its Country Attractiveness Indices, which gives a numerical ranking to 30 global renewable energy markets by scoring renewable energy investment strategies and resource availability. The indices are updated on a quarterly basis and the most recent report can be found here.

Here is the firm’s assessment of France.

Policy

In August, the French Government launched a major renewable energy investment program, promising to provide €1.35b (US $1.8b) of financial support to the sector over the next four years. The program, known as “demonstrateurs energies renouvelables et chimie verte,” will allocate €450m (US $596m) in subsidies and €900m (US $1.1b) in loans. These funds will be targeted at emerging clean technologies that face relatively high development costs, such as solar, marine, geothermal, carbon capture and storage and biofuel development.

Solar

In August, the Ministry for the Environment, Energy, Sustainable Development and the Sea (MEEDDM) published a new Order which modifies the relatively complex PV tariff structure set out in the January 2010 Order by further reducing the applicable PV tariffs (as already amended in March 2010).

One of the purposes of the new Order is to reduce the existing solar PV FIT, by an average of approximately 12%, without modifying the eligibility criteria set forth by the January and March Orders. The decision to reduce FIT rates is supported by the findings of a report by the 'Inspection Générale des Finances,' and those of the 'Commission de Régulation de l’Energie.' A summary of the key provisions of the new Order is presented below. A careful analysis of the Order and applicable rules is further recommended when considering investments in French PV projects.

New solar PV FIT scheme

The new FITs are structured around three main tariff categories, as follows:

i. Building-integrated FIT — tariffs based on building use:

  1. €0.58/kWh (US $0.76/kWh) FIT for plants with a capacity ≤ 3kW located on a building used mainly for residential purposes
  2. €0.51/kWh (US $0.67/kWh) FIT for (a) plants with a capacity > 3kW installed on residential purpose buildings, and (b) plants with a capacity >3kW but < 250kW on buildings mainly used for health or educational purposes
  3. €0.44/kWh (US $0.58/kWh) that applies to other categories of buildings (e.g., office, industrial, tertiary, commercial or storage)

ii. Simplified integrated tariff of €0.37/kWh (US $0.37/kWh)

iii. Basic tariff (where above does not apply), varying between €0.28-€0.35/kWh (US $0.37-$0.46/kWh) depending on the capacity and location

While the January Order (now repealed – see below) provided that the applicable tariff was determined by the date on which the grid connection application was filed, the August Order only states that the date of said application determines the gradual decrease coefficient (see below). Developers and Investors should pay specific attention to the determination of the FIT applicable to their projects.

It also confirms that a PV plant is eligible to receive the building-integrated FIT only if the capacity of the plants located on the same site are less than 250kW. PV plants directly or indirectly operated by the same person/entity and less than 500m apart are considered to be on the same site.

Indexation and 10% gradual reduction

The FIT indexation mechanism remains unchanged since the issue of the January and March Orders. The new tariffs should be maintained until 31 December 2011. For grid connection applications filed after that date, tariffs shall be indexed on                       1 January of each year by multiplying the value of the tariff for the preceding period by the coefficient (1-D) where D = 10%.

Application time frame

The new Order is effective from 1 September 2010. While the January 2010 Order has been repealed, the purchase terms and tariffs that it set forth will still apply, upon request, for (i) projects which filed for grid connection before 1 September 2010 but cannot benefit from the 2006 tariffs, and (ii) certain other projects that meet specific criteria set forth by the August Order.

Offshore wind

The French Government should launch a call for tenders within the next few weeks, for the installation of 3GW of offshore wind capacity. It is estimated that this will involve the construction of more than 600 wind turbines, requiring an investment in excess of €10b (US $13.2b). France’s objective is to achieve a total offshore wind capacity of 6GW by 2020.

Infrastructure

The French Parliament is currently drafting a new Statute that will reorganize the power market. Among other provisions, 100% of the cost of grid connection will pass to developers (currently 60%).

For more information on renewable energy development in France, contact the report’s author Jean-Christophe Sabourin.

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