Intensification of the pace of calls for tenders
The Government has intensified the rhythm of calls for tender that has created a dynamic based on visibility given to solar project developers who can develop projects without having to worry about the frequency of bidding periods.
The Minister in charge of energy committed on 11 December 2017 at the “One Planet Summit” to increase the call for tenders capacity volume by 1 GW per year, resulting in a total capacity volume of 2,45GW per year.
This announcement and the launch of calls for tender providing for capacity volumes that are consistent with the objectives have resulted in restored confidence in the sector. At the present time, the target volumes of capacity are determined by four calls for tenders (identified as pending in the table below) from 2016 to 2020. There is a real need for such pace to be maintained. The fact that the number of photovoltaic installations increases would result in the authorities considering the widening of the type of land that could be used. The installation of photovoltaic installations is mainly limited to sites that are already urbanised, polluted sites or industrial wastelands.
Overview of past and pending solar calls for tenders (please see Table below)
Specific focus on the dual-technology call for tender
The European Commission recently validated an application by the French Government to hold a dual-technology call for tender which creates a competitive procedure between large solar and wind power projects. In that context, the French Government launched a 200MW call for tender in Continental France on 11 December 2017. The total installed capacity of each selected project is between 5MW and 18MW.
The implementation of this procedure (promoted by the General Directorate for Competition Policy of the European Commission) is welcomed by some who consider it useful to test dual-technology calls for tender but criticized by others who put forward the argument that the two types of energy production are complementary and should not be opposed. For example, the highest production period of each technology occurs at a different time of the day and of each season (i.e. electricity from solar sources is exclusively produced during the day and mainly during Spring and Summer whereas electricity from wind sources is mainly produced during nighttime and Autumn and Winter). As a consequence, low production periods of one type of energy can be compensated by the other. However, according to the French energy regulator, such dual-technology calls for tenders could negatively impact the energy policy objectives as well as the costs of incorporation of renewable energies in the power system.
Incentives
Summary of applicable support mechanisms
Capacity |
Purchase obligation Open counter (guichet ouvert) < 100kW |
Call for tender for projects on buildings From 100 to 500 kWp |
Call for tender for projects on buildings From 500kWp to 8MWp |
Call for tender for ground mounted projects From 500kWp to 17MWp |
Support mechanism |
PPA with purchase price determined by the State (feed-in tariff order) |
PPA with purchase price proposed by the bidder |
CR (premium) Contract with CR proposed by the bidder |
CR (premium) Contract with CR proposed by the bidder |
Premium mechanism for solar plants
Under prior subsidy mechanisms, operators sold all their production to EDF for a single indexed price fixed on the date of filing of a complete feed-in tariff request (demande complète de contrat d’achat) and determined on the basis of a tariff order (arrêté tarifaire).
Under the new Guidelines, a premium (complément de rémunération, the CR) has been implemented by the ETL.
Such CR aims to enable the operator to receive a total income level that would cover the cost of its production facility while ensuring regular profitability of the invested capital. The CR purports to bridge the gap between generation costs and the electricity sale price on the market.
The sale of power is to be undertaken either (i) on the EPEX Spot market through an aggregator, or (ii) under a sales contract entered into with an industrial purchaser. In the first case, a contract is to be concluded with the aggregator, pursuant to which the aggregator purchases all kWh delivered at the delivery substation (PDL) as measured by a power meter controlled by ENEDIS. In the second case, all the power measured at the PDL by ENEDIS (the French distribution system operator) is to be acquired by the offtaker (Corporate PPAs).
In addition to the price obtained from the sale of power, the producer is entitled to a premium, to be paid by EDF on a monthly basis.
The level of the premium is based on:
- Investment and operating expenses (including monitoring fees);
- Revenues of the facility, and particularly revenues related to the sale of power, of the guarantees of origin and of capacity guarantees. EDF shall, once a year, deduct from the CR, an amount equal to the value of the capacity guarantees multiplied by the average rate of the prior year’s auctioned power guarantees of origin (the Normative Price). The Normative Price is published by the CRE every year and the deduction is made by EDF once in February of the year following the delivery;
- Impact of the facility on the satisfaction of the objectives set in Articles L. 100-1 and L. 100-2 of the Energy Code (competitive prices, energy independence, diversification of energy production sources ...);
- Costs of market integration of the facility producing power from renewable sources;
- Adjustments where producers self-consume all or part of their produced power.
The premium mechanism is anex-postcalculationequal to the difference between the target tariffs per kWh, and a reference tariff (Reference Tariff), to which management premium is added. The Reference Tariff is determined and published by the CRE on a monthly basis, in accordance with the monthly average EPEX Spot tariff for wind power production for the relevant period. The premium is determined on the basis of the Reference Tariff rather than on the real price obtained by the producer. Thus, the final price obtained by the producer on the market could be either greater or less than the Reference Tariff.
Photovoltaic installations benefiting from a feed-in-tariff contract at the time of the entry into force of the premium mechanism will remain subject to the feed-in-tariff (FIT). The same is true for producers having applied for the feed-in-tariff prior the entry into force of the premium mechanism, provided that the installation is completed within 18 months from submission of the complete application.
Feed-in-Tariffs for solar plants below 100 kWp
A new tariff order for continental France was issued on 9 May 2017 establishing the BIPV purchase price for installations with a peak capacity of 100kw or below.
This new tariff order distinguishes two types of installations: full export and self-consumption with sale of the surplus.
The main innovation is that for full export installations, the FIT is similar for all installations (either BIPV, on top of existing roof, or ground-mounted).
Degression and indexation apply quarterly to these tariffs, depending on the number of complete grid connection applications submitted in the course of the last two quarters. New rates are published on the French energy regulator's website.
The date of the connection application determines the applicable quarter. Once secured, the purchase price of a project is no longer affected by the quarterly degressions. It is nevertheless indexed each year during the 20 years of the contract.
The initial purchase price set for the period 11 May 2017 to 30 June 2017 was 11.5 c€/kWh. It decreased to 11.46 c€/kWh for the period 1 July 2017 to 30 September 2017. The applicable purchase price for the period 1 January 2018 to 31 March 2018 is 11.26 c€/kWh.14
Community investment
Calls for tenders now encourage community investment, by allocating a bonus (3 €/MWh) to bidders having submitted a bid which provides for community investment.
Article 111 of the ETL established a legal framework for community investment, through participation in the capital of a renewable energy generation project company or in the financing of a renewable energy generation project.
The bonus benefits the bidder, in the event that it undertakes to be, at the completion date of the project and for at least the following three years:
- a local authority or a group of local authorities;
- either a joint stock company or a SEML (Société d’Economie Mixte Locale)15 at least 40 per cent of the share capital of which is held, separately or jointly, by twenty individuals, one or more local authorities or groups of local authorities, or
- a cooperative company in which at least 40 per cent of the share capital is held, separately or jointly, by twenty individuals, one or more local authorities or groups of local authorities.
Tender specifications also provide that the bonus is to be paid to the bidder who undertakes that 40 per cent of the financing of the project will be provided, separately or jointly, by at least twenty individuals, one or more local authorities or groups of local authorities. We understand that community investment guidelines are under discussion with the Minister in charge of Energy.