The development of renewable energy sources in France is based on two mechanisms:
- The feed-in-tariff (FiT) scheme, which provides support for energy from wind power, solar power, hydro power, biomass and geothermal sources, among other technologies. The FiT scheme is the key RES support mechanism. It was introduced and imposed on EDF and non-national distributors by the Law n° 2000-108 dated 10 February 2000, entitled loi relative à la modernisation et au développement du service public de l'électricité. The system is financed through the public contribution to the electricity service or contribution au service public de l’électricité (CSPE) which is an amount added to the electricity bill of each French electricity consumer, a mechanism which provides security for investors by guaranteeing revenues with a long-term perspective to production capacity for renewable energy; and
- A tender system for large renewable projects (used for offshore wind power, solar power, biomass, hydro and other projects built at scale).
The main Feed-in Tariffs
|Sector||Duration of the power purchase agreement||Feed in tariff|
(Arrêté 17 November 2008)
|15 years (onshore) / 20 years (offshore)|
- Onshore: 8.2 c€/kWh for 10 years, then between 2.8 (for 3,600 hours and more) and 8.2 c€/kWh (for 2,400 hours and less) for 5 years depending on the number of hours of operation.
- Offshore: 13 c€/kWh for 10 years, then between 3 and 13 c€/kWh for 10 years depending on the location of the site.
(Arrêté 4 March 2011)
The FiT rate depends on the type of photovoltaic installation (full integration of installation into the roof, simplified integration of the installation into the roof or other type of installation) and the nature of the building (residential dwellings, buildings used for health or educational purposes or other buildings).
The tariff varies from 0 % to 10 % depending upon the number of applications per trimester filed as compared to the annual targets determined by Arrêté.
For instance, for the “other types of installation” category (including PV farms) up to 12 MW installed capacity, the FiT varied from 12 c€/kWh (from 10 March 2011 to 30 June 2011) to 10.24 c€/kWh (from 1 October 2012 to 31 December 2012).
(Arrêté 27 January 2011)
Tariff is determined according to the energy efficiency, the system capacity and the resource used. The premium depends on the level of energy efficiency.
Biogas benefits from a specific regime (Arrêté 19 May 2011) with a 8.121 c€/kWh and 9.745 c€/kWh feed in tariff and a premium up to 4 c€/kWh, depending on the level of efficiency.
(Arrêté 1 March 2007)
- 6.07 c€/kWh + premium between 0.5 to 2.5 for small plants, + premium up to 1.68 c€/kWh during the winter depending on the regularity of the production.
- 15 c€/kWh for marine hydroelectric plants.
The validity of the 2008 FiT Order was challenged before the French administrative Supreme Court, the Conseil d’Etat, on the grounds that the FiT qualifies as State Aid and should have been - and was not - notified to the European Commission. On 15 May 2012, the Conseil d'Etat filed a preliminary ruling (question préjudicielle) to the Court of Justice of the European Union (the CJEU) on the legal ground raised by the plaintiff. Should the CJEU confirm that the 2008 FiT does qualify as State Aid, we anticipate that the Conseil d'Etat will cancel the 2008 Tariff Order. For the time being, the 2008 Feed-in Tariff Order remains in place and is fully valid. From previous experience, we expect that the CJEU will take at least a year (as from the filing of the preliminary ruling) to hand down its decision. On 18 January 2013, the French government announced the start discussions with the European Commission regarding the 2008 FiT. It would help if the French government was to issue a new FiT Order and notify it to the European Commission. As of today it is difficult for financiers to finance wind farm projects on a non recourse basis unless a PPA can be entered into prior to drawdown. Until now EDF practice is to sign PPA after the commissioning of wind farms which is a major issue in the current context. Discussions are on going with the French administration and EDF to enable the early signing of PPAs in order to unblock the situation. Negotiations are well under way and we are confident that a solution acceptable to all (i.e. a new pro-forma PPA which could be signed as from the execution date of the grid connection agreement) will be found by the end of March or early April 2013.
In a decision dated 12 April 2012, the Conseil d'Etat cancelled part of the solar FiT regulations (Arrêtés) in force, dated 12 January 2010 and 16 March 2010, on the grounds that distinguishing the kinds of buildings that qualify for the solar FiT is not justified. This cancellation only concerns integrated power plants installed on residential buildings and/or buildings used for educational or health purposes.
Policy & Regulatory Framework
With 6,994 MW of onshore installed capacity on November 2012, wind power has become the most active electricity generation sector in France. In 2020 if the objectives set by the French government are met, wind power will represent 10% of the national electric production (i.e. 25,000 MW (19,000 MW onshore and 6,000 MW offshore)).
As a result of the Grenelle 2 Law, wind farms are now classified as installations that are subject to environmental measures, known as installations classées pour la protection de l’environnement and are subject to more complex administrative procedures as a result. The stringent regulatory environment is concentrating ownership of wind farms into fewer hands and there are several available acquisition opportunities.
There are also some improvements. A law called the “loi Brottes” has been voted on 11 March 2013. This law simplifies the regulatory framework applicable to wind farms by abolishing among others the wind development area (Zone de Dévelopement Eolien) and the minimum “five turbines” requirements. Derogation to the “loi littoral” is also included for the connection to the grid of off-shore wind farms and for marine energies in general.
Despite its long coastline France does not have any offshore wind turbines yet. On 5 July 2011, the French government officially launched a 3 GW offshore wind tender and published the specifications on 11 July 2011. The "target areas" for this tender are: Dieppe-Le-Tréport, Fécamp (Seine-Maritime), Courseulles-sur-Mer (Calvados), Saint-Brieuc (Côtes d'Armor) and Saint-Nazaire (Loire-Atlantique). Prior to the official launch, a number of partnerships had been announced in the sector. In particular, the following major consortiums have been set up:
- Areva Wind, a wind turbine manufacturer, has partnered with GDF Suez and Vinci SA, to bid together for as much as 1.75 GW of the offshore wind farms;
- EDF EN joined forces with Dong Energy, Nass&Wind, WPD Offshore and Poweo (the EDF EN Partnership);
- Iberdrola has partnered with Eole Res, Technip, and Neoen Marine (the Iberdrola Partnership).
On 6 April 2012, the French government awarded the right to develop Fécamp, Courseulles-sur-Mer, and Saint-Nazaire to the EDF EN Partnership and Saint-Brieuc to the Iberdrola Partnership for a total of 2 GW. The tender on Dieppe-Le-Tréport was cancelled, in the absence of sufficient competition, and will be subject to a new tender. The wind farms awarded should generate almost 2 GW. This program aims to enable France to catch up with other countries in Europe. A second tender phase is launched for the “target areas” of Noirmoutier (Vendée) and of Tréport (Seine-Maritime) for a total of 100 MW. The candidates retained should be known in early 2014. The French government announced on 22 January 2013 that it considers to launch a third tender phase.
France’s solar photovoltaic (PV) sector has significant potential that has yet to be realised. France has set a target of installing 5,400 MWp (Mega Watt Peak) of PV capacity by 2020. On September 2012, there was 3,060 MWp of installed solar power capacity in France (including overseas territories).
After a rapid growth of the solar power sector due to strong investment incentives, the French government recently decided to lower the solar FiT, in order to counter inflation in the solar PV sector.
Key features of the new scheme are the following:
- The FiT scheme only applies to plants installed on buildings with a capacity of less than 100 kW, while the annual installation capacity target has been set at 200 MW. The tariffs are applicable to plants with grid connection applications filed between 1 July and 30 September 2011. The tariffs are adjusted quarterly on the basis of grid application volume made during the previous quarter.
- For plants with capacity over 100 kW, two types of tender process apply depending on the capacity and type of the plants. The Government has circulated tender specifications which note that bidders would have to work only with certified subcontractors and panel manufacturers, and would have to give warranties on the recycling and dismantling of the plants. The two tender processes consist of:
- The simplified tender process (for plants installed on buildings with capacity between 100 kWc and 250 kWc) - bidders would only be selected based on the power purchase price they offer. The first invitation to tender launched on 1 August 2011 and ended on 20 January 2012.
- The full tender process (ground plants, regardless of capacity and plants installed on buildings with capacity > 250 kW) - the power purchase price offered by the bidders would account for a 40% weighting of their final tender score. The first invitation to tender was issued on 15 September 2011 and ended on 8 February 2012.
Subject to certain conditions (related to the construction and the grid connection of the plants), solar power plants may still benefit from a more favourable FiT under the interim regime provided by the Law. In order to benefit from the more favourable FiT, investments in solar power plants require a prior audit to check among others the date of acceptance of the technical and financial proposal for grid connection, possible grid connection delays and the construction status of the power plant.
On 7 January 2013, French energy minister announced that France would be doubling it target for annual photovoltaic energy growth from 500MW to 1GW and implement reforms to its existing FiT scheme. To achieve this, the FiT scheme has been simplified to cover only three categories (down from five at present), and increase degression for ground-mounted systems to 20% (from 10%) while reducing degression for rooftop installations from 10% to 5%. A new tender process that comprises 400MW of capacity would also be initiated by the beginning of 2013 for ground-mounted and rooftop-systems bigger than 250kW each. In order to boost equipment manufacturing in the EU, rooftop installations can also qualify for a bonus of up to 10% of the FiT if the equipment uses is produced within the EU.
Biomass is a leading source of renewable energy - typically in the form of heat and/or combined heat and power (CHP) - in France. Boilers are supplied with wood by-products and with wastes from the production of paper and biofuels.
We note that, further to the Grenelle 2 Law, support for biogas has been boosted by the adoption of new FiTs for electricity production that are expected to increase biogas development.
Hydroelectric power has been in use in France on an industrial scale since the 1920s and it is today the largest renewable source of electricity in France, with about 25 GW of installed capacity.
Large hydropower is already highly developed in France. The regulatory regime for concessions came into force by French Law dated 16 October 1919 relating to the use of hydropower energy. The state is the sole competent authority that can award this kind of concession.
The hydropower concession award rules have been amended several times. This last occurred in 2008 and 2009, with the modification of the Decree dated 13 October 1994 relating to the concession and the declaration of public interest of the works using hydropower energy. Concession tenders are due to be launched by the French State in 2012 for the renewal of about ten concessions representing 5,300 MW, to be awarded by 2015. In the beginning of 2012, Vattenfall reached a consortium agreement with Arcelor Mittal, Rhodia and SNCF (under the name Force Hydro) to bid for 1,000 MW under such concession tenders.