Beyond COVID-19: Crisis response or road to recovery?
Crisis response or road to recovery?
As a reminder, article 225 of the Finance Law for 2021, upheld by the French Constitutional Supreme Court in its decision dated 28 December 2020, allows the French government to reduce the solar feed-in tariffs for a limited number of contracts entered into under decrees dated 10 July 2006, 12 January 2010 and 31 August 2010, for PV power plants of more than 250 kW. We discussed the issues raised by this reform in our March 2021 article.
However, we were still waiting for the implementation decrees for Article 225 in order to assess the extent and impact of the tariff reduction. On 2 June 2021, the ministers responsible for energy and the economy published the draft decree and order (arrêté) aimed at implementing article 225. These drafts are currently subject to a two-week public consultation, before being submitted to the Conseil Supérieur de l'Energie and the Conseil d'Etat for their opinion. The publication of the decree and the order should thus take place in July 2021.
The appendices to the draft order set out the mathematical formulae for calculating the reduction of the revised feed-in tariffs, which vary according to the location of the facility, its date of commissioning, and whether the solar panels are on the roof or on the ground. The draft order indicates that the new tariffs will come into force on 1 October 2021.
The draft decree sets out the terms and conditions for reducing the feed-in tariff. To this end, the draft defines what constitutes a "reasonable remuneration" within the meaning of article 225 of the Finance Law, with reference to the financial or fiscal aid received, the investment and operating costs borne by the facility and the financing conditions observed on the date the facility was commissioned.
The draft decree also specifies the nature of the parameters taken into account to calculate the new tariff (tariff order under which the contract was concluded; date of connection to the grid; date of commissioning; geographical location; operating conditions of the facility).
The draft decree details the timetable envisaged for the revision of the contracts concerned:
The publication of the decree should take place in July 2021, therefore producers should be notified of the envisaged feed-in tariff this summer.
The draft decree specifies the implementation of the "safeguard clause" - from which facilities whose economic viability is endangered by the reduction in feed-in tariffs can benefit - which takes the form of a complaint procedure:
The tariff revision and complaint procedures organised by the draft decree are accompanied by very short deadlines that the producers must respect in order to assert their rights and, if necessary, request the rectification of the new feed-in tariff that will apply to them.
The actors of the sector aim to obtain the modification of the draft decree and order before their publication, with regard to the disproportionate and unjustified extent of the tariff reductions (the average tariff reduction, all installations included, would be of 55% according to the Syndicat des Energies Renouvelables, ENERPLAN and Solidarités Renouvelables) based on an erroneous appreciation of the OPEX and CAPEX of the PV power plants concerned.
It is also underlined that the tariff cuts are of such a magnitude that the implementation of the safeguard clause could be systematically requested by the producers. The safeguard clause itself seems to be a false “safeguard”, because the producers have no visibility on the conditions of assessment of their request for re-examination of the envisaged tariff by the CRE, and will have to refund the overpayment from which they benefited during the maximum period of re-examination of 16 months if their request is rejected and that the new tariff is validated by the CRE. The feed-in tariffs reduction seems to us to be a disastrous signal at a time when an acceleration of the development of renewable energy is desirable.
The Norton Rose Fulbright teams are at your disposal to help you understand the new legal framework under discussion, to assess the consequences in the legal life of your projects and to help you defend your interests in the best possible way.
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© Norton Rose Fulbright LLP 2021