Blue skies over the photovoltaic sector in France

Publication April 2018


Introduction

The Energy Transition Law (ETL)1 sets an ambitious target for renewable energy in France. By 2030, 32 per cent of final energy consumption and 40 per cent of energy production (compared with the current figure of 18.4 per cent) would come from renewables. To reach this target, the ETL provides for a “programmation pluriannuelle de l’énergie” (PPE), which assigns a compulsory installed capacity target for each generation technology, including solar energy.2 The ETL also provides that the ratio of nuclear energy as a component of electricity produced in France is to be reduced from 72 per cent to 50 per cent by 2025. However, the Minister of Energy acknowledged on 7 November 2017 that the deadline for achieving this target will be extended until 2030, or probably even more realistically 2035. This is likely to impact the pace of development of renewable energy.

Solar energy will play a key role in satisfying, or at least making progress towards achieving such objectives. Solar tariffs are now below wind energy and comparable in certain cases (in particular grounded PV installations) to nuclear energy. Specifically, the average purchase price for governmental calls for tenders CRE1,3 CRE2,4 and CRE35 dropped respectively from 21.34 c€/kWh to 14.238 c€/kWh and then to 9.926 c€/kWh. Each governmental call for tender is divided into various periods. For CRE4,6 the average purchase price was, for the first period, between 6.25 c€/kWh and 10.56 c€/kWh and for the second period 6.39 c€/kWh for all types of projects and 5.55 c€/kWh for larger installations. This trend should be reinforced, if the decrease by 35 per cent of investment costs for solar projects by 20257 is confirmed.

Overview and key policy drivers

As of 31 December 2017, total installed capacity of French solar plants reached 7,660 MW, while the national target is set at 10,200 MW for 2018.8

Over the last 12 months, total installed capacity of commissioned facilities reached 887 MW. In addition, over the same period, total electricity generated by solar plants amounted to 9.2 TWh, which is an increase of 9.2 per cent compared to the previous 12 months. This historic record can be explained in part by the very favorable weather conditions in spring 2017.

France is behind the curve if we look at its objective for 2023, which is set at between 18,200 and 20,200 MW.9This is despite the fact that available resources amount to one TWp, solar tariffs are very competitive and consumers have demonstrated a good level of acceptance of photovoltaic energy.

The reason that France is behind the curve is related principally to the fact that the solar sector has faced many challenges: the absence of a stable and adequate legal framework, a 2011 moratorium10, the scarcity of calls for tender and a lack of visibility about timing of tenders. Such challenges have been partially overcome and a new support mechanism has been created in compliance with the European Guidelines for State aid for environmental protection and energy 2014-2020 (the Guidelines).11

All the relevant pieces are now in place for the expansion of solar energy.

Stabilisation and simplification of the regulatory framework

Overcoming a shifting and cumbersome legal framework

Frequent regulatory changes, including in particular the moratorium, which led to the temporary suspension of the power purchase obligation for some solar power plants under development and corresponding disappointment for some developers as to the tariff for which they were ultimately eligible, have deeply affected the sector. Lenders have been particularly reluctant to finance solar projects given such context, maintaining that they had lost confidence in the French legal framework.

In addition, the procedure for the development, construction and operation of solar power plant was subject to various environmental regulations. Delays caused by the application process for different environmental authorisations and related legal challenges by third parties were two of the main obstacles to scaling up of the full potential of the French market.

Single environmental authorisation

The solar sector required a well-established legal framework to underpin the rapid development and operation of solar installations. The French legislator has recently introduced12 a single environmental authorisation which entered into force on 1 March 2017 and which now includes most of the required authorisations for the implementation of solar projects.13

On the basis of this "one-stop shop" model, processing an authorisation by the Préfet (local State representative) should take no longer than nine months. While the time period for processing the application has been reduced, stakeholders often claim that there is no sanction in the event that the processing period is exceeded and that it now takes months for their application file to be considered as complete by the administration. The timing issue has consequently been shifted from the processing period to the period required for the application to be considered complete and therefore to be submitted for processing.

The single environmental authorisation can be challenged by third parties within 4 months as from completion of the final public consultation date.

Two innovations are worth mentioning:

  • Better visibility


    The new single environmental authorisation is intended to give more visibility to operators as to the upstream phase of projects, in particular to anticipate all authorisations necessary for the implementation of solar plants. As from the entry into force of the new single environmental authorisation, developers can request a project certificate (certificat de projet) which is a document providing developers with all necessary information regarding the development of the project. The processing services will inform developers of all useful information regarding, in particular, (i) the applicable regime for the contemplated solar projects, (ii) decisions to be issued by the Préfet and (iii) any relevant procedures to be followed. The project certificate may also contain information regarding the data expected to be included in the application file, in order to facilitate the processing of the application. This certificate has nevertheless been criticized as it does not “freeze” the legislation applicable to the project (it was initially contemplated that despite any modification of the legislation, the legislation applicable to the project would be “grandfathered”) and operators would not be able to point to a mistake in the certificate within the context of a challenge introduced against the permits granted.

  • Third party claims

    Third parties have been provided with a new right of claim (procédure de réclamation) enabling them to contest the sufficiency or adequacy of mitigating measures and requirements created by the single environmental authorisation (i.e. environmental hazards caused by the project). This claim can be submitted to the relevant Préfet as from the commissioning date of the solar project. The Préfet to whom the claim is submitted has two months to order, additional mitigating measures for the implementation and/or operation of the solar project. If the Préfet fails to respond, or decides that the measures imposed are sufficient within the two-month timeframe, the claimant may challenge this (explicit or implicit) decision before the court

An ambitious call for tenders policy

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.

Outlook

France has strived to overcome administrative hurdles that once caused obstacles for solar projects. High levels of solar irradiation, and recently implemented economic incentives should provide a great deal of potential for the French solar market. In addition, by deploying an ambitious schedule of solar calls for tenders, France is now considered, as having a credible chance of taking part in the growth generated by the trend of solar projects, and having the potential to fulfil at least part of its 2030 objective. Developers, investors and lenders currently see the French photovoltaic market as an attractive one.

Additional avenues for consideration by regulators are:

  • continue to increase the volume of calls for tenders;
  • follow-up on selected projects and limit significant unjustified delay16 in the commissioning of certain facilities;
  • avoiding the abandonment17 of certain projects through various means such as an increasing of the performance guarantee that can be drawn in case of non-performance of the project;
  • re-award solar capacity where projects have not been developed;
  • take account of the outcome of past calls for tenders and of grid connections in the future tender rounds;
  • impose a maximum two-year period for commissioning.
  • set up an open counter (guichet ouvert) for projects between 100kwp and below 1MWp, projects that may not otherwise meet the conditions set in the call for tender;
  • define the conditions permitting a rapid development of self-consumption.

Table

Overview of past and pending solar calls for tenders

Publication in the OJEU Facility capacity Total tendered capacity Submission longstop dates Main awardees18 Number of selected projects
11/12/2017 Between 5MW and 18MW 200MW (dual-technology solar and onshore wind) 3/09/2018 pending
24/03/2017 Between 100 kWp and 500 kWp 450 MW (9 x 50 MW) self-consumption over 3 years 25/09/2017
22/01/2018
22/05/2018
24/09/2018
21/01/2019
20/05/2019
23/09/2019
20/01/2020
18/05/2020
Carrefour Hypermarchés
Total Solar F
Helexia Solar 6
145 for the first period
8 pending periods
14/03/2017 Innovative facilities 210MW (3 x 70 MW) over 2 years 2/10/2017
1/10/2018
30/09/2019
Cap Solar
Urbasolar
CPV Labecede
Tenao
50 for the first period
2 pending periods
16/12/2016 Between 100kWp and 500kWp 20MW self-consumption SAS Leader ENR
EDF Production Electrique Insulaire
Urbasolar
42
16/12/2016 ≥ 100kWp
Non-interconnected areas
50MW
(25 BIPV and 25 ground mounted)
CorsIca Sole 17
Albioma Solaire Mayotte
Helio Saint-Benoit
67
9/09/2016 Between 100kWp and 8MWp 1450 MW BIPV (9 x 150) over 3 years 10/03/2017
7/07/2017
6/11/2017
9/03/2018
6/07/2018
5/11/2018
8/03/2019
5/07/2019
4/11/2019
Irisolar
TENAO
SASU Elyade
SARL CPV Bernisse
Arkolia Invest
Cap Solar
Silver Enr
Kinasolar
ED4
Technique Solaire Invest
La Ferme Solaire de Rion 2
Solaire Catalane, Solaire Roussillon, Sollaire Canigou, Solaire Ponteilla
Mediaco Energie
Urba 213

361 for the first period
310 for the second period
283 for the third period
392 for the fourth period
5 pending periods

24/08/2016 Between 500kWp and 17MWp 3000MW (6 x 500) ground mounted over 2 years 3/02/2017
1/06/2017
1/12/2017
1/06/2018
3/12/2018
3/06/2019
Urbasolar
La Compagnie du Soleil
Cap Solar
Technique Solaire Invest
79 for the first period
77 for the second period
77 for the third period
3 pending periods
02/08/2016 Between 100kWp and 500kWp 40MW (2 x 20 MW) self-consumption Sovadis
Engie SA
134
15/05/2015 ≥ 100kWp 50MW
(2 x 25 MW for respectively building and ground mounted)
Corsica and OST
Albioma Solaire
Urbasolar Energy
39
19/03/2015 Between 101kWp and 250kWp 240MW on building
(3 x 80 MW)
Cap Vert Energy Exploitation
Arkolia Invest
Yellow ENR
1080
28/11/2014 ≥ 250kWp 800MW (initially 400MW)
(300MW on building – 400MW ground mounted – 100MW parking shelters)
Cap Solar 212
22/03/2013 Between 100kWp and 250kWp 120MW on building
(3 x 40 MW)
Arkolia Energies
Cap Solar
Irisolar
Kergreen
Technique Solaire Invest
TENAD
587
09/03/2013 ≥ 250kWp 400MW
(200MW on building – 200MW ground mounted)
Cap Solar
Urbasolar
121
30/07/2011 ≥ 250kWp 520MW (initially 450MW) Cap Solar
Hélio
Sun Premier France
Tenesol
Photosol
105
13/07/2011 Between 101kWp and 250kWp 300MW on building
(but only 145 were awarded)
SAS Fonroche Invest AO
Urbasolar
Cap Solar
696


Footnotes

1

Loi n°2015-992 du 17 août 2015 sur la transition énergétique et pour la croissance verte.

2

The PPE was published on 27 October 2016, accessible through the following link: https://www.ecologique-solidaire.gouv.fr/sites/default/files/PPE%20int%C3%A9gralit%C3%A9.pdf 

3

February 2012

4

September 2013

5

June 2015

6

From 2016 to 2019

7

RTE, Panorama de l’électricité renouvelable 2017, p. 22.

8

RTE, Panorama de l’électricité renouvelable 2017, p. 21.

9

Décret n° 2016-1442 du 27 octobre 2016 relatif à la programmation pluriannuelle de l’énergie, Article 3, II.

10

Décret n°2010-1510 of 9 December 2010.

11

Guidelines on State aid for environmental protection and energy 2014-2020, 2014/C 200/01, published on 28 June 2014

12

Ordonnance n°2017-80 du 26 janvier 2017 relative à l’autorisation environnementale.

13

The single environmental authorisation shall serve as the license to operate, water law authorisation provided by article L.214-3 of the environmental code, ICPE authorisation, protected species derogation, forest cleaning authorisation, authorisation related to the classified site, specific authorisation related to national nature reserves.

14

The applicable purchase price for the period 1 April 2018 to 30 June 2018 is 11.24 c€/kWh.

15

Company having a share capital partially held by public authorities.

16

Although a reduction of the PPA duration corresponding to the delay of the project was initially contemplated, the French Government seems to consider a reduction of the purchase price by 0.5 EUR/MW per trimester of delay during the six first months and then a 1 EUR/MW reduction would apply.

17

As of 1 November 2017, 64,2 to 80,7% of the solar projects awarded under the CRE1 and CRE2 calls for tenders launched in 2011 and 2013 have been commissioned (https://www.ecologique-solidaire.gouv.fr/solaire#e10)

18

Main awardees with regards to the volume capacity amount in kWp they were selected for.

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