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Renewable energy attractiveness indices - August 2012 - France - EY - Global

Renewable energy attractiveness indices: August 2012

France

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The Government’s short-term strategy is unclear: two think tanks have been created to produce proposals on the development of France’s wind and solar sectors, while tariffs for these technologies are under scrutiny.

Policy

The election victory of Francois Hollande in May 2012 is potentially good news for France’s RES sector. Contrary to his predecessor, Hollande has pledged to scale back France’s reliance on nuclear power, reducing the current 75% of electricity output from nuclear to just 50%. The gap, he claims, will be met by an increase in renewable energy.

However, the Government’s short-term strategy is not yet clear and two ‘think tanks’ have been created to produce proposals on the development of France’s wind and solar sectors, for consideration at September’s International Conference on Biodiversity & Sustainable Energy and Development. Further, the French nuclear lobby is likely to make any transition to renewables slow and painful, and the phasing out of nuclear will heavily depend on the extent to which renewable energy is capable of filling the gap given Frances’s relatively slow progress toward meeting its 2020 target.


Wind and solar FITs embroiled in legal reviews


Ranking Issue 34 Issue 33
All renewables index 6 7
Wind Index 7 7
Solar Index 9 8

Source: EY analysis

Wind

The validity of the 2008 wind power FIT Order has been challenged before the Conseil d’Etat, the French administrative Supreme Court, on the grounds that the FIT qualifies as state aid and should therefore have been presented to the EC (which it was not). The FIT is financed by a special contribution tax paid by consumers.  On 15 May 2012, the Conseil d’Etat decided to suspend the case and filed a preliminary ruling referring the question of state aid to the Court of Justice of the European Union (CJEU).

If the CJEU ruling, which is likely to take at least a year, confirms that the FIT does qualify as state aid, the Conseli d’Etat may have no choice but to cancel the 2008 FIT, which could be a significant blow to the wind sector. However, it is noted that the Conseil d’Etat has not challenged the FIT amount so far, and it therefore remains valid.

Notwithstanding this, the French Government could issue a new FIT Order and notify it to the EC at any time, or, in the event that the CJEU does qualify the FIT as state aid, decide to review the FIT level. The challenge over the validity of the wind FIT has caused some nervousness across the renewable energy sector as a whole, that any qualification by the CJEU could be used to challenge the validity of the other renewable FITs that are also financed via the electricity special contribution tax.

In response to the anxiety caused by these judicial events, the newly appointed Minister of Environment has affirmed her support for France’s onshore wind sector and indicated that the Government will ensure that PPAs entered into under the 2008 FIT Order will not be jeopardized.

In offshore wind news, notwithstanding the award in April of four wind farm contracts worth approximately €2b and totaling approximately 2GW of capacity, a report from Electricité de France SA (EDF) published by the French Senate in July indicates France will fail to meet its target of 6GW of offshore wind capacity by 2020. The report forecasts it will have 3.9GW of capacity installed, but only half of this will start generating electricity by 2020. There are also concerns that the Government’s second offshore tender looks likely to be delayed until early 2013.

Solar

The solar sector has also been the subject of legal controversy this quarter. In a decision dated 12 April 2012, the Conseil d’Etat declared null and void some of the provisions of the solar FIT Orders from 12 January 2010 and 16 March 2010 relating to the utilization of the building for integrated solar installations.
The annulment has been determined on the grounds that distinguishing the kind of buildings that qualify for the solar FIT is not justified, with the Conseil d’Etat stating that the only criteria that should be taken into account should be: (i) the project’s anticipated costs to benefit ratio, and (ii) contribution to the country’s energy independence and security objectives.

As a result, the €0.58/kWh tariff has been canceled for integrated power plants installed on residential buildings or buildings used for health or educational purposes. This decision does not affect PPAs that have been concluded on the basis of the original Orders; however, there is a concern that it could make the FIT Order of 4 March 2011 legally fragile, as it is also based on a building utilization criteria.

In other solar news, in the first of its two competitive tenders, the Government approved 214 solar projects worth approximately €1b. Of the total 541MW awarded, 95% related to projects with capacity exceeding 250kW. According to the regulator, ground-mounted project bids offered an average purchase price of €188/MWh while rooftop projects averaged €210/MWh.

Significantly, the total capacity awarded exceeds the 450MW limit planned for large-scale tenders under the previous Government. Details for the next solar tender will be announced following the distribution of a policy recommendations report due on 13 September.

Marine

The French Government is continuing to support the development of ocean energy technologies actively, in addition to offshore wind. The national authorities have disclosed a road map for tidal energy, including an objective of installing 2.5GW and a possible tender in 2014. GDF Suez is studying the possibility of installing turbines at two sites, including plans to install a pilot plant of three to six turbines from 2015, with a capacity of 3MW–12MW, in the Raz Blanchard area.



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