French feed-in-tariff reform: opportunities and challenges
Under the provisions of Directive 2009/28/EU (23 April 2009) on Renewable Energy, by 2020 23% of France’s final energy consumption must be generated from Renewable Energy Sources (RES).
To face this ambitious target, law n° 2015-992 (17 August 2015) on energy transition for green growth and its implementing decrees and ordinances set up the main characteristics of the new French electricity framework for renewable energy, now partially subject to the open market. Let’s take stock of the reform.
Designing a new path and enduring delays
For years, France’s energy policy provided a strong incentive for renewable energy through a feed-in-tariff (FIT) and tender system to offer long-term purchase agreements for the sale of renewable electricity. A month ago, we celebrated the anniversary of the law on energy transition for green growth which aims at supplying the electricity generated from RES to the market with a feed-in-premium (FIP) mechanism. Implementing decrees from May this year, nine months after the adoption of the law and five months after the official deadline, explain the new mechanism. This controversial delay in setting up the new legal framework has resulted in annoyed professionals in the sector, but also in accelerated legislation to clear the backlog.
Thus, by and large, the quantity of legislation appears to be satisfactory for now, which is not the case from a qualitative perspective. Nevertheless, new opportunities do seem to be presenting themselves…. But also challenges for renewable energy producers.
Premiums won’t be constant, they will vary based on market price. In this approach, as market price increases, the premium amount is designed to decline (and vice versa) to minimize windfall profits for technologies close to the markets, thereby reducing subsidy costs.
However, small producers and certain technologies will continue to benefit from a fixed price FIT to secure investments, particularly to avoid discouraging self-production and consumption for households and to boost technical development and investments for immature renewable technologies.
The revitalization of the energy sector is also expected from the reform for the generalisation of tenders, mainly in the field of photovoltaic energy. A new call for tenders concerning terrestrial solar plant projects has been launched and a new building-mounted call for tenders will soon be launched. Furthermore, in August, the French’s Commission for Energy Regulation published the call for tenders concerning auto-consumption which should encompass the whole sector.
The proliferation of legislation to clear the backlog created problems. First of all, numerous implementing acts appeared ambiguous. Indeed legislation offers both a fixed- and premium-price option depending on each technology type and project size. In order to alleviate producers’ anxieties the government posted a note explaining in much more detail the provisions, especially with regard to wind power installations.
Moreover, according to article R 314-5 of the Energy Code, decrees on tariffs applicable to photovoltaic energy, hydroelectricity, methane plants and geothermal generation facilities should have been passed. This is not the case which creates uncertainty for producers who do not know when and to what extent the tariffs will change.
It is noteworthy that the law for energy transition contains deficiencies and gaps and its implementing provisions do not contribute to the necessary simplification of the renewable energies’ legal framework. The framework is still not stabilized and therefore not reliable. In the same sense, progress is expected to reform the renewable energy facilities’ environmental evaluations system.