Last month, we reported on France’s new climate legislation, the Grenelle de l’Environnement. Today, the focus is on solar power. The French Ministry of Environment has just announced, for the second time this year, that the nation’s feed-in tariffs for solar photovoltaic (PV) will be modified, much to the displeasure of the solar industry.
Feed-in tariffs (FITs) are a financial tool that guarantees producers of renewable energy a specified price for every megawatt-hour of power fed into the grid. They were introduced in France in 2000, and prices during the most recent phase were set by a 2006 resolution.
This year, Sarkozy’s government already has decided to reform the solar FIT twice. First, a resolution was introduced on January 12 establishing new categories and tariffs for three PV applications: built-in rooftop solar panels (58 EUR cents/kilowatt-hour in mainland France except Corsica), rooftop solar panels (42 EUR cents/kWh), and ground-based solar panels (31.4 EUR cents/kWh for those generating less than 250 kilowatt-peak). This new resolution led to a general decrease in tariffs, especially for solar industry professionals, since many of them could no longer benefit from the highest tariff. The government introduced the resolution following a dramatic increase in the number of PV projects and to keep up with decreasing production costs. The FITs were supposed to be enforced until 2012 and then phased out gradually starting in 2013 as the industry gained in competitiveness.
But the government did not settle for these new tariffs and announced on August 23 that a general cut of the tariffs by 12 percent would take effect on September 1. Only individual installations generating less than 3 kWp will still be granted the 58 EUR cents/kWh tariff, in order to “preserve employment growth in this sector,” the Ministry of Environment and the Department of the Treasury said.
But why are Treasury Secretary Christine Lagarde and Environment Minister Jean-Louis Borloo, both members of Sarkozy’s conservative UMP party, so eager to cut the tariffs quickly? Apparently, windfall effects occurred due to the decrease in production costs, and investors were drawn by the attractive FITs, which enabled them to make easy profits. The government now wants to prevent such speculation and to slow down the craze for photovoltaic projects.
In addition, the Ministers reckon that France’s large PV deployment over the last two years demonstrates that the solar industry is not in its start-up phase anymore, justifying the reduction of high-level government support. They estimate that France’s total solar installed capacity will reach 850 megawatts (MW) by the end of 2010, ten times the level of 2008.
Is solar power suffering from its own success? Sarkozy’s government highlights the fact that France’s neighbors Spain and Germany – both solar power champions – also cut their solar FIT recently. Germany enforced reductions of 8–13 percent on July 1 (depending on the type of installation) and plans an additional 3-percent reduction in October. In Spain, the government announced a price cut of 45 percent for new large, ground-based PV plants, while small rooftop installations would be spared with a decrease of only 5 percent.
However, while Germany and Spain ranked first and second in Europe in per capita solar installed capacity in 2009 (at 120.2 Wp and 76.4 Wp, respectively), France rank only tenth, with a capacity of 4.5 Wp. Although the French government claims to be “way ahead” of commitments set in the Grenelle (1,100 MW by 2012 and 5,400 MW by 2020), France cannot be deemed a “champion” compared to its European neighbors, especially given the high (and largely untapped) solar potential in the country’s south. The government apparently wants to stick to its Grenelle target of an additional 500 MW of solar-generated electricity per year despite the fact that the country could do much better. According to Thierry Leclerq, CEO of France’s first solar company, Solaire Direct, Germany is able to generate an additional 500 MW of solar electricity every three weeks.
The French Ministry of Environment has tasked a special committee headed by Mr. Charpin, General Inspector of Finance, with assessing the costs associated with the nation’s solar energy policy. The newspaper Le Figaro, citing the still-unreleased conclusions of the committee, reports that the solar FIT would penalize French consumers. Indeed, the difference between the market price for electricity and the solar FIT is financed by a tax on electricity consumption, the Contribution au Service Public de l’Electricité (CSPE). Thus, as the number of PV projects escalates, so too does the associated state support. High solar tariffs would therefore disadvantage households—especially customers who rely on electricity for heating, who would see a jump in their electricity bills of around 60 EUR (US$77) annually, the committee estimates. The government says the 12-percent FIT reduction would help households by increasing their purchasing power, particularly during a time of economic crisis.
Is France’s enormous growth in solar energy over now? It’s too early to say, but it’s likely that the new tariff revision will shed uncertainty for solar investors, as numerous transitions complicate the administrative process. Sarkozy’s government may well prevent solar power from meeting its full potential in France.