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France

France

Onshore support mechanism declared illegal

FRANCE: The European Commission (EC) has decided a 2014 decree re-instating the guaranteed premium purchase price for onshore wind in France is illegal.

The EC has ruled that France's onshore support system contravenes state aid guidelines
The EC has ruled that France's onshore support system contravenes state aid guidelines

The problem was caused by a reform of France's renewable and social surcharge on electricity bills (CSPE), which came into effect on 1 January 2016.

As a result, the EC considers France's support mechanism for onshore wind contravenes EU guidelines on state aid and must be replaced with a market mechanism.

The industry knew this was going to happen, but had been reassured it would not be introduced until 1 January 2019, giving the sector time to prepare for the changeover.  

While some, such French wind energy association FEE, disagree with the EC's analysis, action needs to be taken immediately to fill the gap. Banks are already holding back on funding, according to FEE.

Also, if a producer signs a contract with state utility EDF under the 2014 decree, the EC will launch an inquiry and ask for the government aid to be reimbursed, warned Marion Lettry, assistant executive commissioner of trade body SER.

To resolve the situation, the French government is in the process of issuing a new decree to secure all contracts signed in 2016.

Producers will receive a "reference market price" based on the price earned on the wholesale market, plus a top-up payment, giving a total revenue roughly equal to the old tariff. "This is very positive," Lettry noted.  

Another decree will cover the situation from 1 January 2017. Smaller projects under six turbines will still be eligible for the top-up payment, while projects with more turbines will have to go through a tender process if they wish to receive the support.

The industry expects the first tenders to be issued in 2018, but is waiting for details as to the timing and capacities. FEE is calling for a rolling programme of around 1.5-2GW a year to ensure France meets its targets.

Given that both decrees must be issued by 31 December, the industry is working urgently to try to ensure acceptable terms.

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