Decrease in feed-in tariffs for solar electricity produced in France

As already stressed early December 2020, although the French Government is seeking to develop renewable energies in France, it had recently been looking to renegotiate the solar energy feed-in tariff (EUR600 per MWh) set under existing contracts (i.e. contracts concluded mainly between 2006 and 2010 which allowed producers to sell the electricity produced at a fixed price, independently of supply and demand in the market). This proposition had been included under an amendment to the 2021 finance bill (projet de loi de Finance pour 2021).

The rationale behind such reduction of the feed-in tariffs is that electricity prices currently negotiated under contracts benefiting from the purchase obligation have fallen on average between EUR60 and EUR200 per MWh.

While the French National Assembly (Assemblée Nationale) voted favourably on the amendment on 13 November 2020, the Senate (Sénat) rejected it on first voting on 27 November 2020.

The senators feared that this amendment would (i) weaken the trust relationship between the State and the producers, (ii) represent a financial burden for producers who have based their business plans on a forecast of turnover from feed-in tariffs and (iii) reduce the attractiveness of the solar industry.

On 17 December 2020, article 225 of the 2021 finance law was adopted which provides for a reduction in the purchase price of electricity produced by certain facilities for contracts concluded mainly between 2006 and 2010. The measure concerns (i) installations that use the radiative energy of the sun by means of photovoltaic or thermodynamic technologies, (ii) with a power greater than 250 kWp and (iii) subject to contracts concluded in accordance with: order dated 10 July 2006 issuing the conditions for the purchase of electricity produced by installations using solar radiative energy, order dated 12 January 2010 issuing the conditions for the purchase of electricity produced by installations using solar radiative energy, or order dated 31 August 2010 issuing the conditions for the purchase of electricity produced by installations using solar radiative energy.

Several safeguards are provided to limit the extent of the tariff reduction:

• on the one hand, the level will have to be determined in such a way that the total return on capital assets resulting from the accumulation of all the revenues of the installation and the financial or fiscal aid granted in respect thereof, does not exceed a reasonable return on capital, taking into account the risks inherent in its operation; and

• on the other hand, it must consider the tariff order applicable to the installation, its technical characteristics, its location, the date of commissioning and the conditions of its operation.

A safeguard clause is also provided for in paragraph 2 of article 225 for producers whose new tariffs would be likely to compromise their economic viability, particularly in view of the specific financing requirements for non-interconnected areas.