Solar slashing: France’s solar feed-in tariff to be cut by up to 12% - updated

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Local press reports in France have pointed towards feed-in tariff cuts for solar power installations. The French government is expected to follow the trend in solar slashing to keep its policy in line with the massive price drops apparent across the industry.

The government has supposedly alerted the Commission de Régulation de l'Énergie (CRE) of its intention to lower the solar FiT with effect from 1 September 2010. The report issued outlines that France remains ahead of its objectives set out in its environmental manifesto, La Grenelle Environnement and thus, the cuts should not affect the country's renewable energy goals.

The proposed cuts are to be around 12% and will be aimed at large-scale ground and roof mounted systems above 30m2. Individual residential installations of less than 30m2 will not be affected by the changes.

The report says: “The cost of the PV sector has become very attractive, with lower module costs thanks to the development of production capacity in Asia, and a collapse in prices linked to the Spanish crisis.”

High electricity prices caused by the FiT are also key factors in the decision to cut, according to the report. The cost of this is initially covered by the energy provider, but is ultimately borne by consumers as it is passed down through EDF.

This will not be the first time the country has made revisions to its feed-in tariff. Back in September 2009 the country's government replaced its three-year old solar FiT with a far more generous system, which spurred a torrent of project applications. The government now admits that this change was made based on “outdated cost assumptions” which have put the country in a situation of overly enthusiastic project applications.

The government claims that in the two months following the increase in FiT payments it received over 2GW of project applications. There are now over 60,000 applications awaiting approval.

Following this, the government took a hard look at the figures and realized that if the tariff was not cut, and soon, then the average customer could be facing a 10% hike in electricity prices. This then of course prompted the change.

What the country is likely to face now, is yet another flurry of project applications which aim to benefit from the higher FiT rate before the cuts take effect. This could put the energy providers in a worse position than they are now, yet this should be resolved as we go into 2011.

France is the latest in a long line of European countries to cut their subsidies for solar power, following Germany, Italy and the Czech Republic, who have all made amendments to their policies using the same reasoning.


Since this article was penned, analysts at Barclays Capital have all but confirmed these rumoured cuts commenting on the number of investor questions they have received in the past 48 hours.

Barclays also reported that the French government has announced that cumulative solar installations could reach 850MW by the end of 2010, implying that 2010 shipments will be ~575MW, above the analyst's current estimate of ~500MW in 2010. Nearly 3,000MW of project applications have been submitted year-to-date according to the finance ministry document, highlighting the attractiveness of the French solar market.

Although Barclays was not surprised by the FiT cuts, it does admit that it has come earlier than expected. “That said, the magnitude of the announced FiT cut is certainly below our expectations. The finance ministry document suggests that FiTs should be adjusted in order to maintain a 500MW annual target for the French solar market and does not suggest a hard cap,” reports Barclays.

“First, we believe any new law implementation would take at least a few months and this would likely result in a surge in new demand (recall the last FiT cut in France was well articulated for ~4 months, September '09 was the proposal, January '10 was the enactment).”

“Second, projects that have already started construction should still receive existing FiTs (proposed back in January). Third, there was no annual FiT cut baked into the current law and this, in our view, was not a sustainable policy. Finally, as we'll explain in the next point, IRRs in France (post the 12% FiT cut) would still be more attractive than IRRs in other markets (such as Germany and Italy). We currently model France demand to increase from 185MW in 2009 to ~500MW in 2010, ~1GW in 2011.”

At present all fully integrated roofing systems for residential and health buildings receive a FiT of €0.58/kWh, guaranteed for 20 years, while fully integrated roofing systems for commercial and industrial buildings receive €0.50/kWh. Simplified BIPV installations receive €0.42/kWh; while regular rooftop and ground mounted systems receive between €0.314/kWh and €0.377/kWh depending on the solar profile of the system location.

Under the newly proposed tariffs, fully integrated roofing systems for residential systems will receive €0.51/kWh, while fully integrated roofing systems for commercial/industrial buildings will receive €0.44/kWh. Simplified BIPV systems will now receive €0.37/kWh, while rooftop and ground mounted systems will receive between €0.276/kWh and €0.377/kWh depending on the solar profile of the system location.

Despite the suggested FiT cuts, Barclays expects 2011 IRRs to remain very attractive in France.

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