On 17 August 2015, the French Parliament enacted the "Law on energy transition and on green growth" in order to bring the French renewable energy support model in line with the Commission's 2014 Guidelines on State Aid for Environmental Protection and Energy (the "Guidelines").
The Guidelines gave Member States until 1 January 2016 to adapt their renewable energy support model notably by encouraging producers to sell their electricity directly on the market against a "top-up payment"- or "feed-in-premium" - paid on a monthly basis, as a complement to the market price. Under the Guidelines, the "top-up payment" system is set to gradually replace the "feed-in-tariff" system (subject to some specific exemptions such as small-scale installations). The Guidelines also provide for a progressive introduction of competitive tender processes for allocating public support.
On 12 December 2016, the European Commission ("EC") approved four French support schemes for renewable energy under EU State aid rules:
- Installations using energy extracted from geothermal deposits: as the potential number of projects is too limited for competitive tenders which could also jeopardize the long-term potential of this technology, the EC authorized the aid to be granted without going through a tender process;
- Installations of less than 500 kW which use biogas produced by methanisation;
- Hydroelectric plants of less than 1 megawatt (MW);
- Wind farms which submitted a complete aid application in 2016.
The EC noted that only small installations of less than 500 kW will remain eligible for the "feed-in-tariff" while other installations will receive support in the form of the "top-up payment" system. The EC also took note of monitoring measures sufficient to prevent excessive compensation.
These aid schemes, with an estimated budget of € 7 681 million until 2042, will help France meet its objectives in terms of renewable energy (target of 23% of gross electricity consumed by 2020), in line with the Guidelines. They are financed from the earmarked "Energy Transition" fund, funded until now by the domestic tax on final electricity consumption, and, from 1 January 2017, will be funded by a share of the domestic tax on coal, brown coal and coke, as well as a share of the proceeds of the domestic tax on the consumption of petroleum and similar products.
In order to address any potential discrimination against renewable energy from abroad, France has committed to invest some € 49 million in interconnection projects.
The EC concluded, therefore, that the four aid schemes will boost the share of electricity produced from renewable energy sources, in accordance with the objectives of the European Energy Union while minimizing any distortion of competition caused by the State aid.
On 14 December 2016, the French Government published four ministerial orders (arrêtés) defining the remuneration mechanisms for each relevant installation. It is relevant to note that the EC has finally agreed that the 2016 "top-up payment" rate for terrestrial wind farms will remain at €82/MWh, identical to the 2015 "feed-in-tariff" rate provided under the previous regime.
Faustine Holderith, associate at White & Case, assisted in the development of this publication.
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