Renewable energy support schemes
The development of renewable energies benefits from State support, either upstream in the field of research and development, or in the industrialisation phase to support demand and commercial deployment (for example through feed-in tariffs, calls for tender or tax schemes).
Objectives of renewable energy support schemes
The development of renewable energies is supported by the State either upstream in the field of research and development, or in the industrialisation phase in support of demand and commercial deployment (for example through feed-in tariffs or additional remuneration delivered as part of open tenders or tax schemes).
The choice between the different support tools depends on the technological maturity, competitiveness and spin-offs in terms of added value in France and Europe, with regard to the characteristics of the value chain for each energy and its comparative advantages.
Renewable energy development targets
The law on the energy transition for green growth (LTECV) was enacted on 17 August 2015. It sets ambitious targets for the development of renewable energies:
to increase the share of renewable energies to 23% of gross final energy consumption by 2020 and 32% by 2030 ;
reach 40% of electricity production from renewable sources by 2030;
38% of final heat consumption from renewable sources by 2030;
reach 15% of final fuel consumption from renewable sources by 2030;
reach 10% of gas consumption from renewable sources by 2030;
increase by a factor of five the quantity of renewable and recovered heat and cooling delivered by heating and cooling networks by 2030.
To achieve these targets, the government has introduced a new programming tool called the Multiannual Energy Programme (PPE), which replaces the previous programming tools and sets quantitative targets for each renewable energy source over a 10-year period, with the exception of the first period, which is scheduled to cover 2016-2023. The EPP will be reviewed every 5 years, with the exception of the first review in 2018.
The existing Multiannual Investment Programmes (PPI) were updated by the decree of 24 April 2016 on renewable energy development targets, which was itself replaced by decree no. 2016-1442 of 27 October 2016 on multiannual energy programming.
Targets have been set for each renewable energy source for 2018 and 2023, thus going beyond their initial timeframe of 2020.
The incentive mechanisms put in place are specific to each sector and must be adapted periodically to take account of technical and economic developments. They are guided by the principle of ensuring that these technologies achieve the minimum profitability necessary for their deployment.
Removing technological barriers
The earlier the technologies are developed, the more technological the barriers. Removing them requires research and development, which is also supported by the government through specific programmes. This support can be targeted (e.g. demonstrator funds) or cross-sectoral (e.g. research tax credit).
Removing technical and economic barriers
When technologies are at the stage of commercial deployment, the obstacles may be more technical and economic: industrial optimisation, business model. State support for the deployment of renewable energies is designed to remove these obstacles and ensure that the national targets for the penetration of renewable energies in the energy mix are met.
Helping the deployment of renewable energies
Public support tools are necessary for the deployment of renewable energies, given that the cost of renewable energies is still higher than the market price, and that they cannot be deployed solely on the basis of competitiveness in a market system.
The incentive mechanisms put in place are specific to each sector and need to be adapted periodically to take account of technical and economic developments. They are guided by the principle of ensuring that these technologies achieve the minimum profitability necessary for their deployment.
Tools to support renewable energies in the electricity sector
Community framework for supporting renewable electricity generation
The European Commission adopted new guidelines governing state aid for energy and the environment on 28 June 2014. They set out the following principles for support for renewable energy or cogeneration:
Possibility of using guaranteed feed-in tariffs for installations with a capacity of less than 500 kW, or 3 MW or 3 production units for wind power ;
Obligation to use market-based remuneration mechanisms with a premium for installations with a capacity of more than 500 kW, or 3 MW or 3 production units for wind power, from 1 January 2016;
Obligation to use technology-neutral calls for tenders for facilities with a capacity of more than 1 MW, or 6 MW or 6 production units for wind power, from 1 January 2017. Exemptions to the principle of competitive tendering and the technological neutrality criterion are provided for.
The aim of this Community framework is to encourage greater integration of renewable energies into the electricity market.
To achieve these new targets for electricity generation, the government has two main types of support mechanism at its disposal:
open windows, which give the right to receive support for any eligible installation; in line with European guidelines, these are now reserved for small installations;
competitive procedures, where support is awarded only to the winners of such procedures (e.g. calls for tender).
There are two forms of support within these systems: the feed-in tariff or the remuneration supplement, introduced by the law on the energy transition for green growth, which, in accordance with the guidelines, consists of paying a premium to the producer in addition to the sale of his electricity on the market.
The « obligation d’achat » scheme, or the « complément de rémunération » scheme to be introduced in 2016, with an open window, are better suited to mature sectors, for which production costs are relatively known and stable, and for which there are many potential development sites, with limited conflicts of use. These arrangements are set out in Articles L. 314-1 to L. 314-13 of the Energy Code for the feed-in tariff and L. 314-18 to L. 314-27 of the Energy Code for the top-up tariff.
By virtue of their greater simplicity, the open-window systems, and in particular the feed-in tariff system, are also better suited to small-scale facilities. Under a feed-in tariff system, any kilowatt-hour injected into the public grid is purchased by an obligated buyer at a feed-in tariff that is higher than the average market price, set in advance and enabling the costs of the installation to be covered while ensuring that the project is normally profitable.
The list of facilities eligible for the open market feed-in tariff is defined in articles D. 314-15 and D. 314-16 of the Energy Code, and the list of facilities eligible for the open market remuneration supplement is defined in articles D. 314-23 to D. 314-25 of the Energy Code.
The remuneration supplement, introduced by the law on energy transition for green growth, is a premium paid to a renewable energy producer to supplement the sale on the market of the electricity it has produced. This premium is proportional to the energy produced and calculated as the difference between a reference tariff, similar to the current feed-in tariff, and a reference market price. This premium, like the feed-in tariff, must provide the producer with a level of remuneration that covers the costs of his installation while ensuring normal profitability for his project.
The feed-in tariff is contracted for a period of 12 to 20 years, depending on the technology and its degree of maturity. The same applies to additional remuneration. The levels of feed-in tariffs or the remuneration supplement, as well as the specific conditions applicable to each sector, are set out in specific tariff decrees for each sector, issued in application of article R. 314-12 of the Energy Code.
The provisions common to the feed-in tariff and the remuneration supplement are set out in articles R. 314-1 to R. 314-14 of the Energy Code. The provisions specific to the feed-in tariff and those specific to the remuneration supplement are set out respectively in articles R. 314-17 to R. 314-22 of the Energy Code and articles R. 314-26 to R. 314-52 of the same code.
The level of feed-in tariffs, and in the future of the remuneration supplement, are and will be reviewed periodically to ensure that they remain in line with the maturity of the sector and the fall in production costs.
Support for research and innovation
For less mature technologies, the government supports R&D initiatives, mainly via the « Investments for the Future » programme (PIA) operated by ADEME (demonstrator funds) or ANR (Institutes for Energy Transition). Dedicated calls for projects can also accelerate the development of renewable energies by providing specific support for project leaders.
For example, since 2009, the French Environment and Energy Management Agency (ADEME) has successively launched several calls for expressions of interest (AMI) or calls for projects (AAP), which have provided support for a large number of projects in the field of renewable electricity and heat production under the « Demonstrators and technology platforms for the ecological and energy transition » action of the PIA.
Cost of support for renewable electrical energy
Until the end of 2015, support for electric renewable energies was financed through electricity public service charges, which were ultimately passed on to electricity consumers via a tax known as the Contribution au Service Public de l’Electricité (CSPE).
The CSPE was reformed at the beginning of 2016, resulting in the budgeting of energy public service charges (including charges other than those relating to electricity) and the creation of a special appropriation account called « Energy Transition ». It is this earmarked account that now finances renewable electrical energy.
In addition, since 1 January 2016, public service charges have been financed by domestic consumption taxes on electricity, but also on gas (TICGN) and, from 2017, on other energy products (TICC and TICPE).
The breakdown of funding will be reviewed as from 1 January 2017, when only fuels and coal, via the TICPE and TICC, will contribute to the special allocation account,
It is CRE’s responsibility to assess these charges each year. In its decision of 13 July 2016 on the proposal for electricity public service charges and the unitary contribution for 2017, the French Energy Regulatory Commission (CRE) estimated that electricity public service charges for 2017 would amount to €7.8 billion. Renewable energies account for 72% of these charges (i.e. nearly €5.7 billion), including €3.1 billion for photovoltaic energy and €1.5 billion for wind energy. The increase in these costs is explained by the development of these sectors and by the fall in electricity market prices, the benchmark for calculating the additional costs incurred. Public service charges dedicated to renewable energies are therefore significant, but their growth is slowing with the downward trend in the costs of the various technologies.
Transparency of State aid
In accordance with European state aid regulations applicable to the 2014-2020 period, the French authorities regularly update the list of aid of more than €500,000 granted under the various aid schemes previously mentioned, specifying: the identity of each beneficiary, the form and amount of aid granted to each, the date the aid was granted, the type of company concerned (SME/large company), the region in which the beneficiary is located and the main economic sector in which it operates.
Tools to support renewable energy in the gas sector
Any producer of biomethane wishing to inject its output into the natural gas transmission and distribution networks is eligible for an open-ended feed-in tariff, subject to the networks remaining in good working order. Under this system, the biomethane injected is purchased by a natural gas supplier at a feed-in tariff set in advance to cover the investment and operating costs of the biomethane production facility, while ensuring normal profitability for the project. The purchase obligation is contracted for a period of 15 years.
Cost of support for biomethane
In its deliberation of 13 July 2016 on the assessment of energy public service charges for 2017, the Energy Regulation Commission estimated the costs associated with the biomethane purchase obligation at €20.9m for 2016.
Until the end of 2015, support for facilities injecting biomethane into the gas network was financed by a biomethane contribution, which was ultimately passed on to natural gas consumers. Since the beginning of 2016, as with other energy public service charges, the cost of supporting biomethane has been budgeted. Support for biomethane is financed by domestic taxes on the consumption of various types of energy through the « Energy Transition » special allocation account.
Tools for supporting renewable energies in the heating sector
Tools for supporting thermal renewable energies in the individual residential sector
For new buildings, the Grenelle 1 law set the target of widespread use of low-energy buildings by 2012 and positive-energy buildings by 2020. The thermal regulations have been tightened (RT2012) to ensure that all new buildings built from 1 January 2013 have a conventional primary energy consumption below an average threshold of 50 kWh/m².an (energy performance level equivalent to the « low-energy building » level), with at least 5 kWh/m².an coming from a renewable energy source.
Several decrees implementing the Energy Transition for Green Growth Act are currently being prepared for the building sector, including a decree that will set out the new building regulations that will replace the RT 2012 in 2018.
For existing single-family homes, the development of thermal renewable energies mainly involves three support tools: the energy transition tax credit, the zero-rate eco-loan and the energy savings certificate scheme.
Tax credit for energy transition (CITE)
The 2005 Finance Act created a tax credit dedicated to sustainable development and energy savings. To provide a stronger incentive, this measure has been targeted at the most energy-efficient equipment, as well as equipment that uses renewable energy. The aim of this measure is to encourage the widespread use of sustainable energy equipment in order to help France achieve its ambitious targets for energy savings and renewable energy.
Successive Finance Acts have seen the scheme evolve. The 2015 Finance Act simplified and strengthened the tax credit, which has now become the Energy Transition Tax Credit: a single rate of 30% with no means-testing and no obligation to carry out a range of work, also applicable in 2016. To ensure that this measure remains effective and continues to promote the most efficient equipment and materials to private individuals, the eligibility criteria are regularly reviewed. Nearly 10 million homes benefited from the scheme between 2005 and 2013, which also has an impact in terms of stimulating innovation, structuring sectors and supporting economic activity and employment.
Zero rate eco-loan (Eco-PTZ)
Introduced in the French Finance Act for 2009, these loans of up to €30,000 are available to households regardless of income. They are used to finance major energy renovation work on the main residence (particularly the purchase of renewable energy production equipment), so that the monthly loan repayments are commensurate with the energy savings achieved by the renovation.
Subject to a means test, this scheme can be combined with the tax credit for energy transition. From March 2016, the means test will be lifted.
Tools to support thermal renewable energy in the residential, commercial, agricultural and industrial sectors
Thermal regulations (RT2012) apply to new buildings in the collective residential and tertiary sectors.
The following measures apply to the collective residential sector:
The heat fund
The Heat Fund supports the development of the use of renewable thermal energies: biomass (forestry, agricultural, biogas, etc.), geothermal energy (for direct use or via heat pumps), thermal solar energy and recovered energy, as well as the development of heating networks using these energies.
The sectors concerned are collective housing, the tertiary sector, agriculture and industry, for which the target for additional production of renewable heat by 2020 represents almost 5.47 million tonnes of oil equivalent (toe), or more than a quarter of the overall target set for 2020 at European level as part of the energy-climate package (20 million toe of additional renewable energy).
The Heat Fund was set up in December 2008 to support the production of heat from renewable sources. With a budget of €1.9 billion for the period 2009-2017, it has supported almost 4,300 projects, generating investment of €5.8 billion and production of 25 TWh/year.
It has been decided to strengthen the Heat Fund and make the rules more flexible from 2019.
As part of the recently announced review of the multi-annual energy programme, a number of measures to promote renewable heat have been proposed. In particular, the increase in the Heat Fund and the relaxation of the rules have just been approved:
The trajectory for increasing the Fonds Chaleur has been included in the PPE until 2022, with a target of €350 million in 2020;
In 2018, the Fonds Chaleur budget was higher than announced, rising from €215 million to €255 million. In 2019, it is expected to rise to €307 million.
The requirement for repayable advances, which applied to all Fonds Chaleur projects for which ADEME aid exceeded €2 million, will be abolished from 2019;
From 2019, the Fonds Chaleur rules will be aligned with the ceilings in the EU framework for heating networks.
By encouraging heating networks to use renewable and recovered energy sources, the Heat Fund also has a significant positive impact in social terms (reduction and stabilisation of heating bills for mainly social housing) and in terms of diversifying energy supplies.
Management of the heat fund has been delegated to ADEME. There are two ways in which the heat fund can be used:
for large-scale biomass installations (renewable heat production in excess of 1,000 toe/year) in the industrial, agricultural and tertiary sectors, national calls for projects are issued on an annual basis. The tenth call for projects was launched on 26 September 2017.
For other projects, the heat fund is managed at regional level by ADEME’s regional offices. The aim of the heat fund is to finance heat production projects based on thermal renewable energies, while guaranteeing a price for the heat produced that is around 5% lower than that obtained with conventional energies. Regional calls for projects are currently in place for projects costing less than €1.5 million. Beyond that, projects are assessed on a case-by-case basis.
Assistance from the Heat Fund complies with Community rules governing public aid. It cannot be combined with energy saving certificates (CEE) or domestic projects. Assistance from the Heat Fund may be combined with other grants (European funds, local authority grants), provided that these grants are taken into account when the project is studied.
With regard to air quality issues, the high environmental quality of biomass projects is ensured by strict requirements on particle emissions, which sometimes go beyond regulatory obligations.