French solar cuts will worry wind investors

Last week, the lower house of the French parliament approved a government policy that puts solar PV developers in the firing line.

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Alex Curtis
November 26, 2020
French solar cuts will worry wind investors

Last week, the lower house of the French parliament approved a government policy that puts solar PV developers in the firing line.

A change to the 2021 budget bill introduced a retroactive subsidy cut to solar projects that have benefitted from the state-backed feed-in tariff scheme.

The scheme had previously guaranteed connection to the grid for selected projects with capacities exceeding 250kW for up to 20 years, and was offered to developers between 2006 and 2010. The policy had great success in encouraging investment and nurturing the then-emerging market.

However, the reversal is poised to axe subsidies for 800 projects totalling 2GW, even though some have more than a decade left on their contracts. Many will be forced to stop operating and go bankrupt as they no longer have an off-take deal, and lenders who funded these projects on a non-recourse basis won’t now be repaid.

So, what does this mean for the French wind market?

Yes, it’s a different sector, and no, the bill doesn’t include cuts to wind farm subsidies. But this isn’t the first time a French government has retroactively cut renewables subsidies. Every time it happens does a little more damage to the country’s reputation for investors.

Think back to 2018, when subsidies for six offshore wind projects were cut by 40%. These cuts were made in negotiation with the developers and affected development-stage projects rather than those already operational.

Even so, they added volatility to a sector that needed confidence, and showed that wind isn’t immune from the axe.

Solar fury

The uproar from the solar industry this time has been fierce.

Daniel Bour, president of French solar association Enerplan, said the policy was ‘simply incomprehensible and unacceptable’. Some members of the government agree with him: ecology minister Barbara Pompili called the move ‘excessive’.

This will have a knock-on for wind companies.

Some key wind and solar investors – Amundi, Axpo Holding’s Urbasolar and Voltalia – were among dozens of companies who joined forces to release a statement calling the policy an “economic disaster” that damages the industry and lenders. Some have even threatened to take the government to court for breaking the terms of a legally-binding agreement.

Wind operators in France will be on tenterhooks too, and rightly so.

Wind and solar developers are often only able to secure private investment if they have government subsidies or supportive policies. Retroactive changes show that the government is happy to ‘move the goalposts’ later. This damages confidence, as we’ve seen over the years from Spain to Canada and beyond.

It also punishes those who took the early risk in helping to establish the solar sector in France. This is likely to damage interest in new sectors, such as green hydrogen, that France wants to foster. Firms want to reduce the risk of nasty financial surprises later on wherever they can.

There are two sides to every story, of course.

According to the bill, the contracts hit by the cuts contribute to less than 5% of the renewable electricity produced in France but cost the state 33% of the total public support from taxes. It said this would cost €400m a year, or €4bn by 2030. There’s the cold, hard financial logic in straitened times.

It also says that project costs dropped 75% between 2006 and 2010 while subsidies stayed the same, and so effectively the aid was too generous.

Yet that’s where that ‘cold, hard financial logic’ falls apart. It ignores the fact that the generous subsidies led to the falling costs as well as creating 17,000 jobs. You can’t separate one from the other. It’s unfair for the government to punish companies just because it expects the rewards without paying those who took the risk.

The French government may feel that it made a mistake in signing 20-year deals with solar developers, but investors and developers shouldn’t be clobbered for a government miscalculation a decade ago. It is putting its energy transition at risk and undermines the thrust of its €30bn ‘ecological transition’ plan.

This policy shift sends a message to the renewables sector that may prove catastrophic. France must change tack.

Last week, the lower house of the French parliament approved a government policy that puts solar PV developers in the firing line.

A change to the 2021 budget bill introduced a retroactive subsidy cut to solar projects that have benefitted from the state-backed feed-in tariff scheme.

The scheme had previously guaranteed connection to the grid for selected projects with capacities exceeding 250kW for up to 20 years, and was offered to developers between 2006 and 2010. The policy had great success in encouraging investment and nurturing the then-emerging market.

However, the reversal is poised to axe subsidies for 800 projects totalling 2GW, even though some have more than a decade left on their contracts. Many will be forced to stop operating and go bankrupt as they no longer have an off-take deal, and lenders who funded these projects on a non-recourse basis won’t now be repaid.

So, what does this mean for the French wind market?

Yes, it’s a different sector, and no, the bill doesn’t include cuts to wind farm subsidies. But this isn’t the first time a French government has retroactively cut renewables subsidies. Every time it happens does a little more damage to the country’s reputation for investors.

Think back to 2018, when subsidies for six offshore wind projects were cut by 40%. These cuts were made in negotiation with the developers and affected development-stage projects rather than those already operational.

Even so, they added volatility to a sector that needed confidence, and showed that wind isn’t immune from the axe.

Solar fury

The uproar from the solar industry this time has been fierce.

Daniel Bour, president of French solar association Enerplan, said the policy was ‘simply incomprehensible and unacceptable’. Some members of the government agree with him: ecology minister Barbara Pompili called the move ‘excessive’.

This will have a knock-on for wind companies.

Some key wind and solar investors – Amundi, Axpo Holding’s Urbasolar and Voltalia – were among dozens of companies who joined forces to release a statement calling the policy an “economic disaster” that damages the industry and lenders. Some have even threatened to take the government to court for breaking the terms of a legally-binding agreement.

Wind operators in France will be on tenterhooks too, and rightly so.

Wind and solar developers are often only able to secure private investment if they have government subsidies or supportive policies. Retroactive changes show that the government is happy to ‘move the goalposts’ later. This damages confidence, as we’ve seen over the years from Spain to Canada and beyond.

It also punishes those who took the early risk in helping to establish the solar sector in France. This is likely to damage interest in new sectors, such as green hydrogen, that France wants to foster. Firms want to reduce the risk of nasty financial surprises later on wherever they can.

There are two sides to every story, of course.

According to the bill, the contracts hit by the cuts contribute to less than 5% of the renewable electricity produced in France but cost the state 33% of the total public support from taxes. It said this would cost €400m a year, or €4bn by 2030. There’s the cold, hard financial logic in straitened times.

It also says that project costs dropped 75% between 2006 and 2010 while subsidies stayed the same, and so effectively the aid was too generous.

Yet that’s where that ‘cold, hard financial logic’ falls apart. It ignores the fact that the generous subsidies led to the falling costs as well as creating 17,000 jobs. You can’t separate one from the other. It’s unfair for the government to punish companies just because it expects the rewards without paying those who took the risk.

The French government may feel that it made a mistake in signing 20-year deals with solar developers, but investors and developers shouldn’t be clobbered for a government miscalculation a decade ago. It is putting its energy transition at risk and undermines the thrust of its €30bn ‘ecological transition’ plan.

This policy shift sends a message to the renewables sector that may prove catastrophic. France must change tack.

Last week, the lower house of the French parliament approved a government policy that puts solar PV developers in the firing line.

A change to the 2021 budget bill introduced a retroactive subsidy cut to solar projects that have benefitted from the state-backed feed-in tariff scheme.

The scheme had previously guaranteed connection to the grid for selected projects with capacities exceeding 250kW for up to 20 years, and was offered to developers between 2006 and 2010. The policy had great success in encouraging investment and nurturing the then-emerging market.

However, the reversal is poised to axe subsidies for 800 projects totalling 2GW, even though some have more than a decade left on their contracts. Many will be forced to stop operating and go bankrupt as they no longer have an off-take deal, and lenders who funded these projects on a non-recourse basis won’t now be repaid.

So, what does this mean for the French wind market?

Yes, it’s a different sector, and no, the bill doesn’t include cuts to wind farm subsidies. But this isn’t the first time a French government has retroactively cut renewables subsidies. Every time it happens does a little more damage to the country’s reputation for investors.

Think back to 2018, when subsidies for six offshore wind projects were cut by 40%. These cuts were made in negotiation with the developers and affected development-stage projects rather than those already operational.

Even so, they added volatility to a sector that needed confidence, and showed that wind isn’t immune from the axe.

Solar fury

The uproar from the solar industry this time has been fierce.

Daniel Bour, president of French solar association Enerplan, said the policy was ‘simply incomprehensible and unacceptable’. Some members of the government agree with him: ecology minister Barbara Pompili called the move ‘excessive’.

This will have a knock-on for wind companies.

Some key wind and solar investors – Amundi, Axpo Holding’s Urbasolar and Voltalia – were among dozens of companies who joined forces to release a statement calling the policy an “economic disaster” that damages the industry and lenders. Some have even threatened to take the government to court for breaking the terms of a legally-binding agreement.

Wind operators in France will be on tenterhooks too, and rightly so.

Wind and solar developers are often only able to secure private investment if they have government subsidies or supportive policies. Retroactive changes show that the government is happy to ‘move the goalposts’ later. This damages confidence, as we’ve seen over the years from Spain to Canada and beyond.

It also punishes those who took the early risk in helping to establish the solar sector in France. This is likely to damage interest in new sectors, such as green hydrogen, that France wants to foster. Firms want to reduce the risk of nasty financial surprises later on wherever they can.

There are two sides to every story, of course.

According to the bill, the contracts hit by the cuts contribute to less than 5% of the renewable electricity produced in France but cost the state 33% of the total public support from taxes. It said this would cost €400m a year, or €4bn by 2030. There’s the cold, hard financial logic in straitened times.

It also says that project costs dropped 75% between 2006 and 2010 while subsidies stayed the same, and so effectively the aid was too generous.

Yet that’s where that ‘cold, hard financial logic’ falls apart. It ignores the fact that the generous subsidies led to the falling costs as well as creating 17,000 jobs. You can’t separate one from the other. It’s unfair for the government to punish companies just because it expects the rewards without paying those who took the risk.

The French government may feel that it made a mistake in signing 20-year deals with solar developers, but investors and developers shouldn’t be clobbered for a government miscalculation a decade ago. It is putting its energy transition at risk and undermines the thrust of its €30bn ‘ecological transition’ plan.

This policy shift sends a message to the renewables sector that may prove catastrophic. France must change tack.

Last week, the lower house of the French parliament approved a government policy that puts solar PV developers in the firing line.

A change to the 2021 budget bill introduced a retroactive subsidy cut to solar projects that have benefitted from the state-backed feed-in tariff scheme.

The scheme had previously guaranteed connection to the grid for selected projects with capacities exceeding 250kW for up to 20 years, and was offered to developers between 2006 and 2010. The policy had great success in encouraging investment and nurturing the then-emerging market.

However, the reversal is poised to axe subsidies for 800 projects totalling 2GW, even though some have more than a decade left on their contracts. Many will be forced to stop operating and go bankrupt as they no longer have an off-take deal, and lenders who funded these projects on a non-recourse basis won’t now be repaid.

So, what does this mean for the French wind market?

Yes, it’s a different sector, and no, the bill doesn’t include cuts to wind farm subsidies. But this isn’t the first time a French government has retroactively cut renewables subsidies. Every time it happens does a little more damage to the country’s reputation for investors.

Think back to 2018, when subsidies for six offshore wind projects were cut by 40%. These cuts were made in negotiation with the developers and affected development-stage projects rather than those already operational.

Even so, they added volatility to a sector that needed confidence, and showed that wind isn’t immune from the axe.

Solar fury

The uproar from the solar industry this time has been fierce.

Daniel Bour, president of French solar association Enerplan, said the policy was ‘simply incomprehensible and unacceptable’. Some members of the government agree with him: ecology minister Barbara Pompili called the move ‘excessive’.

This will have a knock-on for wind companies.

Some key wind and solar investors – Amundi, Axpo Holding’s Urbasolar and Voltalia – were among dozens of companies who joined forces to release a statement calling the policy an “economic disaster” that damages the industry and lenders. Some have even threatened to take the government to court for breaking the terms of a legally-binding agreement.

Wind operators in France will be on tenterhooks too, and rightly so.

Wind and solar developers are often only able to secure private investment if they have government subsidies or supportive policies. Retroactive changes show that the government is happy to ‘move the goalposts’ later. This damages confidence, as we’ve seen over the years from Spain to Canada and beyond.

It also punishes those who took the early risk in helping to establish the solar sector in France. This is likely to damage interest in new sectors, such as green hydrogen, that France wants to foster. Firms want to reduce the risk of nasty financial surprises later on wherever they can.

There are two sides to every story, of course.

According to the bill, the contracts hit by the cuts contribute to less than 5% of the renewable electricity produced in France but cost the state 33% of the total public support from taxes. It said this would cost €400m a year, or €4bn by 2030. There’s the cold, hard financial logic in straitened times.

It also says that project costs dropped 75% between 2006 and 2010 while subsidies stayed the same, and so effectively the aid was too generous.

Yet that’s where that ‘cold, hard financial logic’ falls apart. It ignores the fact that the generous subsidies led to the falling costs as well as creating 17,000 jobs. You can’t separate one from the other. It’s unfair for the government to punish companies just because it expects the rewards without paying those who took the risk.

The French government may feel that it made a mistake in signing 20-year deals with solar developers, but investors and developers shouldn’t be clobbered for a government miscalculation a decade ago. It is putting its energy transition at risk and undermines the thrust of its €30bn ‘ecological transition’ plan.

This policy shift sends a message to the renewables sector that may prove catastrophic. France must change tack.

Last week, the lower house of the French parliament approved a government policy that puts solar PV developers in the firing line.

A change to the 2021 budget bill introduced a retroactive subsidy cut to solar projects that have benefitted from the state-backed feed-in tariff scheme.

The scheme had previously guaranteed connection to the grid for selected projects with capacities exceeding 250kW for up to 20 years, and was offered to developers between 2006 and 2010. The policy had great success in encouraging investment and nurturing the then-emerging market.

However, the reversal is poised to axe subsidies for 800 projects totalling 2GW, even though some have more than a decade left on their contracts. Many will be forced to stop operating and go bankrupt as they no longer have an off-take deal, and lenders who funded these projects on a non-recourse basis won’t now be repaid.

So, what does this mean for the French wind market?

Yes, it’s a different sector, and no, the bill doesn’t include cuts to wind farm subsidies. But this isn’t the first time a French government has retroactively cut renewables subsidies. Every time it happens does a little more damage to the country’s reputation for investors.

Think back to 2018, when subsidies for six offshore wind projects were cut by 40%. These cuts were made in negotiation with the developers and affected development-stage projects rather than those already operational.

Even so, they added volatility to a sector that needed confidence, and showed that wind isn’t immune from the axe.

Solar fury

The uproar from the solar industry this time has been fierce.

Daniel Bour, president of French solar association Enerplan, said the policy was ‘simply incomprehensible and unacceptable’. Some members of the government agree with him: ecology minister Barbara Pompili called the move ‘excessive’.

This will have a knock-on for wind companies.

Some key wind and solar investors – Amundi, Axpo Holding’s Urbasolar and Voltalia – were among dozens of companies who joined forces to release a statement calling the policy an “economic disaster” that damages the industry and lenders. Some have even threatened to take the government to court for breaking the terms of a legally-binding agreement.

Wind operators in France will be on tenterhooks too, and rightly so.

Wind and solar developers are often only able to secure private investment if they have government subsidies or supportive policies. Retroactive changes show that the government is happy to ‘move the goalposts’ later. This damages confidence, as we’ve seen over the years from Spain to Canada and beyond.

It also punishes those who took the early risk in helping to establish the solar sector in France. This is likely to damage interest in new sectors, such as green hydrogen, that France wants to foster. Firms want to reduce the risk of nasty financial surprises later on wherever they can.

There are two sides to every story, of course.

According to the bill, the contracts hit by the cuts contribute to less than 5% of the renewable electricity produced in France but cost the state 33% of the total public support from taxes. It said this would cost €400m a year, or €4bn by 2030. There’s the cold, hard financial logic in straitened times.

It also says that project costs dropped 75% between 2006 and 2010 while subsidies stayed the same, and so effectively the aid was too generous.

Yet that’s where that ‘cold, hard financial logic’ falls apart. It ignores the fact that the generous subsidies led to the falling costs as well as creating 17,000 jobs. You can’t separate one from the other. It’s unfair for the government to punish companies just because it expects the rewards without paying those who took the risk.

The French government may feel that it made a mistake in signing 20-year deals with solar developers, but investors and developers shouldn’t be clobbered for a government miscalculation a decade ago. It is putting its energy transition at risk and undermines the thrust of its €30bn ‘ecological transition’ plan.

This policy shift sends a message to the renewables sector that may prove catastrophic. France must change tack.

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Not a member yet?

Become a member of the 6,500-strong A Word About Wind community today, and gain access to our premium content, exclusive lead generation and investment opportunities.