Since 2007, i.e. the enactment of the first Grenelle law, the government has had very ambitious targets for the photovoltaic sector hoping to reach 5400 MW of installed production by 2020. Since that date, this market has tripled in 2008 and doubled in 2009, and there is no doubt that the 5400 MW aim will be achieved even before 2020.
The reasons for such booming market in France are twofold: attractive and secured feed-in tariffs (for the next 20 years) and tax credits.
- Recent changes in the French PV market
Principle: The French electricity incumbent (EDF) must purchase all the electricity produced from photovoltaic energy at a defined price.
With the fast development of the French PV market, the waiting list of requests for interconnection of solar electricity producers to ERDF (the subsidiary of EDF in charge of the distribution of electricity in France) has grown dramatically. This has created an acceleration of the budget forecast of EDF and hence indirect costs for the customers. For this reason, the government took two major decisions in 2010:
- a decrease of the feed-in tariffs in 2010, which are now between 27.6c€/kWh (ground solar power stations) and 58 c€/kWh (residential), as well as of the tax credits for certain installations;
- the suspension of the processing of all the interconnections requests to ERDF pertaining to new projects, which has lead to (i) the organization of a public consultation of the actors of the PV industry and (ii) the implementation, within the next few weeks, of a new regulation which will hopefully bring more clarity and legal stability.
The French producers have had to adapt their business models in order to cope with these major changes. This has created financial tensions (drop of cash-flows, business model suddenly inappropriate, etc) as well as the need to redefine their overall business strategy (reallocation of services, installation and maintenance rather than producing electricity, common R&D policy rather than individual programs).
- A good time to invest
In this context, the French PV companies are facing financial difficulties. In particular, the French banks are becoming more and more stringent on their decision making process of financing PV projects although the latter are technically efficient (in fact at the cutting edge of their respective technologies such as wafers, cells, silicon technology) and are benefitting from secured long-term feed-in tariffs. Consequently, the PV industry is now attracting more and more foreign financial investors that are willing to put a foot on this market. Although the feed-in tariffs as well as the tax incentives are less advantageous than in 2007, or even 2009, the feed-in tariffs remain yet attractive in comparison with other European countries.
It is certainly the good time for foreign financial investors to allocate part of their funds in this fast growing industry in an economical and political stable country.