Summary: This newsletter describes briefly the CWaPE’s recent proposal to review the current support mechanisms that are established in favor of producers of electricity from photovoltaic installations with power equal to or less than 10 kWp.

Résumé : Cette newsletter aborde succinctement la récente proposition de la CWaPE de réviser le mécanisme de soutien offert aux producteurs d’électricité produite au départ d’une installation photovoltaïque d’une puissance inférieure ou égale à 10 kWc.

Abstract: Deze nieuwsbrief behandelt kort het recente voorstel van de CWaPE om de huidige steunmechanismen ten gunste van producenten van elektriciteit uit photovoltaïsche installaties met een vermogen van minder dan of gelijk aan 10 kWp te herzien.

In its annual report 2011 on the evolution of the Green Certificate Market in Wallonia1, the CWaPE noticed that in 2011 the number of photovoltaic facilities with less than 10 kWc of power has significantly increased in Wallonia. The main reason for such increase was the announcement that the Green certificates’ regime was to be changed as from the 1st of December 2011.2

With regard to the Green Certificate Market in general, the CWaPE also underlined that in 2011 two major elements could be pointed out: firstly, a lack of visibility as regards the evolution of quotas after 2012, and secondly, the presence of too many Green Certificates on the market due to the constant and increasing penetration of solar installations of less than 10 kWc of power in the Walloon Region.3

In practice the anticipated granting of Green Certificates for photovoltaic installations that had been erected as a substitute for the subsidy mechanism under the SOLWATT program accentuated the phenomenon.4 With regard to numbers, the great majority of photovoltaic installations benefits from the upfront grant of 40 Green Certificates which more or less corresponds to the average energy production for two years.5

The offer to sell Green Certificates is thus far superior to the demand to buy such certificates, hence the disequilibrium of the market and a negative impact on the price of Green Certificates. In other words – and as in the Flanders region – the excess number of Green Certificates is clearly putting the very viability of the system at risk. In 2011, the average unit price was of EUR 82.07 per certificate, which is a 3.3% reduction of the price in comparison to the price per certificate in 2010.6 Just for 2011, the Green Certificates granted for photovoltaic installations represented more than 50% of the Green Certificates which were to be introduced by the suppliers to meet their quota obligations.7

Due to this excess of Green Certificates on the market, sales of Green Certificates to Elia at the guaranteed price of EUR 65 Euros are likely to intensify in 2012-2013. By the end of the first semester in 2012, nearly 8 million Euros had already been paid out by Elia. It derives from the “Avis of the CWaPE of Mai 2012” that this number could rapidly increase to EUR 200 million per year.8 Corrective measures are thus called for. In respect of the current context, the Green Certificate Mechanism is simply not adapted to the situation of private parties that own a photovoltaic installation. In other words, other support avenues must be envisaged for these installations. A less costly and more stable solution which allows for the stable development of the small power photovoltaic sector is thus necessary. The CWaPE even considered that the suppression of access to the Green Certificate Market of all photovoltaic installations with power equal to or less than 10 kWc was simply necessary:

“Today, thanks to green certificates, solar panels in Wallonia have become a totally standardized form of equipment which is available from more than 1500 locally established installers. The penetration rhythm of this industry is no longer conditioned by price levels of green certificates, nor by the fixation of quotas for green certificates because Elia’s purchase obligation of green certificates largely ensures a sufficient return to the projects.

Besides for the installations of less than 10 kW, having recourse to market mechanisms seems inappropriate for a target group mainly composed of private individuals. Indeed the green certificate market aims at pushing competition between the various industries and projects of green energy production as well as the emergence of more efficient projects on the basis of the criteria established by the authorities. This market is thus primarily geared towards professionals from the electricity sector which are accustomed to contractual negotiations and to cover the inherent risks of markets…[…]

[…] other mechanisms must now be put into place for this industry – the absence of which would result in endangering the green certificate mechanism which keeps all its usefulness for ensuring the development of other channels of green electricity production.

On the basis of such considerations, the suppression of access to the green certificate market for all solar photovoltaic installations with a power equal to or less than 10 kW should rapidly be pursued.”9 [free translation]

On the basis of this background, the CWaPE proposes to review the support mechanism for green electricity producers using photovoltaic installations with a power equal to or less than 10 kWc. Until now, these producers benefited from two forms of support which were to be added together: Green Certificates for 10 or 15 years as well as compensation for the consumptions (which concern the amount of energy consumed as well as the costs for the use of the network). The proposal to review such a system was made on the 6th of November 2012.10

The main elements of the CWaPE’s Proposal are:11

  • withdrawing the proposed support mechanism for photovoltaic installations with a power equal to or less than 10 kWc from the general Green Certificate mechanism and introducing another form of support mechanism as from the 1st of April 2013;
  • offering a “Guaranteed Global Support” (or in French “ Soutien Global Garanti – SGG”) for a period of time that is necessary for the private investor to recuperate the investment in the solar installation. This would replace the double form of support currently used;
  • fixing the SGG at the moment when the installation is set up; this fixing would derive from the average cost of photovoltaic installations based on different criteria. The CWaPE will determine the average cost of an installation, based on its size, for those that go up to 3 kWc, and will also determine a marginal reference cost for each kWc beyond 3 kWc;
  • integrating into the SGG the avoided cost of the produced electricity, valued at the price of the year n-1 (Price of the energy + price of the regulated tariff for the use of the distribution network);
  • creating a Contribution Green Certificates (“CCV”) – which would correspond to the difference of the SGG and the avoided cost when the SGG is superior to the avoided cost thanks to compensation. The DSO (Distribution System Operator) calculates and grants the CCV to the photovoltaic producer. By repercussion this CCV would then be integrated into the tariffs to be paid by the other system users;
  • a return on investment which should be no longer than 7 years. After this period, no further additional support is given. The financial economy that the “prosumer” will continue to benefit from after this period will only concern the energy that the “prosumer” produces by himself (it will not concern the costs for the use of the network). In other words, the investor will only be able to rely on the benefits of a smaller consumption but will nevertheless have to contribute towards the charges for the use of the network.12 Besides the SGG will not be provided over 3 kWc and a CCV will thus only be attributed for the first slice of 3 kWc;
  • the proposed system also envisages the introduction of an annual fee - “redevance”;
  • the system will prima facie, to a great extent, not apply to those which are under the old regime.

This system proposed by the CWaPE is innovative and contains some interesting ideas. First of all the system seems more proportionate to the needs of the market. It is limited in time, but it still should be able to offer some support to those who wish to invest in solar panels. Besides, the proposed system is auto-adaptive because the degree of support for a new installation will evolve according to (i) the average cost of photovoltaic installations as well as (ii) the price of electricity and of the regulated tariffs which influence the CCV.13 In this way, the system is very similar to the “banding“ regime introduced in Flanders.

To some extent at least, sector organization, EDORA14 welcomes the CWaPE’s initiative, but also formulates various remarks which tend to show that the proposed system is not yet perfect. Among the concerns of the federation of renewable energy producers, one can point to the belief that this proposed mechanism may endanger third–party investments, that it could entail heavy administrative burdens on the Distribution System Operators, or that it could limit the impact on the “prosumer” with respect to the balance between his own production and consumption, etc..

If the future of support mechanisms for small photovoltaic producers may not seem as “sunny and bright” in Wallonia as it used to, especially for those who now wish to invest in such infrastructures, at least the Green Certificate system as a whole now appears to be more sustainable.