France needs more cuts to solar power subsidies, government study says

www.bloomberg.com
Sep 7, 2010

France needs to revise targets for solar power and further cut subsidies to curb costs to consumers that may balloon to 54 billion euros ($70 billion) by 2020, according to a government report. New installations should be capped at 300 to 500MWs a year, wrote Jean-Michel Charpin in a report published on the finance ministry's website Sept. 3. France is on track to surpass its 2020 target for installed solar capacity by 2013 as companies rush to profit from inflated tariffs, he said.

Before Charpin's report was made public, the government said it would cut the so-called feed-in tariff Sept. 1 for a second time since January to counter a speculative bubble in the industry. The move is the first in a planned solar-policy overhaul in coming months that may include an annual growth target of 500MWs, the government said at the time.

Five hundredMWs "won't be nearly enough to develop equipment manufacturers in France," Richard Loyen, head of the solar industry group Enerplan, said by telephone today. "This is a report, not a new policy, although we know the minister will likely base his plan on it." Declining costs for making photovoltaic panels are forcing governments to reduce subsidies shouldered by consumers when they pay for electricity from renewable sources. Spain also plans to cut solar prices while Germany reduced the price for sun-generated electricity from July.

Applications Balloon
Applications to Electricite de France SA for connecting photovoltaic capacity to the grid rose more than four-fold to 80,000 in 2009 compared with the previous year, amounting to 4,670MWs, or 90 percent of the 2020 target, according to Charpin. About 80 percent of the applications were for large installations on industrial or farm buildings. If the trend continues, installed capacity will reach 17,000MWs in 2020 and cost consumers more than 4.5 billion euros annually, according to the report. This could translate into a 200 euro annual surcharge per household heated by electricity.

Feed-in tariffs require utilities to buy electricity generated by renewable sources such as solar panels and pay more than the standard rate. EDF, France's former power monopoly, pays more for solar power than for the nuclear power it produces at 58 reactors and what it can buy on European spot electricity markets. The added cost is passed onto consumers. Companies rushed to install solar power as tariff increases became automatic under a 2006 law and as installation costs declined, according to Charpin. Returns were as high as 26 percent in the sunniest parts of France. France will have 850MWs of installed photovoltaic capacity by the end of 2010 compared to 81MWs at the end of 2008, the government said last month.