Foreign Policy Blogs

France Extends a New Lifeline to Its Solar Industry

Photo: Business Recorder

Photo: Business Recorder

 

As France’s solar industry has not flourishing as planned, French President Francois Hollande and his administration recently extended a new lifeline to France’s struggling solar energy industry. France doubled the nation’s solar production capacity target for 2013 to 1 gigawatt (GW)—roughly equivalent to 1 nuclear reactor—from the previous 500 megawatt  (MW) target. Aside from increasing renewable energy production, the initiative is seeking to save thousands of jobs in an industry that has lost more about 15,000 jobs in the past two years—in 2012 the industry employed 18,000 people, down from 32,500 in 2010.

The action is viewed as interim as the new government is thought to be crafting a long-term, broad energy policy for the nation. Renewable energy sector lobby SER has a similar view; it appreciates the action to revitalize the solar industry in the short-term but it desires a long-term plan to set appropriate certainty and market signals.

Renewable energy will continue to transition into the French energy mix in greater numbers. Now, by percentage, France is the most dependent country on nuclear energy in the world. Around 75 percent of the electric power—about 63 GW—is produced from nuclear energy, which is operated by Électricité de France S.A. (EDF) via 58 nuclear reactors. France initiated a rapid expansion of nuclear power following the oil crisis in 1973 to ensure energy security.

Mr. Hollande, however, has committed to reducing the reliance on nuclear power by 25 percent by 2025. In the relative near-term he has committed to close France’s oldest plant, Fessenheim, at the end of 2016. Renewable energy will have a large gap to fill and substantial investment is necessary—to attract wind farm expansion as well—for the benefit of energy reliability and security, the environment, and jobs. Former President Nicolas Sarkozy set a target for the country to have renewable energy compose 23 percent of the nation’s energy mix by 2020—actually greater than the E.U.’s “20-20-20″ targets—but the nation now totals 13 percent. The other two 20-20-20 commitments France is aiming to reach includes: A 20 percent reduction in E.U. greenhouse gas emissions from 1990 levels and a 20 percent improvement in the E.U.’s energy efficiency.

Meeting the new 1 GW target is anticipated to stimulate the sector for more rapid expansion and bring in investment of more than €2 billion ($2.6 billion). This does not come free, however. The Ministry of Ministry of Ecology, Sustainable Development and Energy estimated that the costs to the public would be between €1 ($1.30) to €2 ($2.60) per household, which will be levied on consumers through the existing CSPE tax on power bills.

An additional component of the new plan is a bonus of up to 10 percent will be paid on top of current FITs for buying solar photovoltaics that are made in the 30 countries of the European Economic Area (EEA). Mr. Sarkozy actually had a similar policy but the Directorate General for Energy and Climate (DGEC) never implemented the plan. The scheme would have provided a 10 percent bonus if a minimum of 60 percent of the installations modules were produced in Europe.

The arguably protectionist policy is due to the fact that the European market has been flooded with below market cost Chinese PV panels, distorting pricing and making it challenging for European PV companies to be financially viable—a very similar issue is occurring in the United States as well. France has cited the unfair competition has created a €1.35 billion ($1.8 billion) trade deficit for the sector in 2011.

In fact, China recently announced it will more than double its subsidies to its solar industry from 2012 to $1.1 billion in 2013. In addition, China seems to continually raise its solar power target. In the most recent announcement, the government increased its target to 21 GW or by 40 percent by 2015.

There is a lot of tension in the solar market. A group of German solar companies have filed a petition with the WTO citing China’s solar subsidies and China has filed a complaint with the WTO as well citing E.U. solar subsidies. France knows its new scheme that provides a bonus for buying products produced in the European Economic Area could be brought to the WTO, but that process will take time. It needs to rebuild its industry now.

As the solar industry continues to grow, it is important to find a way to have an equal playing field or else more lifelines like France’s will continually need to be taken.