ARTICLE
24 August 2016

New Compensatory Fee Regime To Replace (Partially) Feed-In Tariffs Applicable To Renewable Energies

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Such transition was required by the European Commission, which considers feed-in tariffs as State aids and requests a more stringent review of such aids.
France Energy and Natural Resources

In late May 2016, the French Environment Ministry adopted several new Decrees implementing a new regime to transition the support for renewable energy from feed-in tariffs to a compensatory fee scheme. Such transition was required by the European Commission, which considers feed-in tariffs as State aids and requests a more stringent review of such aids.
 
The Decrees have been adopted in accordance with Article 104 of Law of August 17, 2015, on the Energy Transition, which required the energy produced by renewable energies (e.g., solar, biomass, hydropower) to replace feed-in tariffs with a compensatory fee. The compensatory fee replaces the feed-in tariff regime for some renewable installations. This new mechanism aims at improving the integration of renewable energies to the electricity market, as required by the European Commission. The principle of this new scheme is to allow a producer to sell its electricity directly on the market, while limiting the risks associated with the volatility of the market prices.
 
Decree n° 2016-691 specifies which installations will be eligible for the compensatory fee and which remain under the feed-in tariff regime. It should be noted that the feed-in tariff regime is maintained for small-sized installations and for wind energy producers that do not elect to benefit from the compensatory fee scheme.
 
Decree n° 2016-682 sets out the conditions under which the installations are eligible for the compensatory fee and establishes the calculation methods and payments: the compensatory fee will be proportional to the energy produced by the installation and calculated out of a reference fare, based in particular on an estimate of the investment and operational costs of a "sample" installation and a reference market price. It should be noticed that, in practice, the implementation of such scheme may allow installations that will perform better than the "sample" installation used for the determination of the compensatory fee to actually earn more than they currently do based on the feed-in tariffs.
 
The French Environment Ministry stated that "this new regime provides visibility for the renewable energy sector and allows to accelerate the development of renewable energies in accordance with the objective of the transition to other sources of energy."
 
To date, the sector of renewable energy is awaiting the publication of the ministerial orders that will determine the details of the compensatory fee as well as the terms and conditions for each concerned sector (e.g., wind, solar, biomass, hydropower), which should define the level of support granted to each concerned renewable technology.

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