1

French Feed-in Tariffs:

Drivers, Present Status,

Potential Evolution

Bernard CHABOTRenewable Energy Consulting and Training

bechabot@wanadoo.fr

Garbejaire B107, 06560, VALBONNE

Phone +33(0)6 63 84 81 98

July 12, San Francisco, Sponsored by:

Feed in Tariffs: A Time for Real Action on Renewable Energy

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Content

�The European context as a driver for French FiTs

�The French context

�French FiTs

�Grading and principles

�Potential evolution: “ARTs” (advanced Renewable Tariffs)

�Conclusion

3

The European Context

As a driver for French FiTs

4

Europe energy and climate policy: « 3*20 % in 2020 »

�20 % reduction of greenhouse gases emissions in 2020

�Compared to 1990 emissions

�20 % more energy efficiency

�Beyond effects of already decided policies and measures

�20 % renewable energy in final energy consumption

�Compared to 6.9 % in 2006

�Binding target at the European Union level

�Binding target of 10 % of fuels for transportation from RES

�A related European Directive (= European Law)

oUnder the French Presidency (June to december 2008)

oAdopted in April 2009

�All the 27 member states will have to present their National Action Plan to the European Commission before June 30, 2010

�July 8, 2010 : 7 national RE plan available : UK, Spain, Netherland, Sweden, Bulgaria, Austria, Finland, Denmark

5

The European RE Directive « 20% RE in 2020 »(Heat, electricity, fuel for transportation final demand)

Projet directive ER 2020: % ER dans CEF en 2006 et objectifs 2020

1,98

2,11

2,31

4,86

5,94

6,6

6,82

15,01

16,53

21,81

22,84

30,02

15

13

14

15

18

20

17

30

31

34

38

496,92

6,33

20

23

0 10 20 30 40 50

UK

Belgique

Pays-Bas

Pologne

Allemagne

France

Espagne

Italie

Danemark

Portugal

Autriche

Finlande

Suède

UE27

% CEF en 2020

% CEF en 2006%

%

6

Renewable Electricity Roadmap for the « 3 * 20 % » PlanSource: European Renewable energy Council, November 2008

Source: EREC, Nov 2008,

"RE Technology Roadmap" 2006 2010 2020 % in 2020 GW 2020 % in 2020

Wind 82 176 477 35% 180 35%

Hydro 357,2 360 384 28% 120 23%

Bioenergy 89,9 135 250 18% 50 10%

Photovoltaic 2,5 20 180 13% 150 29%

Solar Thermal 0 2 43 3% 15 2,9%

Geothermal 5,6 10 31 2% 4 0,8%

Ocean Energy 0 1 5 0,4% 2,5 0,5%

TOTAL 537 704 1 370 100% 522 100%

% of EU Electricity 16% 19,7% 33 to 40 %

TWh from RE in EU27 GW RE in EU27

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First assessment of 7 NREAP published by July 8

�Based on 8 countries representing 156 M inhabitants (31 %

of the 491 Millions inhabitants in EU27 in 2006):

�UK, SP (Spain), NL (Nederland), SW (Sweden), BU (Bulgaria), AT (Austria), FI (Finland), DK (Denmark)

�For electricity, 2020 targets represent:

�528 TWh of RES-E, around 40 % of final electricity demand

�From: 42.8 % wind power, onshore and offshore; 33 % from hydropower (small and large);18.4 % from bioelectricity (biomass, biogas); 6.3 % from solar (PV + CSP); 0.8 % from marine power; 0.06 % from geothermal energy (without Italy)

�National targets for % electricity from RES-E in final demand: AT: 70.6 %; SW: 62.9 %, DK: 51.9 %; SP: 40 % ; NL: 37 %; FI: 33 %; UK: 30 %; BU: 20.6 %

�Other NREP to be published at:�http://ec.europa.eu/energy/renewables/transparency_platform/action_plan_en.htm

�Policy (including FITs policy) is described in § 4 of each NREP

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The French Context

9

Electricity in France: very specific characteristics

� Large amount of nuclear + large Hydropower, huge exports

Electricity production (TWh/year) Electricity exports and imports(TWh/year)

Nuclear

Fossils

Hydro & Wind

Imports

Exports

Net exports

10

RE in France: shifting from “old” to “new” RE

�Main present contribution from large hydro and biomass

� Efforts on “new renewables” (wind, biofuels, solar, CHP from biogas and biomass) started from 2001, due to European directives for electricity from renewables (2001 ���� implementation of French FITs from 2001 to 2006) and for biofuels (2002)

Renewable Energy Production in France (Mtoe/year)2009: Source: MEEDDDM , June 2010

Other renewables

Biofuels

Biomass from

waste

Solid biomass

Wind Power

Hydropower

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Recent increase of renewables in France

� FITs covering now all RE for electricity and CHP

ktoe/year 2007 2008 2009 % in 2009 FITs

Hydro 5 025 5 514 4 931 24,7% Yes

Wind 348 489 667 3,3% Yes

Solar PV 2 4 14 0,1% Yes

Biomass: wood 8 267 8 872 9 055 45,4% Yes

Biomass: agric. Waste 338 362 352 1,8% Yes

Biomass: MSW 1 167 1 205 1 242 6,2% Yes

Biogas 253 284 298 1,5% Yes

Geothermal 109 116 119 0,6% Yes

Solar thermal 35 44 52 0,3% NA

Heat pumps 531 771 947 4,7% NA

Biofuels 1 122 1 946 2 279 11,4% NA

TOTAL 17 198 19 605 19 956 100%

Renewables in France for heat, electricity, fuels. Source: MEDDM, June 2010

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The « Grenelle de l’Environnement » outcome

�A 2007-2008 national debate on environment and energy

between government and « civil society »

�Complements the July 2005 law on energy (« F4 in 2050 »)

�The « Grenelle 1 » law adopted in November 2008

�The « Grenelle 2 » law (detailed measures) on June 2010

�Will serve as a basis for French action plan for renewables

�Confirms the 23 % target from renewables in France’s final energy consumption in 2020 compared to 6.3 % in 2006

�From -35 Mtoe by supplementary Energy Efficiency measures

�And by + 20 Mtoe of Renewables, of which + 7 Mtoe power

oOf which + 5.3 Mtoe from wind power: 60 TWh from 25 GW in 2020

oAnd around + 0.5 Mtoe from Photovoltaics: 5.8 TWh from 5.6 GW

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The 2020 targets from 2008 “Environment debate”

�European directive will require 23 % RE in final energy

Biomass thermal;

6,20; 30%

Geothermal heat;

1,90; 9%

Solar thermal;

0,90; 4%

Waste heat; 0,50;

2%

Biogaz thermal;

0,50; 2%Hydropower;

0,60; 3%

Wind on-shore;

3,51; 17%

Wind off-shore;

1,54; 8%

Biomass power;

1,20; 6%

Solar PV; 0,50; 2%

Other RE power;

0,10; 1%

Biofuels; 3,30;

16%

"Grenelle Environnement": RenewablesTotal: + 20,5 Mtoe for 20 % Final Energy in France in 2020

(19 GW)

(6 GW)

(5.6 GW)

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French RE FITs

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History and drivers for French FITs

�No FITs before 2001

�“EOLE 2005”: “small French NFFO”: failure (as predicted !)

�European subsidies and demonstration projects for on grid PV

�2000: European Directive on RE negociations under

French Presidency of the EU ���� France motivation for

applying this directive ���� OK for tiered wind tariff

designed in 2000, published in June 2001 ����Wind success

�Other FITs not sufficiently efficient

�PV: 0.15 €/kWh in 2002, 0.3 announced in 2003

�Biomass and biogas: tariffs lower thanfor fossil fuels based CHP

�New law on Energy “POPE Law” July 2005 ���� requires

public assessment of tariffs ���� new tariffs in July 2006

�PV: BIPV Bonus (tariff 0.58 €/kWh), Biogas, & geothermal up, tiered offshore wind tariff created (0.13 €/kWh max)

�“Environment debate”: new biomass, PV FiTs in 2010

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Grading the French 2010 FITs System

Source: WFC, “Grading North American Feed-in Tariffs, Paul Gipe, May 2010

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French FiTs are differentiated and cover all RE

�By renewable energy technologies

�Wind

�Solar photovoltaic (same tariffs for Solar CSP)

�Hydropower, marine energy

�Bioenergy: biogas, solid biomass, biomass part of MSW

�Geothermal energy for power

�By Applications

�Wind: onshore or offshore

�PV: Building integrated, non BIPV, PV plants on land

�According to rated power range: PV, biomass, biogas, Hydro

�High efficiency CHP bonus

�Options for time and seasons of delivering: hydropower

�By regional application: Mainland, Overseas Departments

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French renewable FiTs are Cost + Profit based

�Officially based on a real project IRR before tax on profit

�8% real project IRR from the 2006 review imposed by the July 2005 law on energy (« Loi POPE »)

�Fined-tuned by profitability levels adapted to targets

�Wind: profitability increase with wind speed at hub height

�BIPV: increased profitability to help innovation and market deployment of new BIPV modules and systems (BIPV bonus)

�CHP from biogas: at least same profitability level than the one from CHP based on fossil fuels

�Fine tuning easy from the « Profitability Index Method » :

�From success stories and failures: 0.1 < PI (= NPV / I) < 0.3

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Profitability Target Choice for FITs

-0,1 0 0,1 0,2 0,3 0,4 0,5 0,6 0,7 +

Defensive Growth Crash Towards

failure No Growth programme

Surviving

Offensive Growth Leadership

Targeted Profitability Index (PI) Values According to Risks and Growth Strategies

Low Risks No Risks at all High to very high risks

Non

Profitable

Projects

Targeted zone

For « Fair and

Efficient tariffs »

Using the “Universal Profitability Index Scale”:

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“Advanced Renewable Tariffs”:

RE FITs adapted to different

sites with different potential

energy yield: * Wind (1)

* Solar PV (2)

�

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ARTs : Advanced Wind Tariffs Principle

TWh/y

Profitability PI = NPV/I

8.57.56.2

9

60

V m/s at hub height

V m/s

6.2 8.5

0.1

0.3

Target:

Tariff

Profitability

B. Chabot 11-08

0

A« Win-Winsituation »

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Example of the French onshore wind tariffs

�Adapted from the first tiered wind ART: Germany, 2000

�With a different approach: two successive tariffs levels :

�T1 fixed for all projects from years 1 to 5 ( > 7/2006: 1 to 10)

�T2 variable for projects from years 6 to 15 (>7/2006: 10 to 15)

�T1 and T2 define a virtual constant “equivalent tariff”, Tce

�For a specific project :

�Nh = averaged Ey / P from values years 1 to 5 (hours/year)

�T2: linear calculation from reference values of Nh = Ey / P

�Tce from (T1, T2, t = real discount rate = AWCC before tax)

J, fixed N=15 years

T1, fixed

T2, variable Years

Tariffs

Tce

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Reference profitability : example of 2001 wind tariffs

�Reference case�Yearly O&M expenses: Kom = 4 % of initial investment

�Mean inflation rate 2001 - 2015: i = 0% or i = 2 % / year

�PI = NPV/I = Profitability index = NPV per € invested

Profitability Index - 2001, Mainland

i=0 %

i=2%

0,0

0,1

0,2

0,3

0,4

0,5

1800

2000

2200

2400

2600

2800

3000

3200

3400

3600

Nh (hours/year at rated power)

PI = NPV / I

Internal Rate of Return - 2001, Mainland

i=0 %

i=2%

5

6

7

8

9

10

11

12

13

1800

2000

2200

2400

2600

2800

3000

3200

3400

3600

Nh (hours/year at rated power)

IRR (%)

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What potential evolution for French FITs ?

�General

�Shift inflation protection within a PPA from to 80 // 90 %

�Wind

�Shift from capacity factor Nh (h/year) to Energy Yield Eas (kWh/m2.year): see OSEA 2005 adoption and proposal.

�For onshore shift from n = 15 years to n = 20 years

�Adapt levels of tariffs for the 25 GW target in 2020 and taking into account increasing wind turbines costs.

�Photovoltaic:

�Create tiered PV tariffs: North: 1000 kWh/m2.y, vs 1800 south

o2010 non BIPV projects > 250 kWp: Coefficient “R” on tariff from R = 1

very South to R = 1.2 to the very north, from Departments (90 “county”)

oPotential adoption of the “USPV tariff system” for PV ART

�Define new tariffs from investment cost decrease < 2012

�Nobody is perfect, but everyone can learn from others !

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2009 UNDP-Wind Energy Project Pakistan proposal

�Shifting from Nh = Ey / P to Eys = Ea / S m2 (kWh/m2.y)

�See GWEC 2002 Paris paper (Chabot, Kellet, Saulnier)

�From a PI seminar in February 2009; Decision pending

�Same design proposed in Ontario to OSEA and OPA in 2005 and to GEA in 2009 (not implemented by OPA)

0,151

0,415

0,528

0,083

0,337

0,445

0,0

0,1

0,2

0,3

0,4

0,5

0,6

0,7

600 700 800 900 1000 1100 1200 1300

Profitability before (PIo) and after inflation (PIv)

PIo

PIv

Eas (kWh / m2.year)

7,08

10,51

12,66

0,0

5,0

10,0

15,0

700 800 900 1 000 1 100 1 200 1 300

Projects real IRR before tax (% real)

(WACC = 6 % real)

Eas (kWh / m2.year)

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ARTs : Advanced PV Tariffs Principle

TWh/y

Profitability PI = NPV/I

14001100

1

9

Eiy (kWh/m2.year)

Eiy (kWh/m2.year)

1100 1600

0.1

0.3

Target:

Tariff

Profitability

B. Chabot 11-08

0

1600

A« Win-Winsituation »

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Suggested design of an USPV tariff system (1)

� Inspired from the German EEG 2000 wind tariff system, but much more simple for PV

� T1 on years 1 to j and T2 from year j+1 to year n: constant values for all projects in the

tariff system for a specific PV application (residential, or commercial or PV plants…)

� j: variable from j = jmin to j = n

� Tce = constant equivalent tariff, giving the same profitability than T1 and then T2

� For a specific project: j = f (potential maximum energy yield at he project location)

� Potential energy yield: from PVGIS or PVWATTs for Eiy (kWh/m2 in the optimal plane

of modules, without any shadow) and performance ratio PR = 0.75

� Case studies EPIA 2009: France, Germany, Italy and Spain, Turkey. USA: California

0 1 j j+1 n

T1

T2

Tce = f(T1,T2,t, j, n)

Tariff €(0)

Years

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Conclusions

�Market regulation in favour of RE electricity is logical and is

simple and effective if based on fair and efficient feed-in tariffs

(ARTs = “advanced Renewable tariffs) as demonstrated in

Europe and in France

�Benefits from this regulation are rapidly outweighing its cost

� Future French renewable policy and FiTs from the new 20 %

European target for renewables in 2020 (23 % in France) will

be based on continuity in success from fair and efficient tariffs

�As a potential of FiTs improvement, “Advanced Renewable

Tariffs adapted to site quality are the most promising, as

demonstrated for wind and as possible for PV

� Sharing experience, methods and tools can avoid delays and

unnecessary or risky tests or trials for FiTs systems designs

�Thanks to generous sponsors and dedicated organizers for

facilitating this experience sharing !