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  • Service: Tax
  • Type: Regulatory update
  • Date: 10/8/2013

France 

Taxes and Incentintives
France Taxes and incentives for renewable energy KPMG Global Energy & Natural Resources.

Support schemes

Investments and other subsidies


The accelerated tax depreciation has not been renewed as of 1 January 2011. However, companies can still apply a declining-balance method to certain equipment used to produce renewable energy. This method, which is optional, consists of multiplying the depreciation rate for the straight-line method by a coefficient determined by law, based on the asset’s expected useful life. In practice, when a company applies the declining depreciation method at the beginning of the depreciation period, it can obtain tax depreciation higher than the accounting depreciation.


Biofuels


Biofuels benefit from a partial exemption of the internal tax on petroleum products and of the general tax on polluting activities to compensate for the additional costs arising from biofuel production. Biofuels in gasoline include bioethanol and ethyl tertiary butyl ether (ETBE). This partial exemption is applicable for the period between 2013 and 2015.


Research tax credit


Companies may be granted a research tax credit on their environmental investments if the expenses they incur while carrying on such projects correspond to research activities eligible for this tax credit. The tax credit will be equal to 30 percent of the eligible research expenses that do not exceed EUR100 million and to 5 percent for the eligible R&D expenses exceeding EUR100 million.


The research tax credit will be offset against the corporate income tax due during the year the expenses are incurred. Any surplus tax credit will constitute a receivable for the company that can be used to pay the corporate income tax for the three following years and may be reimbursed afterwards.

Operating subsidies

Feed-in tariff


Remuneration is available for electricity produced from the following sources.


Wind


Onshore wind power plants: EUR0.082/kWh for 10 years and between EUR0.028/kWh and EUR0.082/kWh for the next five years depending on the location of the wind farms and the hours of electricity production. The Court of Justice European Union (CJEU) is currently reviewing this tariff under the EU State aid rules (a decision is expected in July 2013).


  • Offshore wind power plants: EUR0.13/kWh for 10 years and between EUR0.03 and EUR0.13/kWh for the next 10 years, depending on the location of the wind farms and the hours of electricity production.

Solar


Due to several recent changes in the law, different tariffs apply to photovoltaic (PV) power plants, depending on the stage of development of the projects (tariffs for the first quarter 2013):


  • ground-based PV power plants: EUR0.8.18/kWh
  • simplified building-integrated generating facilities: EUR0.1817/kWh or EUR0.1727/kWh
  • building-integrated generating facilities: EUR0.3159/kWh, EUR0.2764/kWh, EUR0.31.59/kWh depending on the use and the power of the plant

As of 1 July 2011, the above-mentioned tariffs have been adjusted quarterly by the Ministry in charge of energy, depending on the number of grid connection applications received by the distribution system operators over the previous quarter.


A bonus of five percent or 10 percent applicable on the above-mentioned tariffs can be granted for the components of the PV system made in Europe.


Geothermal


  • France: EUR0.20/kWh, in addition to an energy efficiency bonus of up to EUR0.08/kWh
  • French overseas departments: EUR0.13/kWh, in addition to an energy efficiency bonus of up to EUR0.03/kWh.

Biomaterial (Biogaz)


  • Between EUR0.0.8121 and EUR0.1337 /kWh, depending on the power of the plant, in addition to an energy efficiency bonus of up to EUR0.04/kWh.

Hydro


  • EUR0.0607/kWh in addition to a bonus between EUR0.005/kWh and EUR0.025/kWh for small power plants, as well as a bonus of up to EUR0.0168/kWh for electricity produced during the winter
  • EUR0.015/kWh for ocean hydraulic energy (wave energy, tidal energy and other hydrokinetic energy sources).

Biomass


  • EUR0.043/kWh in addition to a bonus between EUR0.0771/kWh and EUR0.1253/kWh depending on the energy efficiency, the nature of the resources used and the power of the plant.

Électricité de France (EDF) and other electricity distributors must purchase the electricity produced by a renewable energies producer at fixed tariffs and for a minimum duration. For example, there is a purchase obligation for EDF during a 15 year period for onshore wind power, geothermal power, and biomaterial power and a 20 year period for offshore wind power, solar power (subject to the date of the operational start up of the facilities) and for hydro power. The tariffs mentioned above correspond to the tariff applied to the power plants located in metropolitan France. Increased tariffs apply with respect to Corsica and overseas departments.

Additional information


Building and Construction Authorization and Permission (BCAP):


The construction of a power plant is subject to the issuance of a building permit. However, solar power plants (subject to certain conditions) and wind turbines smaller than 12 meters are not subject to the issuance of a building permit. Specific authorizations exist for hydro and biomaterial power stations. In addition to the building permit, an exploitation authorization issued by the Minister of Energy is required for power plants with an installed load/installed power higher than 4.5 MW. For power plants with an installed power lower or equal to 4.5 MW, only a declaration is required.


The French government launched “invitations to tender” for PV projects with a capacity exceeding 400 kW in 2013. Bids can be submitted until 16 September 2013. The 400 MW should be divided equally between “innovative” ground-mounted solar plants and traditional roof-mounted PV systems. The purpose of this tender is to encourage development at degraded sites rather than farmland, to take into account the carbon footprint of the project, and to encourage innovation and research and development (R&D).


For the installation of PV, the invitations to tender launched beginning in 2011 are maintained.


Renewal of hydroelectric concessions:


Pursuant to the liberalization of the electricity sector decided by the European Union (EU), the French government launched bidding rounds to renew before the end of 2015 the concessions for 10 lots that represent 49 power structures/stations and two power-increase systems with a total power capacity of 5,300 MW.


The concessions due for renewal are located in the Alps, the Pyrenees and in the center of France. The hydropower stations are currently run by EDF and by a GDF-Suez subsidiary, the Société Hydroélectrique du Midi.


According to a statement issued by the French Ministry in charge of energy, the selection will be made pursuant to the following three criteria:


  • The energetic efficiency of the bidders to modernize the existing structures or to create additional equipment.
  • The financial remuneration to be paid to the State by the concessionaire, since a capped royalty proportional to the turnover made with the hydropower stations will be paid to the French State and to the local authorities.
  • The protection of the ecosystems. (The bidders shall especially respect the commitments convention for the development of a sustainable hydroelectricity, signed on 23 June 2010).

Offshore wind energy:


France has set a target plan for installing 6,000 MW of offshore wind energy by 2020 through a tender process.


In April 2012, the French government announced an award of four offshore wind farm development zones (2 GW of offshore wind energy capacity). On 16 March 2013, the French Energy Regulatory Commission issued a second tender for offshore wind farms with 1 GW of new capacity. The new tender is split into two wind farms: one built off the city of Le Treport in Normandy and the other near the Noirmoutier islands and the Ile d’Yeu islands of the Vendee department of the Pays de Loire along France’s Atlantic coast.


The deadline for submission of bids is on 29 November 2013. The result of the new tender should be announced in January 2014 with the construction and commissioning phase of the project is scheduled for 2021 to 2023.


The selection of the bidders will be based on the following criteria:


  • price of the electricity produced
  • overall characteristics of the projects in terms of industrial and social aspects
  • respect for the environment
  • consideration for existing fishing activities.

The maximum price of the electricity to be generated by the by new farms was set at EUR220/MWh to avoid producing “sticker shock” for consumers.


Grid access:


The producer/owner of a new power plant has to apply for a grid connection to the public distribution system such as Réseau de Transport d’Electricité (RTE), Electricité Réseau Distribution France (ERDF) or a local distributing company. Some agreements have to be made by the owner of the power plant for the distribution of the electricity that it produces:


  • public grid contract (Contrat d’accès au réseau public)
  • grid connection contract (Contrat de raccordement)
  • contract regarding the use of the equipment necessary for the grid connection (Contract d’exploitation des ouvrages de raccordement).
 

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