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  • Service: Tax
  • Type: Regulatory update
  • Date: 9/24/2014

France 

Taxes and Incentives
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 5 years depending on the location of the wind farms and the hours of electricity production.

    On December 19, 2013, the CJEU considered that the mechanism relating to the obligation to purchase wind-generated electricity meets the conditions for being characterized as State aid. Based on said decision, the French Supreme Administrative Court has decided to cancel the Order of 17 November 2008 setting the tariff amounts (Decision dated May 28, 2014).
  • Further to this decision, a new tariff should be issued soon.
  • 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: EUR0.2794/kWh, 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 5 percent or 10 percent applicable on the above-mentioned tariffs was granted for the components of the PV system made in Europe. This bonus has been cancelled effective May 2014 since this system has been considered as non-compliance with EU rules on freedom of movement.


    The above-mentioned tariffs are mainly applicable for installations below 100 KW power. For the installations exceeding this threshold, they are subject to invitation to tender.


    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.


    For the installation of PV, the invitations to tender 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.


    A statement issued in 2013 by the French Ministry in charge of energy, the selection will be made, interalia, on 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).

    However, due to lack of consensus over the tender process, it appears that, to date, no calls for tender have yet to be launched. Consequently, several expired concessions – including 2 that expired in 2012 – have yet to be renewed and are still being operated by the incumbent utility company. This process shall take into account the rules of EU competition for any public – private mechanism which could be created by French government in the form of this process


    A decision as regards the tender process should be taken in the coming months.


    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. On May 7, 2014, the French government has awarded a tender to build and run two offshore wind farms to a consortium led by French gas and power group, GDF.


    Furthermore, the Ministry of environment indicated that France wants to have 6000 MW offshore capacity before 2020. Therefore, specific organisms have to identify new zones for the construction of offshore wind parks and in the coming months, the French government should announce a new tender.


    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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