panneaux photovoltaiques français, en france

At the mercy of stop-and-go politics, the French solar industry begs for more political stability. However, a critical observer may wonder if the ground is prepared for its take-off…

Far from claiming an umpteenth article about such a topic, we wish to make our belief clear: brave political decisions are needed for a sustainable industry to develop.

 

The debate initiated by President Hollande over the energy transition, which is expected to end next fall, reveals the French energy exception along with its paradoxes. France boasts a green economy, mentioning that its 2012 energy mix is made of up to 14% of renewable energy, double that of fossil energy. However, this result seems poor when compared to Germany and Sweden (respectively 20% and 55%), and results mostly from hydropower share, which has been stable since… the seventies. And yet, things are changing: from a tiny share ten years ago, wind energy has reached 2% of the national electrical production in 2011, and the solar energy tops 0.3%. Nevertheless, these sources cannot compete with the overwhelming nuclear production that accounts for 75% of French electricity.

Thus, the stakes are high for the French solar sector: on the one hand, the upstream industry depends on financial subsidies, and on the other hand, the downstream has been ruined by stop & go measures. Even though the industry currently lacks integrated actors and is unable to compete with German industrial maturity, does it have to be that way?

 

Is the French solar industry the national pride of tomorrow?

The SOLER (Syndicate of renewable energy) estimates that one MWh of nuclear energy costs 54 euros, as much as coal and four times less than PV, which is estimated at 228 euros.

In addition, the average productivity of a solar panel varies twofold depending on its location in France (South vs North). However, the European solar map reveals that German solar electrical production has exceeded 32 MWc in 2012 compared to 3MWc in France, which aims at meeting the Grenelle target by 2020.

As learnt from German experience[1], the take-off of our industry starts with brave political measures. Economies of scales then fill the gap between the average cost of solar electricity production[2] and the average cost of electricity. State subsidies then need to fade away and give way to a competitive industry. This will kill speculation and avoid a lethal moratorium, as it happened in 2009[3].

Considering the potential of French solar industry, we advocate for a bit of ecological patriotism:

  • A long-term support to this sector could reverse the employment curve, noting that solar jobs dropped from 32 500 in 2010 to 18 000 in 2012. Although the two-thirds of the cost[4] of a power plant cannot be relocated, strengthening an integrated French solar industry would concentrate the maximum of value creation in the Hexagon.
  • Regarding the carbon footprint, the fusion of silicon, which is a main component of solar panels, is energy intensive. It is particularly polluting in China where the two-thirds of the electrical energy comes from the coal industry:  the latter releases up to 900g of CO2/KWh, ten times more than French nuclear-generated electricity.
  • State subsidies have proven to offer a very stable investment framework: In spite of a steady decline, except in January 2013, the prices of repurchase are guaranteed for the      twenty next years. Given a learning curve[5] of the photovoltaic modules of 22%, they present strong growth prospects for investors.
  • Two-thirds of French solar panels come from China and Taiwan[6]: the 2012 French trade balance, with a € 67 billion deficit, is severely deteriorated by a € 69 billion energy deficit (increased by 10% from last year).

 

Exit strategies

In order to develop trust with investors, the French government must give up any moratorium and stabilize its regulation. In addition, France needs ambitious energy performance standards for buildings along with increased market targets (up to 20 000 MWc). Without the 2009 moratorium, the Grenelle 2020 objective (5400 MWc) would have been met.

Technically speaking, substantial investments in R&D are necessary to improve solar equipment volume, life, batteries cost and recycling, and reduce the energetic payback time[7] currently estimated at about 2 or 3 years, depending on sunshine intensity.

Yet, the subsidy-financed industry boom has some drawbacks:  the German EEG tax keeps increasing every year[8], with a dramatic increase of 47% in 2013. In France, the CRE[9] forecasts a 30% rise for the average household electricity bill by 2017.

It is now time to develop financing instruments other than taxes:

  • At first, authorities could encourage individuals to use their own electrical solar production in a smart grid logic[10], so that electricity retailers would only pay to distribute excess electricity. Thus, Germany rewards auto consumption until January 2014.
  • Then, France must substantially increase its production capacities thanks to diversified financing sources. In 2010, the Sustainable Development Saving Bankbook (LDD: “Livret      développement durable”) represented a € 68 billion envelope owned by some 25 million French won over by a 1.75% annual interest rate. However, a mere 10% of the collected funds are used to finance sustainable development….

 

Is solar energy a mere complement?

 Even though network parity[11] is forecast for 2015, solar energy cannot become a main source of energy because of its on-and-off supply – solar panels produce between 3.5 and 5 hours of electricity supply a day[12] – and its cost.

Concerning the latest news in the field, solar energy appears to be a complement for fossil fuels : Areva acquired the Australian-American company Ausra to back a solar power plant with a coal and gas plant, while Germany approved the construction of 23 coal plants by 2012, on the fringe of an ambitious solar program.

At any rate, regardless of its sources, energy is expected to become increasingly expensive, due to the upcoming replacement of French nuclear power plants.

 

By Ronan de Bellecombe, Consultant, and Nicolas Balland, Partner 

Article published in French in Le Cercle Les Echos

 

 


[1] Germany has been building its solar industry since 1990

[2] Includes the costs of construction and grid connection, costs of operation and maintenance costs

[3] The SER makes this moratorium responsible for the destruction of 7000 jobs in the industry

[4] Includes integration, installation, marketing, cables, inverters and insurance

[5] Means that production costs decrease by 22% for each doubling of capacity, according to Irena

[6] The mass production of photovoltaic modules and inverters helped divide in five years their world price by five

[7] This is the ratio between the total energy consumed in the manufacturing, transportation, installation, recycling plants and the photovoltaic energy produced annually.

[8] Nowadays, the State compensates EDF and ELD, who are forced to buy solar electricity, by donating part of their CSPE, which depletes 8% of the electricity bill in 2012, or 10.5 € / MWh, and could rise to 13% in 2013 at this rate. This tax represents the difference between the purchase price set for photovoltaic electricity and the market price of wholesale electricity.

[9] The « Commision de Régulation de l’Energie » or French Energy Regulator

[10] It aims at bringing closer the area of production and the area of consumption

[11] When the cost of producing a kilowatt-hour of solar electricity is less than or equal to the price of electricity paid by the final consumer

[12] Between 1300 et 1800 hours/year