Premium tariff (Complément de rémunération par guichet ouvert)
Updated: 07.02.2019
Author: Helena Vidalic
The European State Aid Guidelines require that renewable energy be progressively exposed to market competition. Within this context, the Act on Energy Transition for Green Growth from 17 August 2015 introduced a thorough reshaping of the existing support schemes for renewable energies. To this end the feed-in tariffs, which constituted the main support mechanism so far, shall progressively be replaced with the so-called “compensation mechanism” (mécanisme de compensation). This support consists in allocating a premium tariff to renewable electricity producers on top of the sale price they get on the electricity market, in order to cover the costs of their installations and ensure their profitability (art. 104, loi n°2015-992). Depending on the technology and size of the installation, the French regulation foresees that the premium tariff is allocated either through direct guaranteed contracts (“guichet ouvert”) or through a tender procedure. This section focusses on the decription of the conditions for the guaranteed contracts.
Another important change was introduced by the Act on Energy Transition in favour of a more flexible electricity market in France. In fact, renewable energy producers are no longer obliged to sell their electricity exclusively to the national electricity suppliers (EDF and local distribution companies). The Energy Code extends the management of the purchase obligation to other operators than EDF or local distribution companies (art. L314-6-1, Code de l’Énergie). The first supplier to have obtained an accreditation in October 2016 is Enercoop, a cooperative supplier providing energy from 100% renewable sources. However, this accreditation, which entered into force on 1 January 2017, is limited to 75 purchase contracts for a maximum installed capacity of 100 MW.
Please note: As of December 2018, the publication of the tariff orders for biogas and biomass installations over 500 MW was still pending.
Eligible technologies
Since 1 January 2017, most of the installations producing electricity are eligible to the so-called “compensation mechanism”, which corresponds to a premium tariff allocated to producers on top of the electricity price they get on the market. The aim of this premium is to allow renewable electricity producers to cover the costs of their installation and ensure their profitability.
Article D314-23 of the Energy Code lists the category of installations eligible to the premium tariff through guaranteed contracts. The general provisions of this decree are particularised by orders (arrêtés) for each technology.
| Wind energy | Onshore wind energy plants with a maximum power capacity of 3 MW per generator and a maximum of 6 generators are eligible to the premium tariff (Art. D314-23, Energy Code). The installation shall be located in continental metropolitan France (Art. 314-23 Energy Code). |
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| Geothermal energy | Eligible, provided the installation meets the following conditions (art.4, arrêté du 13 décembre 2016 geo): - The geothermal plant shall use the energy extracted from a single upstream unit, meaning that all geothermal wells shall be located in the same geothermal site;
- The wells of the geothermal site may not have been used for the production of electricity under a feed-in tariff or a premium contract;
- The application for premium support shall have been filed and completed before construction work for the installation of the plant have started.
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| Biogas | The following installations are eligible: - Installations using biogas mainly produced by the methanisation of urban or industrial sewage with an installed capacity between 500 kW and 12 MW (Article D314-23, Energy Code)
- Installations using biogas from non-hazardous waste storage facilities with an installed capacity of 500 kW and 12 MW (Art. D314-23, Energy Code).
- Biogas producers whose purchase contract for a feed-in tariff under the former regulation has expired may also benefit from a premium tariff for the electricity generated from installations in continental mainland with an installed capacity of more than 500 kW (Article D314-24, Energy Code, pursuant to art. L. 314-19).
- Biogas producers who have already concluded a contract for a premium tariff under the former regulation may benefit from a new premium tariff for the electricity generated from installations with an installed capacity of more than 500 kW (Article D314- 25, Energy Code, pursuant to art. L. 314-21).
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| Hydro-power | Installations using the hydraulic power of lakes and watercourses as well as water piped via gravity are eligible, provided their installed capacity does not exceed 1 MW (Art. D314-23, Energy Code). |
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| Biomass | Biomass installations producing electrity from the thermal treatment of household waste or equivalent (Art. D314-23, Energy Code). |
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Amount
The premium tariff corresponds to the difference between the reference tariff called “Te” defined each year per technology, and the tariff obtained by the producer for the sale of its electricity production on the wholesale market. In addition, the RES producer is also eligible to a so-called “management premium”, which aims at compensating the marketing and balancing costs of RES producers on the electricity market.
Please note: As of December 2018, the publication of the tariff orders for biogas and biomass installations over 500 kW was still pending.
| Wind energy | The amount of the premium is calculated according to a formula taking into account mainly the following components, as defined in the Annex of the order of 6 mai 2017 vent.
CR = ∑ Ei * (α Te - M0i + Pgestion) - Nbcapa * Prefcapa
Under which: - i corresponds to a month; ∑ is the sum for all 12 months
- Ei corresponds to the monthly electricity amount produced by the RES installation and delivered during the operating hours of the spot wholesale market
- The coefficient α equals 1
- Te corresponds to the reference tariff in €/MWh mentioned in R.314-37 Energy Code and is defined according to Annex III Order of 6 mai 2017
- M0i corresponds to the reference market price for the respective month mentioned in R.314-38 Energy Code
- Pgestion corresponds to the management premium mentioned in R.314-41 Energy Code and equals 2.8 €/MWh for the whole contract period
- Nbcapa. corresponds to the number of capacity guarantees, defined in MW, defined for a calendar year
- Prefcapa corresponds to the reference market price of the capacity, expressed in € / MW.
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| Geothermal energy | The amount of the premium tariff (complement de remuneration – CR) is calculated according to the following formula (Annex, arrêté du 13 décembre géo): CR = Eelec (T - M0 + Pgestion) – Nbcapa*Prefcapa - Eelec corresponds to the annual electricity amount produced by the RES installation and delivered during the operating hours of the spot wholesale market
- T corresponds to the reference tariff covering the costs incurred by a reference installation
- M0 corresponds to the reference market price for the respective RES technology, as calculated by the French regulatory authority
- Pgestion corresponds to the management premium
- Nbcapa. corresponds to the number of capacity guarantees, defined in MW, defined for a calendar year
- Prefcapa corresponds to the reference market price of the capacity, expressed in € / MW.
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| Biogas | As of December 2018, the tariff order regulating the tariff conditions for biogas plants eligible to the premium tariff is still pending. |
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| Hydro-power | The amount of the premium tariff (complement de remuneration – CR) is calculated according to the following formula (Annex, arrêté du 13 décembre hydro): CR = E (Te - M0 + Pgestion) – Nbcapa*Prefcapa - E corresponds to the annual electricity amount produced by the RES installation and delivered during the operating hours of the spot wholesale market
- Te corresponds to the reference tariff covering the costs incurred by a reference installation
- M0 corresponds to the reference market price for the respective RES technology, as calculated by the French regulatory authority
- Pgestion corresponds to the management premium
- Nbcapa. corresponds to the number of capacity guarantees, defined in MW, defined for a calendar year
- Prefcapa corresponds to the reference market price of the capacity, expressed in € / MW.
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| Biomass | As of December 2018, the tariff order regulating the tariff conditions for biogas plants eligible to the premium tariff is still pending. |
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Addressees
The persons entitled to the premium tariff are the operators of renewable energy installations. The entities obligated to pay the feed-in tariff and satisfy the obligations arising from the tenders are the electricity suppliers (Art. L314-18, Code de l’Énergie).
Procedure
Process flow | The suppliers and the grid operators are obligated by law to provide RES operators with an agreement offering a premium tariff for the electricity put on the wholesale market. Due to the agreement concluded, the plant operator is contractually entitled to payment for the electricity he produces (art. L314-18, Code de l’énergie). |
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Competent authority | The competent administrative authority is the Ministry of Energy or the regional prefect, depending on the situation. |
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Degression
The tariff orders adopted for each renewable energy source provide for the premium tariffs to be inflation-indexed (coefficient "K"). In addition, a certain percentage of the reference tariff “T” is linked to a degression index (coefficient "L"). This adjustment is made annually on the day the premium agreement was concluded. The index takes into account the index of labour costs per hour and the index of industrial production costs. The indexed percentage of the tariff is 30% to 60%, depending on the technology.
| Wind energy | For onshore wind energy plants with a support application completed and submitted before 31 December 2016, the percentage of the reference tariff that is subject to reduction (coefficient "L“) is 60% (Annex 4, arrêté du 13 décembre 2016 vent). |
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| Geothermal energy | The percentage of the reference tariff “T” that is subject to reduction (coefficient "L“) is 30% (Annex 4, arrêté du 13 décembre 2016 geo). |
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| Biogas | As of January 2017, the tariff order regulating the tariff conditions and thus the amount of the degression index for biogas plants eligible to the premium tariff is still pending. |
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| Hydro-power | The percentage of the reference tariff “T” that is subject to reduction (coefficient "L“) is 50% (Annex 4, arrêté du 13 décembre 2016 hydro). |
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| Biomass | As of January 2017, the tariff order regulating the tariff conditions and thus the amount of the degression index for biomass plants eligible to the premium tariff is still pending. |
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Cap
Installations using the hydraulic power of lakes and watercourses as well as water piped via gravity with an installed capacity up to 1 MW (Annex III, arrêté du 13 décembre 2016 hydro):
- For plants with a drop height up to 30 meters, the annual cap orrespnds to the amount of electricity produced and delivered during the operating hours on the spot wholesale market multiplied by 120,000 hours. Once this cap is reached, the installation my not receive a premium tariff anymore, except if this tariff is negative.
- For plants with a drop height over 30 meters, the annual cap orrespnds to the amount of electricity produced and delivered during the operating hours on the spot wholesale market multiplied by 100,000 hours. Once this cap is reached, the installation my not receive a premium tariff anymore, except if this tariff is negative.
Eligibility period
According to the tariff orders in force for the single technologies, the premium tariff is allocated over a limited period of time:
- Onshore wind energy plants: 20 years (Art. 11, Arrêté du 6 mai 2017 vent)
- Geothermal plants: 20 years (Art. 9, Arrêté du 13 décembre 2016 geo)
- Hydro power plants: 20 years (Art.9, arrêté du 13 décembre 2016 hydro)
Distribution of costs
| Consumers | In France, the end consumers bear the costs arising from the suppliers' obligation to pay for the electricity from renewable sources exported to the grid. |
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