The new alternative energy initiatives in France are absolutely massive. Bravo to France, and considering this is actually the one market where alternative energy makes less sense, due to the large installed base of nuclear energy (80% of electricity generation!) it’s even more phenomenal. So if France can commit to alternative energy, so can others. Europe is showing the way. We think the long decline in solar stocks might be coming to an end, especially if Obama and other European countries deliver, which seems a pretty good bet. Now is the time to take radical measures…
From Raymond James today:
- Even though it already enjoys some of the cheapest electric power in the world thanks to the 80% nuclear share of its electric market, yesterday France announced a major enhancement of its renewable power policy. This is particularly noteworthy against the backdrop of a eurozone that is already in recession, with France being one of many European Union (EU) members whose government budgets are under strain from the global financial crisis.
- Beyond the direct relevance of this news to wind and solar industries, what we would emphasize even more is that this is an excellent illustration of Europe’s structural commitment to renewable energy – a commitment that transcends the current economic challenges. Please see our industry brief published on October 17, “Is the Financial Crisis Making Governments Less Green? – Europe Says NO,” for details.
- General policy framework: Within the context of the overarching EU renewables mandate, France is targeting a renewable power market share of 23% by 2020, more than double the 10.5% level of 2005. While the target itself is not new, yesterday the country’s Environment and Energy Management Agency (ADEME) announced 50 specific policies for implementing this ambitious target.
- Solar power: France is now targeting an increase in installed photovoltaic (PV) capacity by 2020 that is nothing short of colossal – a total of 5,400 MW, up from 75 MW (ranked #8 in the world) as of year-end 2007. This represents an aggregate increase of 72-fold over 13 years or an annualized growth rate of 39%. For context, the prior target was 3,000 MW (released in January 2008).
- To stimulate this growth, the government plans to create a generous feed-in tariff for commercial-scale PV projects of euro 0.45 – greater than what either Germany or Spain will pay in 2009.
- Also, given that much of France’s power market is state-controlled, the government plans to issue tender offers by the end of this year to build at least one solar power plant in each of France’s 26 regions by 2011 with aggregate capacity of 300 MW (or roughly four times France’s existing installed PV capacity). Of note, France’s solar patterns are considerably better than Germany’s, especially along the Mediterranean coast and in the overseas territories in the Caribbean and South Pacific.
- Wind power: France’s installed wind capacity target remains the same – 25,000 MW by 2020 – but new rules announced by ADEME aim to streamline and simplify the process of permitting wind farms, particularly offshore. This is similar to the new wind policy initiatives announced by the U.K. earlier this year; see “The Empire Strikes Back (at Carbon),” published on July 1, for details. At year-end 2007, French wind capacity totaled 2,455 MW (ranked #8 in the world, the same ranking as for solar though with a greater share of global capacity), so the 2020 target implies an aggregate increase of 10-fold over 13 years or an annualized growth rate of 20%.
- This news is inherently positive for the wind and solar industries, but it is particularly meaningful as it shows a firm – and, in fact, increasing – governmental commitment to renewables by a country that has not historically been a leader in these markets. Specifically with regard to solar, while recognizing that the current challenges in the industry – sharp currency volatility and credit tightness – are obviously not going to go away purely because of a decision by one country, we would not be surprised if France contributed more materially to global PV demand in 2009 than perhaps the market is expecting.