Wind sector: 2014 Feed-in-Tariff

25/07/16

Following the decision of the European Union Court of Justice of 19 December 2013 and the decision of the French Conseil d’Etat of 28 May 2014 on the Vent de Colère case, it is established that the French Feed-in Tariff mechanism aiming at supporting the Renewable Energy sector constitutes a state aid. Accordingly, the notification of the state aid status to the European Commission is compulsory, so that the compatibility of such state aid with the general European regime of state aids be assessed.

The Feed-in tariff for the wind sector resulting from the administrative decree dated 17 June 2014 was duly notified to the European Commission and was considered compatible. However, the French Energy Department was recently informed by the European Commission that several members of the DG Competition (European Competition Agency of the UE Commission) consider that the French State should notify again this regime since modifications were introduced by the Loi de Finances rectificative n°2015-1786 of 29 December 2015. This law amended the tax contribution regime to the public utility  of electricity (CSPE), i.e. the tax allocated to financing the Feed-in Tariff.

According to the European Commission, this amendment to the CSPE regime was substantial and of a nature to modify the Feed-in Tariff. This position entails that the French State should proceed to a new notification of the state aid regime.

If such notification became indeed compulsory for the French State, the European Commission would today review the aid regime in consideration of its new guidelines relating to state aids in the energy sector, in particular the necessity to move towards the remuneration complement  mechanism.

The consequences of the present situation are difficult to anticipate from a legal standpoint as they will mostly depend upon the position of the French State on the issue. However, it is reasonable to envisage that the intention of the government to continue to provide the wind projects with the benefit of the Feed-in Tariff at least until 2018 will be questioned. A possibility is that the transition of the wind sector towards the remuneration complement would be brought forward. It is uncertain at this stage if the standing electricity purchase contracts, and the contracts currently being drafted, could be executed as initially expected.

A series of clarifications will be necessary to fully appreciate the impact of the ongoing discussions with the European Commission in relation to electricity purchase contracts already issued or due to be executed on the basis of the 17 June 2014 tariff.

Our company currently works with developers, investors  and financing parties of wind projects in order to produce pragmatic solutions that will ensure the continuation of existing projects.

 

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