Power policy

France has set itself ambitious technology-specific renewables targets through its 10-year roadmap, ratified in January 2020. The country’s renewable-electricity target for 2030 is 40% of energy production and 33% of final energy consumption, according to the national energy and climate plans published in 2019. The Multiannual Energy Program (PPE) covers two five-year periods, 2019-2023 and 2024-2028, with a key target to attain 50% of final energy consumption from renewable sources by 2035. This is underpinned by a net-zero target for 2050. In the April 2022 version of the PPE, France set itself the ambitious objective of reaching 20.6 gigawatts of solar capacity in 2023 and between 35 gigawatts and 44 gigawatts in 2028. An auction timeline extends to 2028 for most renewables technologies, and 10 or so rounds will be held each year. In 2021, France conducted its first-ever auction for a floating offshore wind farm. People that install photovoltaic panels on buildings are eligible for a reduced VAT rate. In addition, a feed-in tariff is now restricted to small-scale PV installations with a limit of 500 kilowatts. France has committed to not building any additional fossil-fuel capacity, meaning renewables will dominate additions. This is especially relevant in light of the government’s plans to reduce the country’s dependence on nuclear – the generation share of this technology is to reach 50% by 2035, from 66% in 2020. Regarding energy storage policy, France has a target of 1 gigawatt to 4 gigawatts of energy storage capacity by 2030 and the long-term call for tenders (AOLT), launched in 2019, is a subsidy focused on achieving that. The aim of this AOLT is to enable the development of capacities to secure electricity over seven-year periods starting in 2020 and 2023, with guaranteed prices during such periods under the capacity mechanism.

Power prices and costs

Among the European markets surveyed in the first quarter of 2022, France had a levelized cost of electricity range for onshore wind at $40-70/MWh; $142-221/MWh for offshore wind and $143-439/MWh for nuclear. France’s retail and wholesale power prices are high due to the cost of maintaining the country’s ageing nuclear reactor fleet while adding renewables - but they are currently frozen until at least the beginning of 2023 because of the energy crisis of 2022. The public electricity company that operates the nuclear plants, EDF, is in charge of ensuring the safety of the reactors, which had previously been intended to run for 40 years. Most nuclear reactors were built in the 1980s, meaning they could be shut down in the 2030s. However, a lack of flexibility makes France among Europe’s most volatile power markets.

Power market

France’s power market is dominated by one of the world’s largest nuclear fleets, which reduces the impetus for renewables. French reactors produce enough power to sell large volumes abroad, although it is expected to increasingly rely on imports as the nuclear fleet shrinks. Already, winter peaks cannot be met without importing power from abroad. The government is poised to restructure EDF to increase the utility’s financing capacity, potentially separating its nuclear arm from more profitable divisions. Meanwhile, it will decide whether to embark on a new wave of reactor building by mid-2023. Recently, President Emmanuel Macron announced plans to invest in so-called small modular reactors (SMRs) to help France reduce its CO2 emissions. The announcement came when Macron unveiled his France 2030 investment strategy of 30 billion euros ($35 billion). France should utilize their historical competitive advantage of nuclear power plants, according to Macron. The strategy allocates 8 billion euros to the development of hydrogen power and 1 billion euros to SMRs, yet Macron declared the plans to develop the small plants as "goal number one."

National champions Engie and Enedis (EDF), which operate 5 gigawatts between them, are the top project owners by a sizeable margin. Even though EDF is the main distribution network operator for France, there are other networks managed by local distribution companies (ELD). Japanese and German credit providers have made inroads in recent years, but domestic banks Credit Agricole, BNP Paribas and Societe Generale top the rankings for renewables lending. The trend toward corporate power purchase agreements is visible with several deals signed in 2022 so far.

With regards to France’s power-market structure, production and supply are now open to competition, but state-owned EDF was responsible for 69% of generation in 2021 and also owns the TSO (RTE- Reseau de Transport d’Electricite) and distribution companies. RTE became a limited company, a change following the deregulation of the electricity market in France. This further reinforced the independent nature of the relationship between EDF and RTE.

Doing business and barriers

Opportunities revolve around the future of France’s nuclear fleet. As baseload power is reduced, renewables will be added in increasing volumes to fill the gaps. Security of supply might also be threatened as increasingly frequent heat waves make it harder to cool nuclear reactors. As in other European markets, there is considerable uncertainty surrounding how the electrification of hard-to-abate sectors will impact demand. That said, France is one of the few countries where electricity accounts for a larger share of residential heat than any other technology, standing at more than one third. In 2021, after a low in 2020, peak demand went back up.

Renewables additions have not reached high enough levels to warrant being curtailed, but local opposition (specially for wind farms) and litigation are increasing. In response, the government enacted a range of measures to increase acceptance and overcome legal challenges over 2018-19, though renewable energy plants are not given priority in France as of 2022.

EDF is facing high debt but is backed by the government of France and hence has a stable financial position. In 2022, French Prime Minister Elisabeth Borne mentioned the plan to nationalize EDF in order to address France’s energy crisis, a push that has increased in intensity since the Russia-Ukraine war. Another measure incentivized by the 2022 energy crisis was the freezing of natural gas prices.

EV market

From 2020 to 2021, annual sales of electric vehicles (EVs) rose from 193,865 to 310,919. The French government has an energy consumption tax (TICPE) incentive.

EV policy

The French Energy Code and National Energy and Climate Plan (NECP) has set a target of 15% renewable energy in final transport energy consumption by 2030. There are currently two main EV incentives available in France: the Ecological Bonus-Malus Scheme and the Conversion Bonus (Scrappage Scheme). France's ecological stimulus raised the maximum bonus to 7,000 euros through the end of 2020, returning to the original schedule of a maximum 5,000 euros in 2021 and 4,000 euros in 2022 under current policy; the conversion bonus can be up to 5,000 euros, depending on the household income. Besides that, both fully-electric vehicles and plug-in hybrids are eligible for either a 50% discount or are fully exempt from paying the license plate registration (carte grise) in Metropolitan France, depending on the region. Also, EVs are exempt from the company car tax. Paris has a target of 1,500 electric buses by 2025.

The subsidy for private e-charging point is a 300 euros tax credit on the purchase and installation of an EV charger at a main residence. For companies, the subsidy is up to 40% of the purchase and installation costs, which is the same as public entities.

Buildings market

By 2030, renewable energy must account for 38% of final heat consumption, and renewable and recovered heat and cold in district heating should grow 1% per year to 60%.

Specifically, the installation of oil-fired boilers in new and existing buildings will be prohibited from July 1, 2022. Heat pump sales are rising abruptly, going from 394,128 in 2020 to 537,110 in 2021. They already represent 9% of the residential heating sector.

Buildings policy

The PPE and the National Low-Carbon Strategy (SNBC) both adopted by the government, contain measures aimed at achieving long-term targets and outline cross-cutting and sectoral policies and measures for energy efficiency. In France, the purchase of commodities is subject to a reduced VAT rate if they are related to investments in the improvement, transformation, fittings, and the conservation or certain equipment of buildings constructed more than two years prior. Thus, the purchase of such commodities by private individuals is indirectly promoted.

There are four grant incentive programs in France for heating: Aide de l’Anah; Coup de pouce economies energie; Coup de pouce thermostat avec regulation performante and Ma Prime Renov, which was increased in 2022.