France announces dramatic PV tariff cuts

The cuts are more severe than originally expected, and follow a three month moratorium, which stopped any PV projects larger than three kW from receiving approval.

In addition to a 500 megawatt (MW) annual cap on the market, the new tariffs for systems under 100 kWp in size will be reduced by around 20 percent. Furthermore, they will continue to be cut by an additional ten percent per quarter, meaning that by the end of 2011, they will have been reduced by a total of 40 percent.

In an even bigger blow to the industry, the new €0.12 per kWh rate for systems over 100 kW in size means that tariff cuts of around 70 percent will be implemented for PV rooftop installations. For other systems, it will mean a reduction of around 57 percent.

Responding to the announcement by the French Minister of the Environment yesterday, Götz Fischbeck, senior equity analyst for PV stocks at BHF Bank AG stated: "The new French tariffs could limit the new installations much stronger than the 500 MWp cap instated. Under the new tariffs we doubt that any PV system larger than 100 kWp will yield a positive return. Even for the smaller PV systems the quarterly digressions by 10 percent pose a high economical challenge."

He went on to say that although the construction and grid connection permits approved for a total of 3.4 gigawatts peak of PV systems prior to the December moratorium are still valid, it can be expected that over 60 percent will not be completed, as the new tariffs will make them "financially unattractive, if not impossible".

Industry figures are today gathering in front of Paris’ Elysee-Palast to demonstrate against the cuts.