European Commission refuses to determine lawfulness of French 2006-10 solar FITs

An attempt by a French solar developer to safeguard historic feed-in-tariff (FIT) payments made to its Caribbean projects by forcing the European Commission to rule the incentives not incompatible with the EU's internal market, has failed.

The General Court of the European Union on Wednesday rejected an attempt by Solar Electric Holding to force it to declare the regulation – introduced by the French state in 2000 to incentivize renewables – not incompatible with EU rules on state aid.

The court last week rejected an application, lodged in November last year by Solar Holding, which sought to annul a decision made by the commission in September 2020. The commission had decided the state aid complaint procedure used by Solar Holding to try and obtain confirmation from the commission the French FIT program was compatible with EU rules, was not intended for that purpose, but rather established to consider complaints seeking to set down in law the incompatibility of such incentive schemes with European legislation.

The issue appears to be related to the French government's decision, in December, to retroactively reduce the FIT payments made to large scale solar projects under 20-year contracts awarded in the first three rounds of a national feed-in tariff program, in July 2006 and in January and August 2010.

The issue erupted in September 2019, when the French Court of Cassation judged payments based on the first two of those centrally-determined FIT levels, and above the market price for solar electricity, were unlawful because they had not been notified to the European Commission, as required under EU law. The commission confirmed that was the case in March 2020.

In June last year, Solar Holding said the lack of a decision by the commission about the compatibility of the FIT payments with EU law created “a legal vacuum detrimental to all French producers of electricity from photovoltaic energy sources.” Three months later – as rumors began to emerge the French government was preparing to reduce the payments made under the first three FIT levels set, to reduce public expense – an attempt by Solar Holdings to force the commission to determine the compatibility of the FIT program with the bloc's state aid rules was rebuffed, prompting the latest attempt made by the developer to reverse that decision.

In Wednesday's judgement, the general court stated the commission is only obliged to consider the compatibility of state aid schemes with the EU internal market in two situations: when such schemes are notified or when a complaint is made alleging their incompatibility. Neither of those conditions has been fulfilled, according to the commission and court.

The court backed the commission's assertion that, in the continued absence of notification of the scheme relating to the FIT payments in question, the tariffs should be considered unlawful and it was up to the member state concerned to recover any monies disbursed.

The FIT payments concerned were guaranteed by France to projects with a generation capacity of more than 250 kW and the problematic rates were superseded by new tariff levels set in March 2011 and May 2017, with the latter still in force. The original, 2006 tariff was set at €0.55/kWh, with the rate changing in January 2010 to €0.50-0.58 for mainland France and €0.40 for the nation's overseas territories. In August of that year, payments fell to €0.37-0.44 on the mainland and €0.35 overseas. The revised tariffs are being settled on a case by case basis with the French state permitting generators an appeal if they believe the new payment levels will threaten their financial viability.

Solar Holdings brought its actions in connection with its business units in the Caribbean territories of French Guiana and Martinique.

This copy was updated on 15/11/21 to add in the FIT payment levels.