Everybody knows about Spain’s solar bubble, but did you know France had one too?
Two years ago, the National Assembly adopted one of those solar “feed-in tariffs” — a cute misnomer for a mandate that forces utilities to buy expensive renewable electricity at ridiculously high prices. Flush with visions for the solar future, the legislature set the price at 546 euros per megawatt-hour, almost ten times the market price of 55 euros that customers pay for electricity from other sources. Electricitie de France (EDF), the national utility, was obligated to buy from all comers, covering the costs with a special levy on other customers.
The result was an avalanche of expensive rooftop projects. Whereas EDF had received only 7,100 applications a year for such connections before 2008, by last December it was fielding 3,000 per day. “We didn’t see it coming,” French lawmaker Francois-Michel Gonnog told Bloomberg News. “What is in the pipeline this year is unimaginable. Farmers were being told they could put panels on hangars and get rid of their cows.” The government cut the price support twice last year but was finally forced to impose a three-month suspension in December.
Now costing 1 billion euros per year, the program does not expire until 2017 and has put the utility in trouble. EDF’s stock declined 20 percent last year, compared to only a 3.7 percent decline for the rest of Europe’s Stoxx 600 Utilities Index. The utility is now 57 billion euros in debt. Plans to upgrade its aging fleet of 53 nuclear reactors — which provide 75 percent of France’s electricity — have been thrown into doubt. The utility has been forced to raise the renewables levy on other customers from 4.50 euros to 7.50 euros per megawatt-hour, but financial analysts say they will have to pay up to 12.90 euros — almost 25 percent above the market price — for EDF to break even.
Unlike Spain, which entertained hopes of becoming a world leader in solar manufacturing, France seems to have created its bubble out of sheer delusions over the “renewable future.” “Most panels installed in France were made in China with a highly questionable carbon footprint,” Environment Minister Nathalie Kosciusko-Morizet told parliament last month. “Policies should create jobs in France, not subsidize Chinese industry.”
They should also recognize that running the world on solar energy is a disastrously expensive fantasy.