Subsidies plummeted in the first of six tender rounds for large-scale ground-based solar power in France, results published by the energy ministry on Thursday showed.
This is likely to squeeze profits for other sources of electricity as the cost of generation from ground-based solar comes close to parity with combined-cycle gas turbines (CCGTs).
There were 79 winners of a combined 500MW of capacity in the first solar PV tender, which ran from 9 January–3 February, the ministry said. The tender was the first to be held under the country’s multi-annual energy plan, adopted in 2016, to drive investment in solar power over the next three years.
Most of the installations will be built in the south of France, the list of winning developers showed.
The government has set a target to have between 18.2GW and 20.2GW of solar PV capacity installed by 2023.
The average volume-weighted award for the projects was €62.50/MWh, which is likely the lowest bid for ground-based large-scale solar PV installations in Europe. The award is a feed-in premium which will be paid on top of the wholesale power price.
Germany’s previous solar power tender in February 2017 yielded an average feed-in premium bid of €65.80/MWh
“The issue at stake for the market now relates to renewables because the production is no longer marginal,“ Nicolas Couderc, director at EDF Energies Nouvelles, told the audience at an industry event in Lyon in France on Thursday.
In France, estimated production costs for ground-based solar PV plants range between €64.00-178.00/MWh, according to a report published by ADEME, the French environment and energy management agency, in January.
But costs have been falling fast. Average winning bids in solar tenders in France have falling sharply in recent years, from €162.20/MWh in March 2013 to €135.60/MWh in March 2015, although this was a total feed-in tariff, so a total income figure.
And more recently costs have fallen quicker still. Assuming a power price in the region of €35.00/MWh, the feed-in premium would give total income of €92.50/MWh.
In comparison, the lowest possible production costs for a CCGT, taking into account a carbon price of €7.00/MWh, was €47.00/MWh, but the average for such plants was between €80.00-90.00/MWh, according to the ADEME report.
The solar developers will receive a top-up premium whenever the wholesale electricity price is below the guaranteed award. In addition to the premium, they will receive an annual bonus in order to assure that revenues covers the investment. More than 60% of them will receive investment support of €3.00/MWh, the ministry said.
Installed French solar PV capacity was at 6.8GW by the end of last year, according to transmission system operator RTE. This means that something between 11.4GW and 13.4GW of solar power could be installed in France over the next six years – a very large amount with the potential to drastically alter the structure of the French power market.
A spokesman from the French energy ministry said that it was the government’s ambition to install 2GW of solar power each year.
French energy minister Segolene Royal announced in August 2016 a three-year tender period to install a total of 3GW of solar PV between 2017 and 2020. The capacity will be divided into six tranches of 500MW every half year.
The second 500MW tender for solar PV opens on 9 May and closes on 1 June, according to the French energy regulator CRE.