Solar energy: Where does France stand? And what are the consequences for the real estate sector?
In France, photovoltaic installations (PVs) generated an overall production of 13 GW in 2022 vs. 11 GW in 2021. Solar energy represents around 37% of renewable/green energy production and is the second source of green energy (after wind power).
The pace of renewable energy production (which is currently around 20% of electricity production at national level) has increased materially over the past few years. This is especially true for solar energy. We estimate that over 600,000 PVs are now up and running in France (a 20% increase between 2021 and 2022).
But these encouraging results are not enough to meet the objectives set at European level. The European target is that renewable energy will make up over 42% of energy production by 2030 (to achieve carbon neutrality by 2050). The law of 10 March 2023 relating to the acceleration of renewable energy production (the EnR Law) should enable France to catch up in this area. The law aims to facilitate the development of solar projects to reach, by 2050, a yearly production of 100 GW.
Buildings are major energy consumers. At national level they account for about 25% of total carbon emissions and no less than 40% of national energy consumption. But they could stop being part of the problem and instead become part of the solution with significant development of renewable and decentralized energy sources.
“Greener” buildings, that comply with ESG criteria (which have become valuable to many operators), have drastically increased real estate investors’ appetite for PVs. They offer the opportunity to generate additional sources of cash flow as energy produced can, in all or part, be sold back to the grid. In addition, the prices of PVs has, according to some evaluators, decreased by 80% since 2008; while the productivity level of PVs has steadily increased because of the technical progress made in the last decade.
Although the latest laws adopted in France tend to accelerate the development of renewable energies, there are still some legal obstacles.
1. Obligation to include PVs on the roof of new and existing assets
Owners of French real estate assets have to install PVs in certain specific cases:
a) Obligation to include PVs on new buildings
The law of 8 November 2019 (the ELAN Law) states that to get certain building permits (notably if relating to the construction of warehouses) developers or owners have to install energy equipment to improve the building’s environmental performance. For the developer or owner of a warehouse building with a floor area of more than 1,000 m2 (as from 1 July 2023, this threshold will be reduced to 500 m2) to obtain a building permit, the building must incorporate:
- either a renewable energy production process (production d’énergie renouvelables); or
- a vegetation system (système de végétalisation) guaranteeing a high degree of thermal efficiency and insulation; or
- any other system that achieves the same result.
The obligations resulting from this law must be gradually carried out on:
- 30% of the roof of the building as from 1 July 2023;
- 40% of the roof of the building as from 1 July 2026;
- 50% of the roof of the building as from 1 July 2027.
b) Obligation to include PVs on existing buildings
French law states that, as from 1 January 2028, the obligation to install PVs on rooftops of buildings will apply to (all) existing real estate assets. This includes assets dedicated to commercial, industrial, artisanal, administrative, office, storage use but also for storage premises not open to the public – hospitals, sports, recreational and leisure facilities, school and university buildings. The regulator is yet to determine the surface area of rooftops that has to be covered by PVs. And certain exemptions (notably relating to technical or cost-related constraints) will of course apply.
c) Obligation to include PVs (existing and new) car parks
Parking lots (either indoor or outdoor) are also seen by the legislator (and by investors) as an opportunity to increase PVs production. In this respect, since the ELAN Law:
- Covered parking lots, accessible to the public and of more than 1,000 m2 (as from 1 July 2023, this threshold will be reduced to 500 m2) are subject to the same obligations as the ones mentioned above applicable to buildings (namely, include PVs or equivalent systems on respectively 30%, 40% and 50% of the rooftop by 1 July 2023, 1 July 2026 and 1 July 2027).
- Outdoor parking lots:
- of more than 500 m2 (and either “accessory” to a building subject to the obligations mentioned above or open to the public) must (as from 1 July 2023) include vegetation system or solar panel shades (ombrières photovoltaïques) on at least 50% of their surface.
- of more than 1,500 m2 (and which are not the accessory of a building subject to the obligations mentioned above) must include solar panel shades (ombrières photovoltaïques) on at least 50% of their surface.
This new obligation must be fulfilled before 1 July 2026 for parking lots of more than 10,000 m2; and before 1 July 2028 for parking lots of less than 10,000 m2.
2. Persistence of legal barriers
The development of renewable energies is still restrained by legal obstacles and by the grid operator's monopoly on local loops. There’s also a lack of bespoke regulation applicable to electricity storage.
a) The monopoly on local loops
These new obligations to install PVs on buildings and parking lots raise the question of the development of local loops (or even private grids) – which bring together local producers and direct consumers.
French law has set up a (public) monopoly for the distribution of energy and the management of the electricity grid. The EnR Law has only indirectly eroded this monopoly to a minor degree. The EnR Law has indeed created a (first) legal framework for Power Purchaser Agreements (PPAs) – the aim of PPAs is to create a direct relationship between a producer and its consumers, so consumers can get renewable energy and secure part of their energy needs at a price that is not subject to variations in wholesale market prices.
b) The absence of a specific regime for energy storage
The management of an energy network requires that, at all times, the electricity volumes produced (and injected into the grid) are equal to the volumes consumed. This need for equal production and consumption becomes much more complex with solar (and renewable) energy as production is, by its nature, sporadic.
Storing electricity could be a solution to the problem. It would enable providers to release – when demand peaks – surplus electricity produced when production exceeded immediate needs.
French law and regulations are still inadequate when it comes to energy storage. Currently the entity storing electricity is seen by the regulator as an electricity consumer when it stores electricity and as an electricity producer when it releases the electricity previously stored.
Despite the significant technical improvements in electricity storage methods, the lack of a specific legal storage regime is preventing this business from growing – and it may ultimately hinder the momentum of solar and renewable energies.
