France is making slow progress in developing PPAs (Power Purchase Agreements) for renewable energy, according to the first report prepared by the Energy Regulatory Commission (CRE). Although contract signings accelerated between 2022 and 2023, driven by the price crisis, volumes remain modest compared to the most active European countries in this segment.

Between 2019 and 2023, 116 PPAs were signed in mainland France, covering 162 renewable facilities with a total capacity of 2.2 GW. This represents an annual production of 3.3 TWh, a volume well below that developed under public support contracts, which in the same period led to the awarding of 7 GW of solar and 5 GW of onshore wind.

“The development of PPAs in France is recent and has been driven primarily by the wholesale price crisis,” states the CRE, which warns that the market remains immature.

High Concentration in Solar and Contracts with Large Consumers

Of the total contracts analyzed, 141 are linked to photovoltaic installations and 18 to onshore wind farms, with only two projects incorporating storage. Eighty-one percent of PPA production comes from photovoltaics, and the most common format is the corporate PPA, with two-thirds of the contracts signed directly with industrial consumers.

“Buyers are primarily large companies with annual consumption exceeding 100 GWh,” details the CRE. The most active sectors are commerce and transportation, each representing 25% of the contracted volume.

Despite their size, PPAs cover less than 20% of these buyers’ electricity consumption, partly due to the difficulty of adapting solar production to consumption profiles. This requires complex contractual arrangements, which often require high financial guarantees, which restricts the participation of smaller companies.

Long Durations and Highly Variable Prices

The average contract duration signed in France is 19 years, significantly higher than the European average of 13 years, according to the CRE. This extension benefits producers, who ensure stable income to facilitate project financing.

Regarding prices, the report indicates a wild range for solar PV PPAs in 2023, with values ​​between €50 and €100/MWh, and prices above €80/MWh for wind contracts. These values ​​reflect both inflationary pressure and the rising cost of technologies during the crisis.

During that period, many facilities forego public support contracts to sign PPAs with prices averaging 32% higher for solar and 34% higher for wind. Even so, most of these contracts do not include indexation mechanisms, which transfers some of the risk to the producer.

Comparison with the State Support System

The CRE notes that PPA contracts in France mimic many elements of public support contracts, such as long durations or the inclusion of products such as guarantees of origin or capacity. However, PPAs have stricter conditions in terms of penalties for early termination and delays, which seeks to protect private investment.

One of the main differences is the development stage at which the contract is signed: while public contracts are awarded more than two years before start-up, PPAs are typically signed less than 20 months before the start of operations, which limits their ability to finance new projects from an early stage.

Recommendations to Promote PPAs

To reverse this situation, the CRE issues several key recommendations:

-Reduce the scope of public support programs, so as not to discourage the use of PPAs;

-Limit the maximum capacity of projects eligible for auctions, allowing more projects to seek financing through PPAs;

-Require that a portion of the production of certain facilities be marketed outside the support scheme;

-Promote public guarantees for consumers with lower credit ratings, as Bpifrance already does with its “Garantie Electricité Renouvelable” program.

“The CRE believes that more mature facilities should be able to develop without state support, and that the regulatory environment should not discourage the use of PPAs,” the report states. The goal is for private power purchase agreements to play a more relevant role in the fulfillment of national energy planning without compromising public finances.

Although PPAs are beginning to take off in France, their development remains limited by the importance of state support. The challenge in the coming years will be to reshape incentives and eliminate contractual barriers so that more actors—producers and consumers—will turn to this key instrument in the energy transition.

“The French market needs to mature and diversify its buyer profiles and contract structures,” concludes the CRE, which proposes mandatory monitoring of all signed PPAs as a public policy to monitor the sector’s development.