Bpifrance to provide a guarantee for the long-term supply of green electricity
On Thursday 10th November, the French government announced the implementation of a guarantee fund to facilitate the establishment of Power Purchase agreements (PPAs) between industrialists and renewable energy producers. It aims to double the current installed capacity provided by these contracts, making a significant move towards net zero.
Commitments to clean energy sources, soaring electricity prices… The motives for adopting Power Purchase Agreements (PPAs) are piling up. On Thursday 10th November, the French government announced that Bpifrance would implement a guarantee fund, in order to boost the number of long-term electricity supply contracts between manufacturers and renewable energy producers.
By covering default risks for industrial buyers, the fund aims to foster the development of renewable electricity producers by facilitating the signing of long-term PPAs with industrialists. These contracts will enable industrial companies to secure a part of the cost of supplying clean electricity, giving them greater visibility in the long term. France’s Minister for Energy Transition, Agnès Pannier-Runacher, defined this achievement as “a major step forward that will help overcome one of the main obstacles to the development of long-term energy supply contracts”.
The first guaranteed contracts in 2023
Bpifrance aims to secure the first guaranteed contracts in 2023. All sources of renewable electricity are eligible to benefit from the scheme. The guarantee fund has been designed to subsidize renewable energy installations with a total installed capacity of up to 500 megawatts, equivalent to the energy consumption of the city of Bordeaux. Moreover, the compensation granted to contracts in default will operate in a similar manner to additional remuneration. The fund will be self-funded by the premiums paid by guaranteed contracts and the recovery of a portion of their excess income, in the event of high market prices.
Accelerating the transition to net zero
France has set itself the objective of achieving carbon neutrality by 2050. The implementation of renewable electricity technologies is set to increase their share of the French electricity mix.
This trend is seen as a unique opportunity to strengthen the competitiveness and attractiveness of the national territory. These technologies are becoming a lever for industry and renewable energy developers to hedge themselves, at least partially in the long term, via PPAs, against changes in the prices of carbon, fossil fuels and electricity markets.
The completion of supply contracts should benefit both renewable electricity producers and industrial consumers in the long term. The former will secure a given level of income, while the latter will benefit from both visibility and stability on a part of their supply costs. Such an offer is cogent for industrialists due to the current economic context where energy prices are soaring, pushing electricity prices to unprecedented levels.
Through the establishment of the guarantee fund, Bpifrance has reinforced its strong commitment to the energy transition.