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France Plans Temporary Freeze on Solar Projects to End `Bubble,' PM Says

France plans to temporarily freeze new solar projects as part of a plan to end a “veritable speculative bubble” that has emerged in the industry, French Prime Minister Francois Fillon said today.

“The flourishing of solar in France, which is faster than expected, comes at a cost to local government and consumers,” Fillon said in a statement today. “Development relies on a feed-in tariff for electricity that is very favorable to producers.”

Fillon didn’t announce a further reduction in the tariffs paid by Electricite de France SA for solar power as reports this week suggested would be the case. Instead, the prime minister said a new regulatory framework would be put in place by March. Long-term targets for solar development have already been surpassed “justifying” the new rules, he said.

Solar development targets for 2012 will be reached “within weeks,” Fillon said. The new rules aim to balance a target of 500 megawatts of new solar projects a year and protecting consumers by keeping power prices in check.

The freeze excludes household solar panels with a capacity of less than 3 kilowatts, according to the statement. For bigger ventures, the government plans to pass a decree “to temporarily suspend the registration of new projects.”

France’s solar industry has come under scrutiny in recent months as capacity expanded while subsidized tariffs remained relatively high and costs dropped. The government cut the so-called feed-in tariff for solar power twice this year.

‘Wise’ Decision

“Feed-in tariffs will be lowered. The question is how quickly and whether they will be accompanied by caps on capacity,” Richard Loyen, head of industry group Enerplan, said by telephone. He called decision to impose a three-month moratorium on new projects eligible for the subsidy “wise.”

Feed-in tariffs require utilities to buy electricity from renewable sources at more than the standard rate. EDF, France’s former power monopoly, pays more for solar power than for the nuclear power it produces at 58 reactors and what it can buy on European spot electricity markets. The added cost is passed on to consumers through the tax.

The regulator estimates that EDF will pay an average of 546 euros ($722) a megawatt-hour for solar power in 2011. This compares with estimated spot market power prices of 55 euros.

To contact the reporter on this story: Tara Patel in Paris at tpatel2@bloomberg.net

To contact the editor responsible for this story: Will Kennedy at wkennedy3@bloomberg.net

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