Renewable Subsidies Fuel Power-Market Crisis, French Study Finds

Subsidies for renewable energy are partly to blame for Europe’s electricity market “crisis” and should be revised, according to a French study.

The system of feed-in tariffs that pay above-market rates for wind and solar energy should be changed to one based on tenders and rates pegged to market prices, a report from the French planning commission Commissariat General a la Strategie et a la Prospective recommended today.

The European Union is wrestling with how to reduce pollution while keeping a lid on power prices that can be more than double those in the U.S. Germany, France, Spain, Britain and Italy all have trimmed subsidies after a boom in installations increased bills.

The rise in capacity of renewable energy is posing a “serious threat” to European power supply security, industry competitiveness and consumer purchasing power, the study found. “It could further deteriorate.”

Deploying renewables in Europe “could be done for a lot less money” than under the current system, Fabien Roques, one of the report’s authors, said at a press conference in Paris.

Germany must face the consequences of the decision to shut its nuclear power plants, he said. Oversuppply of solar and wind power from Germany has resulted in periods when the price of power on the spot market falls below zero, leaving utilities wary of investing.

The study recommends that the EU fix targets for lowering greenhouse gas emissions and refrain from setting a target for the share of renewables.

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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