Brussels clears French ‘green’ state aid worth over €8 billion in just one month

According to EU figures released this week, the European Commission has approved more than €8 billion in French state aid to decarbonise industry and develop renewable energies in just one month.

In October 2023, France adopted a law designed to encourage the country’s re-industrialisation while reducing the sector’s greenhouse gas emissions.

As part of this, the French Finance Act for 2024, which governs public budgets for the year, put forward a tax credit scheme for companies that invest in the four key energy transition sectors: batteries, wind power, solar panels and heat pumps.

The tax credit scheme, worth €2.9 billion, received the greenlight from the European Commission on Monday (8 January).

“The French tax credit scheme, which is targeted at batteries, solar panels, wind turbines and heat pumps, contributes to the achievement of Europe’s ambitious climate goals,” commented EU Competition Commissioner Margrethe Vestager to justify the decision.

The French state will, therefore, be able to support the production of components such as cells and modules for solar panels and electric batteries; masts, blades, nacelles and foundations for mostly wind power; as well as for the extraction of materials such as cobalt, lithium, nickel, manganese and silicon which are needed for manufacturing.

Offshore wind and backup power

The French scheme was authorised under the EU’s Temporary Crisis and Transition Framework (TCTF), initially adopted in response to the COVID-19 pandemic and subsequently amended in response to the “significant economic uncertainties” caused by the war in Ukraine.

In early December, under the same mechanism, the European Commission approved €4.12 billion of French state aid to support constructing and deploying two offshore wind farms of 230 and 280 megawatts off the Mediterranean coast.

The aid will take the form of a variable monthly premium based on a two-way Contract for Difference (CfD), as facilitated by the EU electricity market reform agreed by the European institutions in mid-December – though the beneficiaries have not yet been named.

More aid for French industry came at the end of December as the Commission green-lighted €1.3 billion of state aid to support the remuneration of non-fossil power plant operators – a decision which, this time, fell outside the scope of the EU’s crisis framework.

These state-backed “capacity mechanisms” allow electricity producers to remunerate backup power plants, which can be fired up at the last minute to meet demand during peak periods.

The French state already remunerates industrial energy users who manage to reduce their consumption during peak hours when electricity demand is highest. The government would now still like to extend this to private households and consumers of electricity in the services sector.

Cover photo: French economy minister Bruno Le Maire (C) speaks to the press after a meeting with the main French energy providers at the Minister of Economy in Paris, France, 05 October 2022. [Photo credit: EPA-EFE/TERESA SUAREZ]