Extending the term of purchase contracts to promote electricity produced from biogas in France

By | 2016-08-03

The transition to cleaner energy requires substantial investments and the implementation of biogas plants is no exception to the rule. In France, to alleviate the burden of the initial investment in a biogas plant, several strategies have been developed and manage to make their effect at the country management level. The goal is always the same, i.e. increase the viability of plants as well as access to biogas.

Current and future solutions

In November 2015, the French government has made the revaluation of rates for the purchase of electricity produced from biogas. However, this measure, supposed to help the biogas sector, was not sufficient to counteract the withdrawal of the premium associated with energy efficiency which occurred roughly at the same period. Consequently, the difficult first years have not been offset and it was important to implement other initiatives.

The latest solution that is currently being prepared, is extending the term of purchase contracts to promote electricity produced from biogas in France by adding 5 years which will bring the total duration from 15 to 20 years. This modification will significantly lengthen the period guaranteeing the incomes of project developers and will make their initial investments more accessible and less risky. Not to mention that this will inflate the effect of the initial revaluation of electricity rates as well as the viability of the facilities.

Expected short-term and long-term impacts of these solutions

In the short term, the effects will be especially felt at the biogas project developers’ level who will find themselves in a more favorable financial environment. Indeed, while the term of the purchase contracts would increase from 15 to 20 years, the profitability of biogas projects would increase by 2% on average. This substantial increase would mean that almost half of the biogas plants in France would simply become bargains financially. In addition, if the purchase contracts have a longer term, the price of electricity from biogas can be expected to be more accessible because more negotiable, which is also an advantage to buyers.

Finally, the potential long-term effects are obvious, starting with the increased consumption of clean electricity produced from biogas. This would result in a significant increase in the number of biogas plants, which would optimize even more accessibility to energy that is clean and from a renewable source. There is also obviously the reduction in the use of electricity from fossil fuels as well as the reduction of GHG emissions associated with it.

For more details, read the following article: Actu-Environnement