France Renewables Report Q1 2013

BMI View: We have revised down our 2013 growth forecast for non-hydropower renewable energygeneration due to the possibility for delays in wind projects and tougher operating for wind energyproducers. We have also revised down our long term forecast because of the lack of progress in thecountry's ambitious offshore wind energy plans and the government's renewable energy agenda. We alsobelieve that France might not be able to undertake the grid investments necessary to increase the share ofrenewables in the country's energy mix.

We have revised down our 2013 forecast of non-hydropower renewable energy generation growth from11.6% to 8.6%. This was brought about mainly by a downward revision in our wind generation growthforecast from 12.6% to 7.2%, due to the scope for delays in wind projects. According to several industrysources, it currently takes eight years for a wind project to be completed due to a high level ofgovernment bureaucracy, in contrast to the two years needed in Germany.

For the long term, we have revised down our average non-hydropower renewable generation growthforecast from 8.6% to 7.1% per annum between 2013 and 2021. This is due to the tougher conditions forwind energy producers mentioned above, the continued stagnation of the country's offshore plans, and alack of progress made by the government on its renewables agenda.

Here are the key trends and regulatory changes in the industry:

The elections held on May 06 2012 saw François Hollande, who has a markedly different stancefrom the previous incumbent Nicolas Sarkozy on the France's energy policy, take thepresidency. Hollande has vowed to reduce France's dependence on nuclear power from 75% to50% by 2025, and has stated that he would seek to increase the share of renewable energy duringhis term.

The Eurozone debt crisis continues to loom over France, and unemployment in the countrystands at a 13-year high of 10%. The government is also facing difficulty in keeping its debtsituation in check, and these macroeconomic forces will hinder development of the sector.

The first round of offshore wind tenders was completed in April 2012. The tender comprised offour sites along the country's North coast with a total capacity of 1.9GW. A consortium led byFrench utility EDF won three of the four sites totaling 1.4GW of capacity. The remaining sitewith a capacity of 0.5GW was awarded to a consortium led by Spanish utility Iberdrola.

The French Energy And Ecology Minister, Delphine Batho, announced that 214 solar projectswith a total capacity of 541MW were approved in two tenders over the last year. This stronggrowth comes despite continued cuts to solar FiTs.