Thermal renewable energies. DG Tresor Working Papers No. 2018/2 - May 2018

In 2015, 47% of final energy consumption results from heating use (primarily for indoor heating, hot water and cooking) in France. 65% of the heat production derives from fossil energies (gas, oil or coal). Increasing the share of renewable energies in the heating sector is an important issue for the transition towards a low carbon economy. France has set very ambitious objectives for renewable energy in the heating sector (33% in 2020 and 38% in 2030). In 2016, France lagged behind its objectives (20.7% vs. a 25.5% target) due to the decrease in fossil fuel prices during the last two years, which changes the relative competitiveness between renewable and fossil energies. Most of thermal renewable energies are relatively inexpensive (for instance, the cost to reduce CO₂ emissions with a collective wood heating system stands between 8 and Euros 11/tCO₂). In particular, thermal renewable energies are more efficient to decrease CO₂ emissions than most electric renewable energies. The latter are highly subsidized. In France, thermal renewable energies are supported through different mechanisms: - A special fund for thermal renewable energies (the so-called 'fonds chaleur'). For 2017, the fund was allocated Euros 200 M. The fund supports important collective projects, through subsidies to help compete with gas installations. Since 2009, the fund has been effective in the selection of projects with a low cost of reducing CO₂ emissions. The fund received Euros 1,2 bn between 2009 and 2014, whereas electric renewable energies received Euros 11,7 bn through the so-called 'contribution au service public de l'electricite'. - The tax credit for energy transition (CITE), which can support some thermal renewable energy technologies (Euros 300 M in 2016). - Local subsidies which encourage households to replace old and polluting boilers with more efficient ones. - Reduced VAT rates for some installations. Raising the level of carbon pricing is the best way to increase the share of renewable energies in the heating sector, due to the decentralized nature of heating installations (most of the production is at the household or a few households' level, except for heat networks). According to a French professional association, a Euros 50/tCO₂ carbon pricing is enough to enhance the competitiveness of thermal renewable energies. France has adopted a more ambitious trajectory for its carbon tax in the 2018 Budget Law, than that of the 2015 Energy Transition for Green Growth Act. This new trajectory is a key element in supporting thermal renewable energies. However, even with a high carbon tax, some investment barriers - similar to those preventing the development of energy efficiency and building renovation -, will remain and could prevent the development of renewable thermal energies: credit constraint, information issues, cognitive bias, short-term preferences. Complementary tools are therefore needed: - The 'fonds chaleur', which distributes subsidies based on socio-economic analysis, should be maintained. - For individual installations, the CITE could encourage the use of the most efficient technologies (such as wood boiler and heat networks) and the less polluting ones (in the case of wood boilers). It is also necessary to increase the level of public knowledge on wood heating, in order to limit local pollution due to misuse of wood boilers. (author)