Renewable energy producer: the accountant's role

A renewable energy accountant secures revenue recognition from the feed-in tariff or the market premium, sets up dismantling provisions, handles the IFER, structures the project company and supports the lenders. Over contracts of 12 to 20 years, this framing protects the farm's profitability and its compliance.

Producing solar or wind electricity is not an ordinary commercial activity. Revenue does not depend on an order book but on a public support mechanism and a heavy asset, capitalised over two decades.

Two schemes shape turnover, both operated by EDF Obligation d'Achat:

• The feed-in tariff (obligation d'achat, OA): EDF (or a local distribution company) buys the electricity at a regulated tariff set by the contract, independent of the market price. The sale covers the entire output, or only the surplus in the case of self-consumption.
• The market premium (complément de rémunération, CR): the producer sells its electricity on the market and receives a premium equal to the difference between a reference tariff and a reference market price.

Under OA, turnover corresponds to the electricity delivered, valued at the contractual tariff. Under CR, it combines the market sale and the premium: the precise matching of the premium to the period deserves to be confirmed file by file. This is exactly the kind of judgement call where a generalist firm misses the mark.

In the files we see, this is the most frequent point of friction. For wind power, article L515-46 of the environment code makes the operator (or, in the event of default, the parent company) responsible for dismantling and restoring the site. From the start of production, it must set up financial guarantees, reassessed every 5 years.

The amended order of 26 August 2011 sets the reference amount: 50,000 euros per turbine with a unit installed capacity less than or equal to 2 MW, plus 25,000 euros per additional MW above 2 MW.

In accounting terms, the treatment is precise. Under the PCG (article 213-8 on the entry cost of fixed assets and article 321-10 on provisions), the initial estimate of dismantling and site restoration costs is included in the acquisition cost of the asset (the so-called dismantling asset), with a matching provision recorded as a liability. This asset follows its own depreciation schedule, and the obligation arises as soon as the farm is built or commissioned.

The classic mistake: recording the dismantling charge at the end of life, or ignoring the asset on the balance sheet. It distorts the result of each period and the value of the farm presented to lenders.

Electricity production installations with a capacity of at least 100 kW are subject to the flat-rate tax on network companies (IFER), an annual flat-rate local tax. Wind and tidal power fall under article 1519 D of the General Tax Code, photovoltaic and hydro under article 1519 F.

It is a recurring cost to factor into the forecast from the outset: it does not depend on the result but on installed capacity. The applicable rate must be checked for each installation against the text in force.

Most farms are held by a project company (Special Purpose Vehicle, SPV) dedicated to a single asset. The project debt is generally non-recourse, or limited-recourse: lenders are repaid from the farm's cash flows, secured by the OA or CR contract.

In practice, the accountant produces financial information that is readable for the bank: tracking of debt service coverage ratios (DSCR), cash-flow reporting, compliance with covenants. Accounts kept at project level are not a convenience, they are a financing condition.

In this sector, an accountant's value does not lie in routine bookkeeping but in four structuring judgement calls: the matching of OA or CR revenue, the dismantling asset and provision pairing, the integration of the IFER into the forecast, and the quality of the reporting expected by lenders.

The underestimated risk is almost always dismantling: a poorly calibrated provision or a forgotten asset shows up on the balance sheet, at audit, and when the farm is sold. A clean framing from commissioning avoids painful adjustments ten years later.

A wind producer commissions a farm of four turbines, each with a unit capacity less than or equal to 2 MW. From commissioning, the dismantling asset must be recorded in the cost of the fixed asset, the matching provision set up, and the financial guarantees provided for by the 2011 order calibrated (revisable every 5 years). In parallel, the IFER under article 1519 D enters the forecast, and DSCR reporting is configured for the bank. Nothing exceptional, but every missing link weakens the financing case.

• Identify the support mechanism (OA or CR) and its revenue treatment
• Record the dismantling asset and provision from commissioning
• Reassess the financial guarantees every 5 years (wind)
• Factor the IFER (capacity of at least 100 kW) into the forecast
• Keep the accounts at project-company level
• Track the DSCR and covenants for lenders

Each farm has its own configuration (capacity, contract, legal structure), and a precise point such as the matching of the market-premium income is settled file by file. To explore the issues specific to your installation, discover our dedicated support for renewable energy producers, then let's discuss your project.