A storm in Europe threatens to leave the green energy sector of the continent's second-largest economy stuck in the doldrums.

A legal battle with anti-wind energy activists has frozen investment in France's onshore wind sector, threatening a "sea change" in energy pledged by the Socialist president François Hollande and his coalition partner Greens.

Mr Hollande wants to see France boost its renewable energy output from sources such as wind and solar power while closing the oldest of its nuclear plants and eschewing shale gas development.

But legal wrangling that threatens to drag on for months has created uncertainty over the future of tariffs paid to producers of wind power, halting needed investment.

Europe's largest electricity exporter fell to fourth place behind Italy in installed onshore wind power capacity last year.

"We had to stop hiring. And that's a shame because we see the French unemployment rate rising and we would have the means to hire on projects that are ready," says Peter Schuster, the head of the German turbine maker Enercon's French unit.

Enercon last year installed one quarter of all new wind turbines in France and has invested heavily since 2003, employing 400 people and building a factory in Compiègne, 60 kilometres north of Paris.

But, with the outlook for French wind power unclear, the company has moved about 50 staff to Germany and Austria, where wind power is growing.

"It's not helping us because we created everything necessary: training centres, transport, offices. But we're not using them," Mr Schuster says.

"The potential is here, and that's frustrating."

The French anti-wind group Vent de Colère, or "Wind of Anger" - has battled against the development of the sector for years and last year contested France's onshore wind tariffs.

A French court has referred the case to the court of justice of the European Union in Luxembourg, which will determine whether the tariffs constitute undeclared state aid. That could be as much as a year away.

"Projects that need bank funding are finding it extremely complicated, so we think there will be another slowdown in added capacity this year," says Jean-Louis Bal, the head of the SER renewables energy lobby.

"We're not on the right track [to meet France's 2020 energy use targets]. The current trend is really not good."

Under the former president Nicolas Sarkozy, France set a 2020 target to install 25,000 megawatts of wind power capacity, 10 per cent of total electricity production. But only 757MW of onshore capacity was added to the grid last year, bringing the total to 7,449MW versus more than 30,000MW in Germany.

Wind - onshore and offshore - makes up just more than 3 per cent of France's electricity production.

Some in the industry also feel frustrated as the government stands firm, refusing to issue a new decree over the tariffs while it awaits the EU court decision.

"In terms of legal tactics, it's in their interest to wait, use every opportunity to express support to the sector … but stop short of issuing a decree because that would be a demonstration of guilt, a mea culpa," says Serge Savasta, the head of renewable energy at the private equity firm Omnes Capital.

The legal limbo could put 1,000 jobs at risk in the second half of this year, the wind-energy lobby group France Energie Eolienne has warned.

France has Europe's second-largest wind potential after Britain, yet the tariff dispute reflects broader problems with bureaucracy and litigation.

It takes on average eight years to set up a wind farm in France, compared with about four years in other European countries, Mr Schuster says, because of repeated legal challenges and a lengthy, two-track French permit process.

"Our problem is bureaucracy and legislation changes every second year."

Any wind turbine taller than 12 metres, for example, requires a permit from the local prefect and approval from a dozen authorities including the culture ministry's heritage department, the ministry of defence, the national weather forecaster, the civil aviation authority and the radio spectrum agency.

A green energy bill under discussion in the French parliament contains measures to simplify administrative procedures, but the text has gone back and forth between the two houses for months, following filibustering by the opposition.

Mr Savasta says onshore wind power for France compares favourably with other sources.

"Offshore wind takes time, and French coasts are not very suitable. Solar power is good but it's much weaker in terms of output capacity. Onshore wind is the most easily, quickly deployable energy source," he says.

Mr Bal agrees: "By delaying every fundamental decision to the end of the debate, we're shooting ourselves in the foot. In the meantime, foreign competitors have not stopped."

* with Reuters