Policy uncertainty biggest threat to France’s 2030 renewable targets and long awaited offshore wind plans
Despite France’s energy transition law, which could lead to the country generating 40% of its electricity from renewables by 2030, too many "what ifs" shadow the country's clean energy ambitions and job creation needs.
By Katherine Steiner-Dicks
The introduction of a variable premium model and a potential Senate amendment re-introducing wind-power development zones (ZDEs) could make the French wind energy sector prone to legal challenges and more deployment delays.
The introduction of a variable premium subsidy model to replace feed-in tariffs for renewable power generation in France could slow deployment in the short term, The Association of Renewable energy companies - France (SER), warns.
According to chemical and energy specialist, ICIS, France is in the process of introducing the variable premium model under its energy transition law. A vote of parliament’s upper house is set for 3 March, after the senate has debated the finer points of the bill.
Contract for difference
According to a spokesperson at SER, the option of a premium ex-post will provide the best solution in keeping with EU directives. Ex-post meaning contract for difference, whereby energy producers will sell at market price, but receive additional remuneration if the market price falls below a target price.
While other markets in Europe with very ambitious renewable energy plans have adopted to the premium model, such as Germany, and the UK, there is always a delay in the decision process by energy producers and investors, for those adopting such a model for the first time. This is particularly the case for smaller producers who are not accustomed to selling on the market. And then there is the matter of paying premiums in an agreed time frame, according to the SER spokesperson.
With progression comes uncertainty and many not already working in the French wind sector will be reluctant to make any commitments to starting operations in France until the multi-annual energy programme establishing 15-year targets for each sector is announced in October this year.
One-stop-legal shop
Then, according to local French news reports, there is the expected decree establishing a single administrative court to handle legal cases concerning offshore projects and help speed up the permitting process, the launching of a third tender for offshore projects and a call for expressions of interest for pilot projects for floating turbines.
So, the pressure is on for all those involved in the current renewable energy policy progress.
"Together with the Minister for Ecology, Ségolène Royal, and all the stakeholders present - local authorities, businesses, trade union organisations, environmental associations, NGOs, experts, MPs, we have reaffirmed a shared ambition: to build the French environmental model", Manuel Valls declared at a press conference following the meeting of the National Council for Ecological Transition.
A model which must not only get the whole country on board but also "spread throughout Europe and the world". A few months ahead of the COP21, which will be held in Paris in December, France "must set an example". And send the right signals in the run up to the 21st UN climate change conference (COP21) to be held in Paris in December.
Supply chain ready and waiting?
Pierre Etienne Claveranne of Green Giraffe Energy Bankers, which focuses on offshore wind and specialises in project and structured finance, M&A and contracting expertise, believes that while the French offshore wind market has had a late start, for the most part it is now set in motion for future growth, according to a presentation he published in 2014.
Competitive dialogue
One sign that the offshore wind market in France is set to progress faster than in recent years is the introduction of what France Environment minister Ségolène Royal initiated as the introduction of “competitive dialogue” where the government and developers will cooperate to reflect the specific properties of wind zones in the tender process. This will enable companies to have direct yet formalised input for the bidding criteria to be used in future licensing rounds.
Denmark, for example, is no stranger to the bidding element, having brought in greater developer input for its 400MW Horns Rev 3 and 600MW Kriegers Flak projects, which intensified competition, which can only be good for the overall wind energy supply chain.
The mechanism will first be used in France when the country has its third offshore wind tender in late 2015. In addition, the Government announced last year that it will launch a call for expression of interest for a floating wind farm project.
France has two major supply chain centres. One is derived from Alstom, which is concentrated in the Saint-Nazaire and Nantes region and Areva, which has concentrated its supply centres around Le Havre and Rouen. Both have offshore experience outside of France. In 2014 Gamesa and AREVA signed binding agreements for the creation of a joint venture in the offshore wind sector. The new company wanted to be well positioned to become a player in the offshore wind segment with a 2.8 GW pipeline and the objective of garnering a market share close to 20% in Europe by 2020. This JV could help in the competitive tender process later this year.
The recent approval of the Cherbourg port extension to accommodate tidal and offshore wind manufacturing and logistic facilities is also a good sign that France is gearing up for a long-term offshore wind industry. The majority of the land is currently allocated to Alstom’s blade and tower facilities (Haliade 150-6M turbine supplying three offshore projects in France), but according to news reports, the Ports of Normandy Authority is increasing the harbour area by 39 hectares to accommodate for more renewable energy facilities.
French companies, such as Alstom and Schneider Electric also have a good footing in the HVDC transmission market, which is expected to grow at a CAGR of 17.13% in the next five years (2014-2020), with the growing onshore and offshore wind energy project markets. According to a recent report, the major market drivers for HVDC transmission include increasing demand for reduction of transmission losses in power systems, growth in offshore wind transmission infrastructure, and rising government mandates in HVDC power transmission systems.
France’s transmission system operator, Réseau de Transport d'Électricité (RTE) is on the look out for a contractor to connect four offshore wind projects. It is inviting tenders for the project ownership assistance for round 1’s Fécamp, Saint-Nazaire, Calvados and Saint-Brieuc wind farms. According to one news report, the AMOA can also enquire for contracting the supply contract and cable laying.
And French companies with an international presence, such as Cofely Fabricom GDF Suez, have been active in the offshore O&M market. Cofely Fabricom GDF Suez has been recently awarded two contracts to handle repairs, mechanical and electrical services for the Lynn Dowsing offshore wind farms in Lincolnshore, England.
Offshore wind: feeding France’s starving economy
Despite all the uncertainty over energy policy in France, one thing is certain and that is that offshore wind projects create thousands of jobs through the entire life cycle of any one offshore wind farm. And with the number of people in France claiming unemployment benefits at 3.496 million people, an aggressive offshore wind industry in France, uninhibited by unnecessary legal red tape, should be welcome by all.
France’s economy is barely growing, showing a gain of just 0.3 percent in the third quarter of last year, said France24. The government in Paris is banking on a lower oil price and a weaker euro – which makes exports cheaper – to kick-start the economy and is banking on 0.4 percent growth for the whole year.
Nevertheless, most economists believe that France, the Eurozone's second largest economy, needs a growth rate of around 1.5 percent to create jobs. French companies supplying the European onshore and offshore wind supply chains at home and abroad creates more jobs, there is no disputing that. And with more projects approved in France, the country has a much clearer path to meeting its 40GW onshore wind power and 15GW offshore capacity by 2030.
But now is the time for energy policy makers to take a bullish stance on making matters clear and draw a line in the sand when it comes to giving job creation and the environment the upper hand over legal red tape and flaky policies that can change with the wind.
Manuel Valls must ask policy makers and the Senate: do you want to keep potential investors, energy producers and turbine makers at arm’s length or with arms linked when it comes to getting the economy back on track?