France

France

Update: French projects avoid tariff cut

FRANCE: A draft amendment tabled in parliament on 9 March which could have allowed the government to renegotiate tariffs for 3GW of offshore wind projects awarded in 2012 and 2014, or even cancel them all together, has been rejected.

France's National Assembly (pic: Richard Ying and Tangui Morlier / WikiCommons)
France's National Assembly (pic: Richard Ying and Tangui Morlier / WikiCommons)

While the amendment was rejected by a large majority in the Senate last week, the government is sticking to its guns.

"Our goals remain the same," Sébastien Lecornu, minister for the Ecological and Inclusive Transition, said after the vote.

"It is logical that the government... gradually adapt the burden on taxpayer money so that the market takes over these projects," he said.

According to the amendment, "as prices of offshore wind farms have fallen sharply, the state is seeking to reduce the cost of public support," the government explained.

The six affected projects included: Courseulles-sur-Mer, St-Nazaire and Fécamp, awarded to a consortium led by EDF Energies Nouvelles; St-Brieuc, assigned to Iberdrola and Eole RES; and Dieppe-Le Tréport and Les Iles d'Yeu et Noirmoutier, awarded to an Engie-led consortium. 

Due to the terms of the tender system in place at the time, the risk structure and seabed conditions, among other things, the projects were awarded tariffs of around €200/MWh, including grid connection.

Since then, prices elsewhere in Europe have tumbled, prompting the government to rethink its strategy.

"In some cases, especially when technical progress makes it possible to envisage substantial cost reductions, the state may wish to renegotiate the conditions of the offer... and in particular to reduce the amount of the tariff chosen," the amendment stated.

If this is not possible, "one of the options could be to put an end to these projects and start a new procedure," it warned.

Candidates will be compensated for "all expenses incurred, duly justified, between the decision designating them as successful candidate and the decree [withdrawing the award]," the draft added.

Reaction

The industry was up in arms, with renewable-energy trade body SER describing the proposal as a "disastrous, unprecedented signal" that puts all commitments in the area in doubt.

"We call on the government to withdraw its proposal to ensure that France remains a country where the decision to invest cannot be challenged overnight," said Jean-Louis Ball, president of SER, prior to the vote.

French wind energy association, FEE, argued the amendment, "tabled without prior dialogue", "undermines the competitiveness of the industry and undermines the confidence in the calls for tenders". 

FEE president Olivier Perot, said: "The possibility of unilaterally challenging projects awarded by competitive bidding is in contradiction with the method implemented by the Ministry of Ecological and Solidarity Transition in the context of National Wind Working Group, which aimed to give visibility to the sector."

Engie said they "would not hide their deep concern for their projects and the whole sector".

The amendment would have created a "disastrous precedent" bringing into question all the projects awarded by tender, undermining legal security and the confidence of investors.

The Union Française de l'Electricité (UFE) agreed, saying that if the government wants to meet its energy transition objectives, "it is essential to maintain a climate of trust for all investors and economic players."

UFE also pointed out that if the government wants to drive down prices, then the best idea is not to undermine confidence: "The greater the level of trust in the system, the more competition there is, the more investors are willing to receive lower levels of remuneration, and the lower the costs of projects."

In other words, it is a virtuous circle, where short-term losses will be balanced by long-term gains.

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