News that the French government is having a serious rethink about the level of support for six offshore wind projects awarded between 2012 and 2014 hardly comes as a surprise. My initial reaction was, what took them so long? I’d been expecting something to happen.
That the French government would like to renegotiate the deals – or even cancel them altogether – because of their high cost compared with more recent awards isn’t surprising when you consider how little progress has been made with building them, and how hideously expensive they are.
The projects in question are Courseulles-sur-Mer, St-Nazaire and Fécamp, which were awarded to a consortium led by EDF Energies Nouvelles; and St-Brieuc, awarded to Iberdrola and Eole RES. These contracts were awarded in 2012. The other contracts potentially affected are Dieppe-Le Tréport and Les Iles d'Yeu et Noirmoutier, both awarded to a consortium led by Engie in 2014. All of the projects were given tariffs of circa €200/MWh, including grid connection, which far exceeds current norms. Remember, we are now in an era of zero-subsidy bids for some, if not all, offshore windfarms.
As I reported here, France has made a significant commitment to offshore wind but still hasn’t built any offshore windfarms. It has been nearly four years since France announced the winners of its second commercial-scale offshore wind tender and nearly six years since announcing the winners of its first tender.
Combined, the tenders awarded contracts for 2.9 GW of capacity, but fast forward to today, and only the projects in the first 1.9 GW tender have secured the necessary permits and not a single project from these first two tenders has reached financial close.
That they have not progressed is not industry’s fault, however. The fault lies with the country’s slow and cumbersome development process, which is delaying projects. Bloomberg New Energy Finance told OWJ it does not expect to see any conventional projects commissioned before 2021. Several small-scale floating offshore wind projects will probably be in the water first.
The French government has acknowledged the deathly slow nature of the development process and, under the leadership of president Emmanuel Macron, said it planned to cut development times to less than seven years from more than 10 currently. The government has also tried to streamline the appeal process for offshore wind projects and cut the length of court cases. Appeals against permits by stakeholders such as the fishing industry, tourist bodies and conservationists have added years to project development timeframes.
Unfortunately, the review of the 2012 and 2014 tenders and the level of support they received could undermine confidence in the sector and adversely affect jobs and industrial commitments, as industry bodies such as France Energie Eolienne have been quick to point out. As it noted, above all, the industry needs forward visibility and stability – regulatory and economic – especially where long-term investments are concerned. It is that very visibility that has led to a significant reduction in the cost of offshore wind energy. In the past, uncertainty has been the enemy of investment and has led to cost increases.
“At a time when the public debate on the future of the French energy policy is opening, this proposal is a disastrous signal for all types of renewable energy and a challenge to government commitments,” said the Syndicat des Energies Renouvelables (SER). Jean-Louis Bal, president of SER, said the bill that the government is proposing would “destroy all confidence of investors and industrialists.”
Mr Bal said “We call on the government to withdraw its proposal and ensure that France remains a country where the decision to invest cannot be challenged overnight.”
Ironically, one of the reasons that the French government espoused for supporting offshore wind in the first place was the chance to create a powerful new industrial sector with a significant commitment to production in France and to job creation.
So, although I’m not at all surprised about the news from France, it’s clear that renegotiating – or pulling the plug on projects – could cause untold harm to a sector in which French companies – and the French government – has invested heavily and in which large-scale export opportunities are fast opening.