The Blog - Wind energy market analysis

Posted 25/07/2018

Ilaria Valtimora


Why is wind power so expensive in France?

The World Cup may have energised France, but French wind investors are still losing. Want to learn more about the future of European wind?  Take a look at our new report, 18 Predictions for Wind Investors in Europe. 

onshore wind auction France


Winning the World Cup could benefit France socially and economically, according to a short video by the World Economic Forum. 

The WEF argued that winning the World Cup had positive social effects as it helped strengthen bonds and overcome cultural differences. (The analysis didn’t include the rise of the National Front in France despite the previous World Cup win in 1998!) It also said the win could support France’s economy by boosting consumer confidence.
Goodness knows, investors in the country’s wind sector could do with a confidence boost themselves.

The challenges facing French wind power

Shortly after Emmanuel Macron won the French presidency in 2017, we analysed wind investment in France in our first Finance Quarterly report and we noted that the wind sector in the country has been steadily growing despite administrative and bureaucratic issues including a long permitting process. Lead-times for wind farms in France can last up to seven years, for example.

The French government is well aware of the hurdles facing wind investors in the country and has committed to fix them.

Secretary of state for ecology Sébastien Lecornu set out a ten-point plan in January 2018 to speed up wind development. He did this following an announcement by ecology minister Nicolas Hulot in July 2017 that administrative hurdles would be reduced for wind projects.

However, the government has been slow to transfer its good intentions into practice and wind investors have now being put under pressure by new administrative issues.


New issues arising for wind investors

Industry body France Energie Eolienne (FEE) warned in July that the development of new onshore wind farms had stalled since the beginning of 2018. This is because of the absence of an environmental authority.
This is what happened. Until the end of last year, the prefecture of each region acted as environmental authority and decision-making authority, giving the final approval to wind developers to build the projects. It was a slow process but worked fairly well.
However, in December 2017, France’s Council of State suspended this approach to comply with European Union rules that there should be separation between these two functions. It hasn’t introduced an alternative system.
This means that for more than seven months, every new wind project proposal has been frozen. According to the FEE, at least 170 wind projects totalling 3GW are now in limbo, waiting for environmental approval.

What is the government doing to address this? 

The government is taking measures to combat this issue. In July, it presented a draft of a decree that is set to be put to public consultation imminently. This would appoint France’s General Council of the Environment & Sustainable Development as environmental authority. However, it does not say which entity should issue the final authorisation for the projects, and it is unclear if regional prefectures would be still able to do so.
The FEE said the first consequences of this regulatory uncertainty would be seen in the country’s second onshore wind energy auction this year. This is because, to be eligible to participate in the auction, developers must obtain environmental approval and authorisation to build the project. In absence of an environmental authority and a decision-making authority, developers have not been able to submit their proposals and hence they did not apply for the auction.
The FEE has estimated that the second 500MW call for onshore wind projects would be undersubscribed, with bids totalling less than 300MW. This compares to its first 500MW onshore auction in February, where projects of 900MW were in the mix.

We appreciate that the decree draft is a first step to resolve the situation. However, it will take time before the draft is agreed and becomes law. And even then, the new environmental authority will have to examine all the delayed 170 projects and any other project that might come, adding new delays. In addition, it still remains the uncertainty surrounding the decision-making authority.


What other obstacles do investors have to face?

The French wind market does not need to add further obstacles to the already-long permitting process and all the other administrative hurdles that developers need to jump over. For example, almost 70% of the authorisations issued for projects are subject to appeal in administrative tribunals and the FEE has estimated that up to 2GW of authorised projects are currently subject to “a high risk of cancellation by the administrative courts”. These can take years to resolve, which delays the completion of projects.

And, as WindEurope said in March 2018, this has a knock-on effect on the levelised cost of energy. 

Giles Dickson, chief executive at WindEurope, said that: “once you apply for your permit at the start of the process it’s almost impossible to update it later on with the latest technology”.

This means that wind developers in France aren’t able to use state-of-the-art turbines, and the cost of their projects have to reflect that. 

“Also the tip height of turbines is often limited to 150m or less in case of radars and aviation constraints, which undermines the deployment of the latest technology,” he added.

Speeding up the development process will free up developers to use these more sophisticated machines, and the levelised cost of energy should fall too.


Are current government commitments enough?

To address this problem, Lecornu proposed in February the removal of a level of jurisdiction, and abolishment of the ‘electrical work approval’. His plan also included some changes to make wind farms more attractive to local communities, thereby reducing the need for court appeals. 

For example, it would guarantee 20% of the wind part of the ‘fixed taxation on network enterprises’ to the municipality where the wind turbines are being planned. Last year, this generated €7,400 for each megawatt of wind installed, which mainly went to government institutions. Guaranteeing the 20% of this wind tax to local areas should make them more attractive to the communities. 

However, we have seen no progress since then. 

Lecornu’s plan made us optimistic about the wind sector in France, as it showed the government’s commitment to support wind by helping businesses to reduce costs and keep local people happy. However, development times of up to seven years and new administrative issues continually arising are now putting wind developers and investors’ patience under constant pressure.

So before many of these projects complete, France might have won the next World Cup, in 2022.


Download the report: 18 Predictions for Wind Investors in Europe

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