French connection

Wednesday, 29 July, 2015 - 15:45
Public tender zones for offshore wind. The second round tenders are in green, the first round in red. (Source: Ministry of Ecology, Sustainable Development and Energy)
Public tender zones for offshore wind. The second round tenders are in green, the first round in red. (Source: Ministry of Ecology, Sustainable Development and Energy)

The offshore wind industry in France is gaining momentum. Encouraged by local content requirements in the first two tenders, new factories and jobs are being created. Whether the government will initiate a further round, enabling the industry to manufacture sustainably, depends on lower costs.

France is developing into a new and potentially important core market for the European offshore wind industry. To date, 2,920 MW have been awarded in two bidding rounds. A tender for floating offshore wind turbines is also planned. The country missed its opportunity to get involved in conventional offshore wind technology, so France is aiming to become a leading market for this new technology.

Since 2004, one government after another has tried more or less wholeheartedly to give the industry a boost. Up till now, projects and tendering processes have failed due to the maximum prices demanded by policy-makers. The most recent initiative provided 13 € / MWh for the first ten years of operation and pegged the funding rates to the operating results for a maximum of ten more years. The problem was, no one made use of this barely profitable funding rate, particularly since it would have also had to cover the cost of refinancing the grid connection. The controversy regarding the funding rate has now died down "because the wind power tariffs for the offshore wind industry that were implemented in 2008 were done away with in the summer of 2014 and replaced by tenders," said Sarah Florence Gaebler from the Franco-German Office for Renewable Energy.

Under the new arrangement, the funding rate is negotiated between the government and the bidders. The price for a megawatt hour is classified as a "trade secret" and not disclosed. Nevertheless, the negotiated funding rate will be valid for a period of 20 years. This includes the six projects with a total capacity of 2,920 MW that were tendered in the first two rounds in 2011 and 2013. "The tariff is adjusted to various indexes and newly determined every year. This applies to the labour costs or industrial goods and is stated in the specifications for the projects. In addition, the tariffs include the costs of grid connections," Gaebler said.

Local content is a determining factor

Price adjustments are common in France and are more likely to drive prices upward than downward. For the operators of the first projects, this is quite a profitable business: the highest price is a whopping € 226 for 1 MWh. "French companies should definitely be involved. However, just like Alstom, these companies do not have offshore turbines ready for series production and they also do not have production facilities in France," said Matthieu Monnier, industry and offshore wind advisor at the French wind energy association France Énergie Éolienne. This is why the cost of the technology was not the deciding factor for starting. "We are currently engaged in difficult negotiations with policy-makers over a third tender round as well as the search for new locations. If it does happen, then it will certainly not be at the same price level as it was previously. There will only be further projects if costs can be reduced," Monnier said.

Some questions, such as who will benefit from a third round and whether there really is free competition in France, are still unanswered. French industrial policy is the subject of much dispute. At the centre of the criticism is a local content requirement that is actually not permissible under competition law in the EU, but nevertheless continues to dominate French tenders without drawing too much fire from the European competition authorities.

Under this system, offers are differently weighted. Measures to protect the environment are only worth 20 points, but the price of electricity and industrial policy factors are both weighted at 40 points. This means that the only way to gain access to the market is by building production facilities in France. For this reason, it comes as no surprise that the only companies under consideration as turbine suppliers during the first two tenders were the state-owned corporations Alstom and Areva and their wind energy subsidiaries.

Ready and waiting

Three projects comprising 240 turbines were awarded to Alstom. The wind division of the state-owned company will work for the consortium Éolien Maritime France, which has already tendered the transportation and construction of the components. The consortium, which includes EDF EN France, Dong Energy and WPD Offshore GmbH, was awarded contracts for the wind farm projects Saint-Nazaire, Courseulles-sur-Mer and Fécamp.

Alstom is building production facilities in Cherbourg and Saint-Nazaire. The investment decision for Cherbourg will be made in 2016. Foundations will be manufactured there as well as rotor blades (in co-operation with LM Windpower). "The production facilities for generators and nacelles in Saint-Nazaire have been completed. We will launch series production in 2016," said Markus Rieck, managing director and country sales director at Alstom.

The first five turbines produced by the turbine manufacturer are intended for a floating turbine project in the USA. A further project with two floating 6-MW turbines will be carried out together with the French industrial group DCNS in 2017. In addition, a third prototype of the gearless Haliade will be built in Denmark. Nevertheless, the trial has not been completely free of setbacks. A magnet became dislodged from the package in the generator and caused disruptions inside of the nacelle. "We went through the entire chain together with our suppliers and optimised the processes. The prototypes will be running again in August," Rieck said.

This means that Alstom is right on schedule because the government's official timetable provides for the first projects to be connected to the grid between 2017 and 2019. In case there are delays, the government has threatened fines and shorter payment periods. Nevertheless, things are never as bad as they seem, and this is also true in France. The amendments to the tender regulations now allow three-step commissioning of projects. The four projects started in 2011 must be completely connected to the grid eight years after the tender. In the second round, the period is 111 months. The remuneration for each section put into operation will then run separately for twenty years.

Put on hold

The new arrangement is obviously very convenient for Areva Wind. The turbine manufacturer is a partner of the Ailes Marines consortium and is supplying 186 turbines for the Saint-Brieuc project. Together with GDF Suez, EDP Renewables and Neoen Marine, Areva won the only two locations in the second round (Iles d'Yeu et de Noirmoutier and Le Tréport). Final assignment of the location rights, however, is still pending. The environmental impact assessment and public enquiry procedures for the zones in the second round are currently in progress and will run until 2016. Areva only intends to begin construction of its production facilities after this process is finished and will begin manufacturing in 2018.

Following the merger between Areva Wind and Gamesa to form Adwen, the turbine concept was also changed. Instead of the 5-MW offshore turbine installed in Germany, a new turbine with an output of 8 MW and a rotor diameter of 188 m will be manufactured in France. The prototypes will be unveiled to the industry at the beginning of 2016, so the French projects have been postponed until 2020 and 2021.

The pilot projects for floating offshore wind turbines seem to have more momentum. Originally, there were discussions about 4 to 6 GW capacity for this technology. That number has now been reduced to 100 MW. One reason for this is the fact that the French wind industry has already entered into partnerships for floating installations with Japan and the USA, but it has not been allow to build projects on its own coast. "For this reason, four zones in the Mediterranean and off the coast of Brittany are planned. The remuneration rate has not yet been set, but the pilot plants will receive € 150 million in government funding. The original goals were much too high, but that's the way it is with politics," Monnier said.

Torsten Thomas

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