2016 is a year of transition between two support mechanisms for French wind energy projects: the Feed-in Tariff (FiT) obligation and the Contract for Difference (CfD).
The French government has published in 2016 or is about to publish several texts to complement the legal framework of the remuneration systems for projects developed in 2016.
The legal framework for the new support mechanism planned for 2017 is still being discussed.
A brief reminder of the context:
The European Commission had declared valid the FiT obligation mechanism in March 2014. A decree published in June 2014 described the conditions for wind power plants to benefit from this support mechanism.
Then guidelines from the European Commission were published in July 2014, related to state aid in the fields of energy and the Environment protection. They stipulate in particular that “in order to encourage integration in the electricity market produced from renewable sources, it is important that beneficiaries sell their electricity directly on the market and are subject to obligations market “. To this end, the national support system had to take the form of a premium to be added to the market price at which producers sell their electricity from 1 January 2016 (applicable for wind farms above 3 MW or 3 wind turbines).
The FiT mechanism, being confirmed in 2014, was valid for the next 10 years. However the French government decided to keep it in effect until 2018 only. In the end, the change in the financing mechanism put in place to support renewable energy projects made on January 1, 2016 has precipitated the transition to the CfD system.
The terms of the new support mechanism to be applied in 2017 have not been published and specified at this stage.
FiT or CfD in 2016?
1. FiT
Some installations can still benefit from the FiT mechanism under specific conditions. According to the 28/05/2016 decree, producers can benefit from the power purchase obligation if the complete PPA request was made before January 1st 2016 and if they demonstrate the plant was completed (i.e. turbines fully erected, not necessarily connected to the grid) on the later of the following dates:
- within three years from the date of the complete PPA request or
- within 18 months from the date of publication of the 28/05/2016 Decree
It has to be noted that trade associations fought for deadline extensions in case of delayed commissioning of the plant due to grid connection works or to litigation against administrative authorizations. In these cases, an extension corresponding to the grid connection delay or the period necessary to solve the administrative dispute would be granted. However, beyond the remuneration aspect, wind turbines cannot remain disconnected for a long time due to high constraints endured by major components. The grid connection schedule must therefore be considered when investing in a wind farm.
The completion deadline may also be extended by the Minister for Energy in the event of force majeure duly justified by the producer.
The text ratifying these deadline extensions is being validated by the Council of State.
2. Contract for Difference
Wind farm projects can also benefit from the Contract for Difference mechanism in 2016 under specific conditions.
A project of decree has been produced by the Ministry of Energy in October 2016 related to the conditions of the Contract for Difference for PPA requests made DURING 2016. It is currently being discussed with the European Commission, the French Energy Regulatory Commission and trade associations.
This bill indicates that projects whose complete PPA request was made after January 1, 2016 and benefiting or not from a signed PPA at the date of publication of the decree are eligible to a Contract for Difference mechanism. If this is the case, a cancellation of the purchase contract (or its request if not yet obtained) must be made to benefit from a Contract for Difference.
Moreover for wind farms whose complete PPA request was made before January 1, 2016 and subject to a high risk of overrun of the completion date (see 1.), a cancellation of the signed PPA can be requested and a new application for purchase contract can be submitted. Then the producer cannot benefit from the FiT anymore.
WARNING: To be able to benefit in those two cases of the 2016 Contract for Difference you should request your new PPA before the end of the year!! If not, the project will rely on the new (and still unknown) support mechanism of 2017.
This 2016 decree will be published in its final version before the end of the year.
Our team is here to assist and advise you, do not hesitate to contact us.