Client Alert I Wind Energy in France
January 2017
A new regulatory framework for wind energy: Happy New Year 2017 !
With volumes of onshore wind transactions to increase over
the coming years, France is regarded as a hot spot for wind
energy projects as well as one of the most attractive European
markets in the wind industry.
In order to assist this promising development and satisfy the
requirement of gradual liberalization of the market by the
European Commission, the French Government has had no
choice but to substantially modify the regulatory framework
applicable to the financial support mechanism of renewable
energies.
In this context, the French parliament enacted a new law socalled “Law on energy transition and on green growth” on
17 August 2015, with the purpose of creating a new French
energy model, based on a new support mechanism called “the
additional remuneration” or feed-in-premium, which is a bonus
paid monthly to a producer of renewable energy in addition to
the sale of energy on the market that he has produced.
Such feed-in-premium shall then become the main support
mechanism for renewable energy, while feed-in-tariffs
mechanism would only be applicable to a limited number of
projects.
The above-mentioned Law of 17 August 2015 was
supplemented by three implementation decrees published
on 27 and 28 May 2016, which give more detail on the new
additional remuneration systems.
Since doubts were expressed as to the compatibility of this
new regulatory framework with the 2014 guidelines of the
European Commission relating to state aid for the protection
of the environment and the energy sector, intense discussions
between France and the European Commission took place.
ensuring a transition between the previous regime of feed-in
tariffs and the new mechanism for feed-in-premium.
Finally, on 14 December 2016 the government published a
decree defining the new rules on operating and administrative
supervision applicable to installations producing energy, giving
increased powers of surveillance and control to prefects
extending as far as to suspend or terminate contracts
concluded with producers.
New projects developed from 1 January 2017 onwards will
be the subject of a forthcoming ministerial order which will
finally define the new regulatory framework applicable to wind
energy installations, and will serve as a sustainable basis for
the development of these projects in France for the future.
Support mechanisms available for wind energy
installations up to 31 December 2016: feed-intariffs or feed-in-premium
The implementation by the above mentioned 13 December
2016 Ministerial order of a transitional legal framework for
wind energy installations led to several evolutions for the wind
energy sector.
As a matter of fact, whilst a new support mechanism called
the additional remuneration (feed-in-premium) was created
for replacing over a larger period the former power purchase
mechanism (feed-in tariffs), the French government decided
to maintain the benefit of feed-in tariffs to a limited number
of wind installations developed or to be developed by the end
of 2016:
u
Feed-in tariffs → only owners of onshore and offshore wind
installations who lodged a complete application for a power
purchase agreement (PPA) or were granted a CODOA prior
1st January, 2016 shall continue to benefit from the feed-intariff regime (as defined by the Ministerial order dated 17th
June 2014).
u
Feed-in-premium (additional remuneration) → only onshore
wind installations are eligible for the additional remuneration
mechanism.
On 12 December 2016, the European Commission validated
compliance with European Union rules regarding state aid for
four types of renewable energy, and more particularly for wind
energy installations having filed an application for aid in 2016.
In light of this success, on 13 December 2016 the French
government published a ministerial order laying down the
conditions of the additional remuneration for electricity
produced by the wind energy installations.
This order, which repeals notably the wind energy tariff order
of 17 June 2014, previously applicable, thus creates a legal
framework for wind energy installations already developed or
in the process of development up to December 31, 2016, by
How to keep benefiting from feed-in tariffs and PPA ?
According to article 14 of the Ministerial order dated 13
December 2016, installations using mechanical energy derived
from wind for which a complete application for a PPA was filled
Client Alert | Wind Energy in France
January 2017
or a CODOA was granted before 1st January 2016 can keep
benefiting from the feed-in tariffs defined by the Ministerial
order dated 17 June 2014.
In this context, owners of wind farms that obtained a CODOA
and already submitted a complete application of the purchase
contract to EDF to benefit from the PPA do not have to fulfill
any additional obligations and must follow the procedure
described by the Ministerial order dated 17th June 2014, while
owners of wind farms which obtained a CODOA before 1st
January 2016 but did not complete a full application of the
purchase contract to EDF to benefit from a PPA before that
date must follow the procedure and conditions laid down by
article 3 of the Ministerial order dated 17th June 2014 in order
to obtain a PPA and benefit from feed-in tariffs.
Finally, and as Article 14 of the ministerial order of 13 December
2016 expressly recalls, PPA’s signed before the 14 December
2016 (date of publication of said Ministerial Order in the Official
Journal of the French Republic) will continue to be regulated
by the wind energy tariff order of 17 June 2014.
How to benefit from the new feed-in-premium regime
(additional remuneration mechanism) ?
List of wind installations eligible to feed-in-premium and
additional remuneration contract
According to Article 2 of the ministerial order of 13 December
2016 and of Article D. 314-23 7° of the French Energy Code,
installations using mechanical energy derived from wind can
benefit from the additional remuneration contract in the
following cases:
u
New Installations using mechanical energy derived from
wind for which an application is completed before 31st
December 2016. An installation is considered as new if a
complete application was filled before the beginning of the
works linked to the project. The beginning of works is either
the start of the construction work, or a firm commitment
making the investment irreversible.
u
Installations using mechanical energy derived from wind
benefiting from a signed PPA pursuant to the ministerial
order dated 17 June 2014, whose the request to benefit
from the additional remuneration was filed from 1st January
2016.
u
Installations using mechanical energy derived from wind not
benefiting from a PPA but for which a complete application
was filed pursuant to the Ministerial order dated 17th June
2016 from 1st January 2016 and before 14th December 2016
entered into force.
How to apply for feed-in-premium and additional remuneration
contract ?
◊ Procedure
Owners of onshore wind farms who fall into one of those
categories can benefit from this supplementing remuneration
mechanism.
The decree n°2016-682, 27th May 2016 and the Ministerial
order dated 13th December provide that in order to benefit
from such mechanism, the producer must send a completed
application for a contract of additional remuneration to
Electricity de France (EDF).
It should be emphasized here that this additional remuneration
contract is not a contract for the purchase of electricity,
insofar as EDF does not commit to purchasing the electricity
produced (as in the case of the purchase contract with feedin-tariffs) but simply to pay an additional remuneration to its
contracting electricity producer should the market tariffs do
not exceed certain thresholds.
The above mentioned decree provides that the application
of the owners must contain personal details concerning the
producer, but that more importantly the applicants must
provide accurate information about the installation such as:
u
its localization,
u
the delivery station,
u
its installed power capacity,
u
a sworn statement specifying that the request was made
before the commencement of work,
u
number and type of generators.
When EDF receives the application, it must formally
acknowledge the receipt of the application.
EDF then has a time limit of three months to offer this contract
to the producer whose installation is eligible for additional
remuneration. The decree specifies that the contract of
additional remuneration remains into force throughout the life
span of the installation, being specified that the duration of
such contract for wind installations is 15 years. The contract
of additional remuneration shall take effect once the producer
has submitted to EDF a certificate of compliance of its
installation with the terms of its application for contract and
the requirements set down by the Ministerial order dated 13
December 2016. Moreover, until EDF receives the certificate
of compliance that the producer must send to it within
three years (from the date of application to the additional
remuneration contract), some details of its initial application
(such as the producer’s personal details or the installed power
capacity as long as it respects the eligibility threshold and
without exceeding 30% of the initial installed power capacity)
can be modified.
Client Alert | Wind Energy in France
January 2017
If the certificate of compliance is not sent within three years
(as mentioned above), the duration of the contract is reduced
according to the period of delay, beginning with the first 10
years period.
In addition, the ministerial order also states regarding
Installations benefiting from (i) a signed PPA pursuant to the
ministerial order dated 17 June 2014, whose the request to
benefit from the additional remuneration was filed from 1st
January 2016, as well as for (ii) installations not benefiting from
a PPA but for which a complete application was filed pursuant
to the Ministerial order dated 17th June 2016 from 1st January
2016 and before 14th December 2016, that the limitation of
time is extended when the installations are put in service with
delay because of the grid connection work or because of a
judicial appeal by a third party. The ministry of energy can also
extend the time limitation due to force majeure. In that cases
additional time corresponding to the delay or until the Court
rules that case.
The decree n°2016-682, 27th May 2016 also specifies
that when an owner of wind farms benefits from a power
purchase obligation mechanism and that he/she may decide
to switch to the additional remuneration mechanism for the
remaining duration of its PPA. To do so, the owner must
follow the procedure that was previously described and add
in its application a request for the withdrawal of the power
purchase agreement.
It is also provided that the contract of additional remuneration
can be transferred to another producer after signature of an
amendment to the original contract.
The Ministerial order dated 13th December 2016 also specifies
that the owner of wind farms will have to communicate to
the Energy Regulatory Commission details about costs and
incomes related to his installations.
Finally, the additional remuneration contract may be terminated
prior to its expiry date at the owner’s request. In that case,
the request has to indicate the effective date of termination
with a minimum notice period of three months. The owner will
also have to pay to EDF an indemnity corresponding to the
discounted amounts collected and paid under the contract of
supplementary remuneration from the effective date of the
contract until its termination, except if the definitive cessation
of the installation is beyond the control of the owner.
◊
Calculation formula of the feed-in-premium for wind
installations
According to the new article L.314-20 of the French energy
code, the amount of the additional remuneration is calculated
by especially taking into account:
u
the investments and operating costs of efficient plants that
are representative of each energy sector;
u
the cost of integration into the electrical system/network;
u
the revenues from the installation, including the value from
the generated electricity and value from guarantees on
capacity;
u
whether these facilities contribute to achieving the national
electricity policy goals;
u whether
the consumer concerned also produces some or
part of the electricity generated by the plant.
The main objective of this feed-in premium is to ensure a
reasonable return on the capital, given the risks associated
with these activities, in order to avoid an excessive return of
investment capital and speculative bubbles.
The above mentioned criteria will be of course subject to
periodic reviews in order to take into account the evolution of
the market prices applicable to the facilities that benefit from
such additional remuneration.
The exact amount of the feed-in-premium for wind installations
will be fixed in application of the following formula, as defined
by the Ministerial Order dated 13th December 2016:
The amount of the additional remuneration thus corresponds
to the difference between the energy bonus (equal to the
difference between a reference tariff and the average value
of the energy produced in the given sector), and the income
obtained on the capacity market, by adding a management
bonus intended to compensate for the costs of placing the
electricity on the market.
The amount will be paid each month on the basis of the
monthly energy bonus and the management bonus defined
in Article R.314-41 of the French Energy Code. The Ministerial
Decree of 13 December 2016 thus sets the reference tariff at
82 €/MWH for eligible projects.
In this regard, the decree and the Ministerial Order dated
13th December 2016 define precisely each of the parameters
provided for in the above mentioned formula. This additional
remuneration shall also be increased by a “performance
bonus” representing the costs incurred by the producer for
selling what it produces on the energy markets. This amount is
calculated for a calendar year and therefore revised annually.
Finally, the decree specifies the modalities for implementing
the purchaser of last resort mechanism. In fact, the Law on
energy transition provides for the possibility for the authorities
to designate, by way of a tender offer, a purchaser of last resort
required to conclude a contract for the purchase of electricity
produced with any producer who makes the application
and who justifies the impossibility of selling its electricity
Client Alert | Wind Energy in France
January 2017
(impossibility of enlisting with a physical person or legal entity
responsible for the sale of electricity on behalf of a producer or
failing of this physical person or legal entity responsible for the
sale of electricity). When this mechanism is implemented, the
sale of electricity must not engender a level of remuneration
higher than 80% of the total remuneration that would have
come from the sale of the electricity produced on the market
and the payment of the additional remuneration.
The new regime for controls and administrative
sanctions applicable to energy producing
installations
The above-mentioned three decrees published on 27 and
28 May 2016 were supplemented by a decree published on
14 December 2016, which frames the control of installations
benefiting from feed-in tariffs or additional remuneration
contract.
uFirstly,
the time limit for completion of the installation is
framed in order to keep benefiting from feed-in tariffs.
According to the decree dated 28 May 2016, wind farms for
which a complete application of the purchase contract was
filed before 30 May 2016 must be completed no later than
three years after the complete application of the purchase
contract, or within eighteen months from 30 May 2017.
u The
decree dated 14 December 2016 relaxes those rules
by offering producers the opportunity to request additional
time from the Minister of Energy when the installation is
put into service with a delay due to the grid connection
work, a judicial appeal by a third party, or in the event of
force majeure, left to the Minister’s discretion in this case.
The decree of 14 December 2016 also specifies the
methods of completion and control of the installations.
Indeed, pursuant to the decree of 28 May 2016, the
operator must ensure the good completion of his installation
by submitting to EDF a certificate of compliance of the
installation.
u
The decree of 14 December 2016 reinforces the repressive
nature of the control mechanism by adapting the conditions
under which the prefect may pronounce administrative
sanctions against energy producers, such as suspending or
terminating the contract. The six month time limit, in which
the producer can remedy his situation in order to avoid a
sanction, has thus been abolished. However, the process
for giving formal notice is better regulated and enables the
prefect to grant a second time limit for the producer to
remedy his situation.
Europe > Middle East > Asia
uFinally,
the decree of 14 December 2016 requires the
authorized bodies to transmit a visit report to the prefect
within one month at the latest, when they find nonconformity in the installation. New Ministerial orders should
describe the general and specific requirements imposed on
producers and how they should be monitored.
What’s next? The era of feed-in-premium and
public tenders
As explained earlier, the projects developed from 2017 onwards
will be subject to a different regulatory framework from the
transitional regime organized by the Ministerial Order of 13
December 2016.
For example the Minister of the Environment undertook
to communicate as rapidly as possible to the European
Commission a draft ministerial pricing order applicable to wind
energy installations developed from 1 January 2017onwards,
so that it may enter into force as soon as possible.
Although the terms of this draft ministerial pricing order are
not yet known with accuracy, the Minister of the Environment
has already indicated that from 2017, the wind energy sector
will be backed by an additional remuneration for small wind
farms and by tender offers for the rest.
In this regard, she stated that in accordance with the new
European Commission guidelines on state aid in the energy
sector, wind farms with a capacity of up to six turbines will
be assisted by an additional remuneration; for the others a
multiannual three year tender procedure will be launched, with
two project applications per year.
These new support mechanisms will thus help to achieve the
ambitious targets for the development of renewable energies
set by the law on energy transition and that the Minister of
the Environment has set out in the multiannual periods of
energy programming (PPE), published on 28 October last.
Therefore in the near future, a comprehensive and ultimately
stable regulatory framework will be effective in France, thus
fulfilling the expectations of investors and developers of the
wind energy sector.
So, be patient, the best is yet to come!
Contact
uOlivier Laffitte
Partner, Paris
Projects
T: +33 (0)1 72 74 03 33
[email protected]
taylorwessing.com
© Taylor Wessing 2017
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