Proximo Weekly: French offshore wind gets a dose of vitesse?
France has made some significant progress in offshore wind in the past month. But it still lags behind its European peer group in pace of development. Will recent government initiatives make a difference?
The recent project financing of the €2.5 billion 500MW Eoliennes en Mer Iles d'Yeu et de Noirmoutier (EMYN or Noirmoutier) offshore wind project was a big deal for French renewables – the fifth offshore wind farm likely to become operational by 2025.
And in late March the country’s largest offshore wind scheme to date – the 1GW Centre Manche 1 – was awarded to EDF Renouvelables and Maple Power at a tariff of €44.9/MWh, excluding grid connection.
But despite those headline-grabbing deals, the pace of French offshore wind development is still relatively slow. Noirmoutier was awarded in 2014 – that’s nine years from award to financial close, more than twice the time it takes in comparable European markets. And its sister project, the 496MW Le Treport scheme, is still waiting on a final investment decision (expected in the coming weeks) from sponsors Ocean Winds, Sumitomo Corporation, and Caisse des Depots.
Centre Manche 1 will be much quicker to financial close than Noirmoutier if it is to meet its 2031 operational date. But it is still the only French offshore wind project awarded since June 2019. Consequently, if France is to meet its 2050, 40GW offshore wind target it really needs to speed up all facets of tendering, particularly given the current rising cost of debt and supply chain costs for the sector.
The reason for the slow progress to date is not lack of lender appetite. Debt pricing on the first French offshore wind farm to reach financial close – the 480MW Saint Nazaire project in 2019 – was highly competitive given its pathfinder status: margins on the main €1.5 billion 19-year term loan were 150bp during construction, decreasing to 140bp for the first five years of operation and then back to 150bp at end of year five and increasing by 10bp every five years after that.
An even stronger indication of lender confidence was the Provence Grand Large financing in late 2021 – a global first for utility scale floating offshore wind. The technologically challenging project attracted €286.5 million of 20-year debt, as well as €108 million of subsidies. Lenders on the transaction included BNP Paribas, Credit Agricole, Natixis, Societe Generale, Caisse d’Epargne, MUFG, Rabobank, Santander, and the EIB. The subsidies were provided by the European Commission (a €25 million NER 300 subsidy), the European Regional Development Fund (ERDF) (€5 million), and Agence de l'Environnement et de la Maitrise de l'Energie (ADEME) (€78 million).
Similarly, although supply chain costs have gone up, France has a strong supply chain footprint in Normandy. Siemens Gamesa produces blades and nacelles for offshore wind turbines in Le Havre, and General Electric produces offshore turbine blades in its factory in Cherbourg. The French government is also set to pass the Green Industry Bill in the coming months to support the supply chain and facilitate future growth.
So what have been the causes of slow French offshore wind development and are they resolved or near to resolution? All six of the projects awarded in France’s first two offshore wind tenders faced protracted litigation over the validity of their construction permits. The Conseil d’Etat, the highest French administrative court, ruled in favour of the Saint-Nazaire, Fecamp, Courseulles-sur-Mer (CSM), and Saint-Brieuc projects in 2019, while Treport and Noirmoutier had to wait a little longer for a decision.
The French government’s tender documents for the first two offshore wind tenders were also insufficiently detailed to establish a clear regulatory foundation to allow offshore wind projects to operate. State officials had erroneously assumed that the projects’ concession agreements, offtake agreements, and grid connection contracts could draw material from documents previously used for smaller onshore wind farms and solar plants. Further difficulties arose when the feed-in tariffs for all six projects were cut from around €200/MWh to around €150/MWh.
All those issues are now resolved, at least on paper, and in March this year the French government and the offshore wind sector signed the Offshore Wind Pact which includes some significant targets:
- Aim for a minimum volume of call for tenders of 2GW per year for offshore wind power from 2025.
- Set the objective of 20GW allocated in 2030 to reach a capacity of 18GW in service in 2035 and 40GW in 2050.
- Enable development of the PPE (Programmations pluriannuelles de l’energie), carry out planning work to enable the achievement of these objectives.
- Commit more than €40 billion of investments for the realisation of the projects, over the next 15 years.
- By 2035, achieve local content of 50% at the time of commissioning for each offshore wind project.
If those targets are met, French offshore wind developers can look forward to a strong and steady deal pipeline and bin the adage ‘plus ça change, plus c'est la même chose’.
Selected news articles from Proximo last week
NORTH AMERICA
Port Arthur LNG syndication nearly finalised
Syndication of the project financing for the Port Arthur LNG Phase 1 project in the US has nearly been finalised and primary syndication has closed, according to a source close to the financing.
EUROPE
Vulcan flags ECA interest for Zero Carbon Lithium project financing
Vulcan Energy has received in-principle support from several export credit agencies for the phase one financing of its Zero Carbon Lithium project in Germany.
ASIA-PACIFIC
Origin takes FID for Eraring battery
Origin Energy has taken a final investment decision on the first stage of a large-scale battery at the Eraring Power Station in New South Wales.
MIDDLE EAST & AFRICA
Tanzania advances three critical minerals projects
The government of Tanzania has signed three framework agreements with Australian resources companies, which could result in the development of three critical mineral projects.
SOUTH AMERICA
Chile grants environmental permit to Los Brancos copper project
Chile's ministry of environment has approved an environmental permit for a $3 billion extension of Anglo American's Los Bronces project.
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