A new horizon for offshore wind energy in France

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White & Case LLPWith 11 million square kilometers of territorial waters under French jurisdiction and 20,000 kilometers of coastline, France has both an extensive and wind abundant seafront. France benefits from the second largest source of wind for offshore wind power after Great Britain. Despite these natural predispositions, the development of offshore wind energy in France is late in comparison to many European countries.

Difficulties encountered in the development of the first wind farms in France have gradually been overcome. Successive legislative and regulatory reforms that have taken place in recent years and strong ambitions displayed by the public authorities with the launch of new major projects represent a new opportunity for the sector, both in installed and floating wind power.

The most important call for tender (1GW in Normandy) has just been launched.

The difficult first steps of great potential projects

Launched in 2011 and 2013, the first six commercial offshore wind farm projects experienced protracted development delays due to difficulties, that were eventually overcome.

Troubled development of "pilot" commercial projects

The French State launched an initial request for tenders, aimed at awarding operating authorizations for five wind farms, i.e. 3,000 MW1  total capacity in 2011. The successful bidders were awarded an operating license and the right to enter into a purchase contract with EDF OA, with a pre-established tariff over a 20-year period for each tranche.

The development of the projects encountered several difficulties. As pathfinder projects, they needed to address and overcome many issues of acceptability. Preferred bidders were required to conduct public consultations for each project. These local consultations have resulted in the modification of certain projects and the specifications described in the tender documentation. 

Because of the issues of acceptability, decisions in the selection process and administrative authorizations relating to projects have been the subject of numerous appeals. It was not until 2019 that the Council of State ("Conseil d’Etat") definitively rejected the first appeals, allowing final investment decisions to be taken, external financing to be put in place and work to begin.

The development of the projects has also highlighted the need to develop template contracts specifically designed and adapted for offshore wind energy.

Alternative contracts have been created. First, a specific model of administrative lease for the use of the public maritime domain ("Convention d’utilisation du domaine public maritime" or "CUDPM") has been created and includes stipulations aimed at securing financing in the event of early termination, including events preventing the connection of the wind farm to the electricity grid. Similarly, the standard power purchase contract has been adapted into a specific model designed to take account of complex issues faced by offshore wind farms. In particular, it takes into account the occurrence of a certain number of external events affecting the producer during the term of the purchase contract.

Risks related to the sharing of project management responsibilities between the park and the connection to the grid were not dealt with in sufficient detail during the requests for tender stage. Unavailability of the connection constitutes a major risk that directly affects the producer's income and therefore its ability to repay the loans taken out.

In order to make up for the producer's lack of income due to the delay in connection, Decree no. 2017-628 of 26 April 2017 set out an initial compensation scale in the event that the deadline for connection to the transmission network is exceeded. The compensation covers, at least partially, the producer's additional financing and design-build costs, up to a maximum amount equal to three years of delay.

In addition, the transmission system operator, Réseau de Transport d’Electricité ("RTE"), has included specific conditions applicable to offshore wind farms in its standard grid connection conditions, enabling the coordination of the project management of the wind farm, the connection works and the interfaces between them.

The long road to confirmation

The development phase of the first six projects proved to be particularly long due to the procedures prior to the works2, the complexity of the contractual arrangements relating to these projects and the legal appeals led to the postponement of investment decisions.

The delay in the timetable of the development, produced a divergence between the electricity purchase prices appearing in the calls for tenders and market prices , particularly in Northern Europe. Admittedly, these projects were not necessarily comparable, both in terms of the natural characteristics of the sites and the obligations placed on the developers. However, this price differential put the very existence of these projects into question.

Under the power purchase agreements concluded with the winners of the tenders, the State provided financial support at an estimated cost of 40 billion euros over 20 years. An amendment to the ESSOC law3 offered an opportunity for the State to renegotiate the financial terms of the projects and, in the event of failure, their possible termination with a cap on compensation for project sponsors4.

After several months of negotiations, the French government announced on 20 June 2018 an agreement with the project developers, resulting in a 30 per cent reduction in the purchase price on commissioning. The new tariffs were then submitted to the European Commission for State aid control, receiving a favorable decision on 26 July 20195.Financing for the first parks was secured , enabling the construction phases to begin.

The complex development of the first six wind farms revealed the inadequacies of the initial regulatory and contractual environment for wind power projects in the French offshore market. This experience has led to a profound modification of the legislative and regulatory framework of offshore wind power projects.

Reaffirmed ambitions based on enhanced planning

With the development of new projects, a continued reduction in costs associated with the sector and a growing number of recognized participants, several important reforms have taken place.

Reinforced planning

Two planning tools are particularly useful for the development of offshore wind projects:

  • Facade Strategic Documents ("DSF") which define the objectives for integrated sea and coastal management6. In particular, the DSF includes a vocation map with a zoning system identifying the zones favorable to the development of wind farms.
  • Multiannual Energy Programming ("MEP") is the second key element of the planning system. The MEP enables stakeholders to gain visibility of the likely requirements of the public authorities. It provides the target for installed capacity, a timetable for launching the procedures, the price of electricity targeted by the State and, for some identified projects, their potential location. Decree No. 2020-465 of 21 April 2020 which relates to the multiannual programming of energy, provides for the launch of three calls for tenders for bottom fixed wind farms and three requests for tenders for floating wind farms totaling 3.75 GW in the first period of the MEP (2019-2023), then 1,000 MW per year (installed or floating) from 2024 onwards. For installed wind turbines, a request for tenders for a capacity of 1,000 MW is planned to launch in 2021-2022 and will be located in the South Atlantic. For floating wind power, the first 250 MW tender is planned to launch in South Brittany in 2021, followed by two tenders in the Mediterranean in 2022. The target prices for floating wind represent almost twice the price of installed wind power (120 € MWh then 110 € MWh). As such, market participants have improved visibility on the flow of future projects.

The anticipation of consultations and preliminary studies

Increased visibility of projects may result, even before the launch of requests for tenders, in consultation phases and certain preliminary studies.

A major change brought about by Law No. 2018- 727 of 10 August 2018 ("ESSOC Law") is to reverse the procedure, so from now on public debate will take place before a request for tenders is organized.

Requests for tenders announced by the MEP in the Channel (landed) and in Southern Brittany (floating) were therefore preceded by public debates. The first ended on 19 August 2020 and the second on 17 December 2020.

In order to further accelerate the process, in October 2020 the French Parliament adopted, a bill named "acceleration and simplification of public action". Article 55 of the law authorizes the launch of tender procedures prior to the completion of the public consultation and where the choice of the site has not yet been made. 

Areas of uncertainty surrounding project development have been reduced by the use of anticipatory studies including environmental and preliminary technical studies. Article L. 181-28-1 of the Environmental Code provides for the possibility of the State carrying out all or part of an impact study for an offshore wind farm. This measure will enable candidates to enhance their knowledge of the area and therefore formulate an appropriate offer.

Improved procedures to facilitate project development

A desire to streamline procedures to obtain the best tender offers is reflected in (i) the reform of the tendering procedures, (ii) flexibility given to certain critical authorizations for projects and (iii) in the introduction of specific rules for litigation.

Reformed tendering procedures

The competitive tendering procedures launched in 2011 and 2013 were conducted through a request for tenders, which was the only procedure provided for at the time by the French Code of Energy.

This procedure proved unsuitable for the award of complex installations involving investments of up to several billion euros.

The independent administrative authority competent in the field of energy, the Commission de regulation de l’énergie ("CRE") noted that the request for tenders had paradoxically lead to limited competition and high price levels7. CRE considered that the process favored the candidates who had already undertaken technical studies in the areas selected by public authorities. Moreover, the lack of relevant data led to an increase in the price of electricity in order to deal with any technical risks. 

To overcome these difficulties, Order No. 2016-1059 of 3 August 2016, which relates to the production of electricity from renewable energy and Decree No. 2016-1129 of 17 August 2016 which relates to the competitive dialogue procedure for electricity production facilities, introduced a new competitive dialogue procedure.

The competitive dialogue procedure, inspired by the Public Procurement Code8, has three phases.

The first and third phases are similar to the tender procedure.

The second phase of the procedure, i.e. the dialogue phase is a real evolution in the competitive tendering procedure. Based on a draft set of specifications sent to candidates by the Minister for Energy, the selected candidates assist the State in defining solutions to meet the State’s needs and in drawing up a final set of specifications.

The dialogue phase has a twofold advantage. On the one hand, the technical risk linked to the site selected by the public authorities and allocated to the selected bidder is reduced as the candidates have the benefit of information from the preliminary studies conducted by the State9. On the other hand, the specifications created based on these discussions, enable the administrative authorities to benefit from information received from the different bids that take into account all the issues for different bidders and their stakeholders for the selected sites.

The Minister for Energy opted for competitive dialogue in order to award the Dunkirk wind farm10, leading the Administration to conduct a competitive dialogue with nine candidates in the competition.

Unlike the 2011 and 2013 request for tender specifications, the Dunkirk wind farm specifications prioritized the selection criteria. The overriding criterion being the reference energy price. The proposed reference tariff (€44 per MWh) exceeded the Administration's expectations. It is substantially lower than the feed-in tariffs of tenders 1 and 2, which, after negotiation, are in the range of €135 to €155/MWh11.

Recently, in order to address the need for flexibility, the possibility of making non-substantial amendments to the specifications after the selected bidder has been appointed has been introduced in the French Code of Energy.

Competitive dialogue will also be used for the award of the Normandy offshore wind farm which has just been launched on 15th of January 202112 and the floating wind farm in southern Brittany13.

The adaptation of the authorizations required for the construction of a wind farm

Offshore wind farms, with a power output not exceeding one gigawatt, are now considered authorized under the energy code. However, several important authorizations are still required. Construction of a wind farm in territorial waters requires an environmental permit14  and a CUDPM. Whilst the operation of wind farms within the exclusive economic zone (“EEZ”) requires a single authorization15.

To enable project sponsors to benefit from the latest technological innovations and to deal with technical difficulties related to the site selected for a wind farm, these authorizations may have variable characteristics16. The system concerns both the single environmental authorization and the CUDPM. This authorization or "envelope permit" ("permis envelope") can allow the developer of an offshore wind farm to modify the model of wind turbine presented in its offer or to change the layout of the park. Due to the absence of an amending order, changes to the project will not be subject to appeal provided they fall within the maximum authorized characteristics.

In order to benefit from an "envelope permit", the variable characteristics of the wind farm must be taken into account while petitioning for the various authorizations required for the project17. Avoidance, reduction and compensation measures are also established based on the maximum effects on the variable characteristics of the wind farm or the options selected by the permit holder18.

Reduction of connection-related risks borne by the project owner

Risks related to the delay in completion or unavailability of connection facilities is a major risk for project sponsors as it directly affects their ability to finance the project. Consequently, Law No. 2017-1839 of 30 December 2017 amended the provisions of Articles L. 342-3 and L. 342-7-1 of the French Code of Energy to provide for a more favorable compensation mechanism in the event of delay and unavailability of the connection. Decree No. 2018-222 of 30 March 2018 set a new compensation scale in the event of a delay in the completion of the connection or the event of damage or malfunction affecting the land or sea portion of the offshore production facilities.

The public transmission system operator (RTE) must bear the cost of the connection corresponding to the technical conditions provided for in the specifications or defined by the Minister for Energy. The Act also makes the public transmission system operator liable for stranded costs if the competitive tendering procedure is abandoned. Conversely, in the event of the selected bidder’s failure, the latter assumes the costs borne by the network operator under the conditions and within the limits provided for in the specifications. In addition to this reform, RTE has adopted a new standard grid approved by CRE19.

This new legal framework aims to limit the exposure of project developers to risks related to the connection of production facilities to the networks with the aim of reducing target prices.

Controlling litigation risks

Offshore wind farms awarded since 2011 have been the subject of numerous disputes. Several reforms have been adopted to speed up litigation procedures whilst preserving the right of appeal.

  • Article R. 311-4 of the Code of Administrative Justice provided the Nantes administrative court of appeal with jurisdiction in the first and last instance to hear disputes concerning a series of decisions relating to energy production facilities.
  • The law 2020-1525 dated 7th December 2020 ("ASAP" law) is designed to speed up and simplify public action. It modifies the provisions of the Code of Administrative Justice such that appeals of decisions concerning offshore wind farms and connection works are brought directly before the Council of State, ruling in the first and last instance. The list of the acts concerned will be determined by decree. During a conference at White & Case Paris, the Energy Director confirmed that this competence of the Council of State as a first and last resort would be extended to the main authorizations required to develop an offshore wind project. The Energy Director specified that the list of these authorizations was currently being drawn up.

In recent years, offshore wind energy has undergone a succession of major reforms, drawing inspiration from good practice in Northern European countries.

With the forthcoming development of floating wind power, the attention of the players is likely to be focused on projects in the exclusive economic zone. These projects are subject to a specific regime.

The articulation of the procedures applicable to these developments between territorial waters (port developments and connection works) and EEZ (implantation of the floating park, of its anchoring devices, and the connection works) could imply modifications of the regulation.

The new call for tender in Normandy will benefit from these successive reforms. The 1GW project, the first located within the exclusive economic zone, would be awarded in 2022.

1 Call for tenders n° 2011/S 126-208873. The parks concerned were those of Saint-Nazaire (banc de Guérande), Saint-Brieuc, Courseules sur Mer, Fécamp and le Tréport.
2 For instance, the public debate, the environmental permits, the signature of the connection network agreement and the signature of the CUDPM.
3 Now Law No. 2018- 727 of 10 August 2018 for a State at the service of a trustworthy society, § III : JO 11 August 2018, text n°1 (“ESSOC” law)
4 See Law No. 2018-727, 10 August 2018, art. 58 for a State at the service of a trustworthy society, § III : JO 11 August 2018, text n°1.
5 State Aid SA.45274 (2016/NN), SA.45275 (2016/NN), SA.45276 (2016/ NN), SA.47246 (2017/NN), SA.47247 (2017/NN), SA.48007 (2017/NN) ;
6 Article L. 219-3 of the Environment Code
7 CRE, déliberation 26 May 2016 giving its opinion on the draft decree on the competitive dialogue procedure for electricity production facilities.
8 Report. to the President of the Republic on Ordinance No. 2016-1059 of 3 August 2016 on the production of electricity from renewable energy. 
9 French Code of Energy, art. R. 311- 25-10.
10 Competitive dialogue n° 1/2016 concerning offshore wind power installations for the production of electricity in an area off the coast of Dunkirk 
11 Ord. No. 2016-1687, 8 Dec. 2016, art. 20 relating to maritime areas under the sovereignty or jurisdiction of the French Republic
12 https://eolmernormandie.debatpublic.fr/.
13 https://eolbretsud.debatpublic.fr/.
14 Environmental Code, art. L. 181-1 and seq.
15 Ord. No°. 2016-1687, 8 Dec. 2016, art. 20 relating to maritime areas under the sovereignty or jurisdiction of the French Republic.
16  Environmental Code, art. L. 181-28-1.
17 Environmental Code, art. R. 181-54-2.
18 Environmental Code, art. R. 181-54- 3.
19 CRE, Deliberation, Nov. 8, 2018 approving the model terms and conditions relating to the "Construction and financing of connection works" of the agreement for the connection to the public electricity transmission network of offshore 

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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