Renewable Energy: The government is giving the sector an austerity boost
On June 22, renewable energy experts sounded the alarm. Industry players feared that many solar, wind, hydro and biogas projects would not see the light of day due to rising commodity prices and rising interest rates. They asked the government for emergency measures without waiting for the end of the summer. Good news: you’ve been heard. Last Thursday, the Ministry for the Energy Transition presented a series of measures which will be published in the Official Journal in the coming days, to support this crucial sector for the country’s energy transition and security.
Producers of electricity from renewable energies can thus sell their electricity on the markets for 18 months before the public subsidy contract is activated. This measure is intended to give them the opportunity to use the currently very high prices on the electricity market (currently just under 500 euros per megawatt hour for 2023, i.e. significantly above the price negotiated in tenders) to cover their additional costs. However, the 18-month period granted by the government remains shorter than the 24 months hoped for by the Union of Renewable Energies (SER).
Dampen rising construction costs
For future smaller projects that benefit from an electricity off-take tariff (known as an open window), the Executive will allow the price of resold energy to be indexed to better reflect the increase in capital costs. Another highly anticipated action for professionals in the sector. The government is also planning to freeze the initially planned tariff reduction for photovoltaic systems on buildings for 2022 and to allow all renewable projects that have already been tendered to increase their output by up to +40% before they are completed. Finally, biomethane production plants can benefit from additional time for their commissioning.
Renewable energy professionals are particularly affected by the rise in the price of steel, used in particular in water turbines, solar panel tanks or wind turbine towers. The industry is also affected by the rise in the price of concrete and silicon, the production of which requires a great deal of energy. Added to this increase in raw material prices is the increase in transport costs, but also the increase in interest rates, which weighs on the borrowing capacity of the project promoters and forces them to mobilize more equity.
“All of this combined leads to an increase in investments [les dépenses d’investissements, Ndlr] between 25% and 30%”, estimated Alexandre Roesch, General Delegate of the SER, at the end of June.
Important projects for the coming winter…
This inflationary context related to the war in Ukraine threatens 6 to 7 gigawatts (GW) of solar projects and 5 to 6 GW of wind projects, according to government calculations.
“These projects are essential to build and strengthen our energy independence as quickly as possible […] make a crucial contribution […] to protect our security of supply for the coming winters,” stresses the Energy Transition Ministry, as Europeans prepare to spend the winter without Russian gas.
The war in Ukraine is indeed causing serious energy tensions between Westerners and Moscow, which is using gas as a geopolitical weapon, making its natural gas supplies weaker and more uncertain unless they are completely cut off as it was to Poland, Bulgaria or Latvia last Saturday.
…and the climate
In this race against time to find alternatives to Russian gas, renewable energy has a major advantage. They are developing very quickly, especially photovoltaics, unlike other zero-carbon solutions such as nuclear power plants, which take at least ten years to see the light of day.
In addition, these renewable energy projects not only contribute to energy security, but also make it possible to accelerate the transition to a low-carbon economy, in contrast to other emergency solutions, such as. B. the use of coal-fired power plants, many of which should be extended to the Old Continent.
Emergency law coming soon
These immediate regulatory measures come in addition to an emergency law currently being prepared and expected for the next school year to structurally accelerate the expansion of renewable energies in France.
France, well behind on its national targets, is also the only one of the 27 Member States to have missed its target set in a European directive. In 2020, the share of renewable energies in the country’s gross final energy consumption reached only 19%, compared to the expected 23%.
It is necessary “have the honesty to admit we’ve fallen behind”, himself recognized by President Emmanuel Macron during his trip to Belfort last February. In addition, the head of state has set himself the ambitious goal of increasing the installed photovoltaic solar capacity tenfold by 2050 (i.e. around 100 GW) and to achieve 40 GW of offshore wind power (i.e. around 100 GW). 50 wind farms).
Full throttle in offshore wind… not on land
With this in mind, the government has just selected two areas off the island of Oléron for the construction of two new parks, while the original project announced by Jean Castex in January 2021 only mentioned a single park. The two parks could thus represent a total capacity of around 2 GW, i.e. the equivalent “a plant with 2 reactors like Fessenheim”, welcomed the Ministry of Energy Transition. The first park, whose public debate ended last February, is scheduled to open in the early 2030s.
Read our dossier on future wind farms off Oléron
On the other hand, the President has decided to curb onshore wind power. It envisages doubling the output of onshore wind turbines by 2050, with the original target being to double output by 2030. However, according to calculations by the Energy Regulatory Authority, these wind turbines, which are regularly heavily criticized in particular during election campaigns, should make their way into the state with almost 8 billion euros.