Renewable energy : new wind tariff Order and Governmental renewable measures Following cancellation of ministerial Order (arrêté) dated 10 July 2006 enacting the feed-in tariff applicable to wind farms by the Conseil d'etat, France's highest administrative court, the French Governement announced that measures would be adopted to ensure that new wind farm projects could benefit from the same tariffs as those provided for in the 2006 Order (see our newsletter dated 3 September 2008: "French wind: Cancellation of Wind Feed-in Tariff"). Consistent with this statement, a new wind tariff Order was enacted on 17 November 2008 and published in the French Government s Official Journal on 13, 28 and 30 December 2008. In addition, the French Government presented on 17 November a national plan for the development of renewable energy, providing for the increase to 23% by 2020 of the share of energy from renewable sources in final consumption of energy. This plan will allow the implementation of certain measures contained in the Energy and Climate Package, adopted by the European Council on 12 December 2008 and European Parliament on 17 December 2008. The French revival plan also includes a one-year extension of buliding permits that is of particular interest for wind farm projects. Contents 1 Content of the new feed-in tariff Order 1 2 The application of the New Order to ongoing projects 2 3. Application of the New Order to wind development zones 3 4. Public Response to the New Order 3 5. New Measures as part of the National Plan for the Development of Renewable Energy 4 6. Extension of Building Permits as part of the French Economy Revival Plan 4 1 Content of the new feed-in tariff Order The new Order dated 17 November 2008 on wind purchase feed-in tariffs (the "New Order") provides for the same feed-in tariff as those set out in the ministerial Order of 10 July 2006 cancelled by the Conseil d Etat (the "2006 Order"). Accordingly, the base tariff (c. 8.2 or c. 13/kWh for onshore or offshore wind farms respectively) and the methodology for calculation of the purchase price by EDF, are identical to those provided for in the 2006 Order.
2 The application of the New Order to ongoing projects Three situations are to be considered: (i) Application to demandes complètes filed prior to the adoption of the 2006 Order Similarly to the 2006 Order, the New Order provides that operators that have filed a demande complète with the relevant grid operator for the execution of a power purchase agreement in accordance with the 2001 tariff order may file a new application to benefit from the New Order tariff provided that the relevant wind farm has not yet been commissioned. (ii) Non application to power purchase agreements already signed We understand that the Ministry of Ecology, Energy, Sustainable Development and Regional Planning (Ministère de l'ecologie, de l'energie, du Développement durable et de l'aménagement du territoire or "MEEDDAT") considers that the validity of power purchase agreements entered into on the basis of the 2006 Order is not affected by the cancellation of the 2006 Order, since their validity is to be determined as at their date of execution. In our view, this position is reasonable. Therefore MEEDDAT considered that there was no need for the New Order to apply to power purchase agreements already entered into on the basis of the 2006 Order. (iii) Application to demandes complètes filed after the adoption of the 2006 Order The New Order brings a solution to the common sitation where a demande complète was filed on the basis of the 2006 Order but with no purchase purchase agreement having been executed when such order was cancelled. There was a risk, as a consequence of the cancellation of the 2006 Order, that the relevant grid operator would decline to enter into a power purchase agreement on the grounds that the demande complète was based on invalid legislation. This risk is now removed as the New Order provides that "an operator that filed a demande complète related to a power purchase agreement between 27 July 2006 and the date of entry into force [of the New Order], for a facility which was not subject to a purchase obligation agreement at the latter date, may benefit from a power purchase agreement on the basis of [the New Order] without having to file a new application for a power purchase agreement" (article 9).
3. Application of the New Order to wind development zones As from 14 July 2005, wind farms located in a wind development zone ("WDZ") qualify for the power purchase purchase obligation. This legislative amendment had not been taken into account by the 2006 Order. 1 It was therefore uncertain whether the 2006 Order tariff applied also to projects located in a WDZ. EDF s practice was to apply the same tariff conditions to all qualifying projects, irrespective of whether their installed capacity was under or above 12MW, or located within or out of a WDZ. This practice is now recognised by the New Order. 2 4. Public Response to the New Order The Commission de régulation de l énergie ("CRE"), the French energy regulator, whose opinion was required to be given to the Government prior to the adoption of the New Order, issued a negative opinion on 30 October 2008. Consistent with its position regarding the 2006 Order, the CRE criticized the New Order mainly on the basis that in its view, its tariffs could lead to excessive returns on invesment in certain situations, for example: "as regards facilities located in continental France operating 2,400 hours per year or more (in total equivalent capacity) and facilities located near shore or offshore by low depht". It should be noted that the opinion of the regulator has consultative value only and does not affect the coming into force of the New Order. Renewable operators, through the Syndicat des énergies renouvelables, a renewables professional association, expressed their "satisfaction" at the publication of the New Order and indicated that its enactment would allow to confirm the French Government objectives to bring to 23% by 2020 the share of energy from renewable sources in final consumption of energy. 3 1 2 3 The 2006 Order applied solely to facilities using wind-generated mechanical energy, as provided for by clause 2-2 of the 6 December 2000 Decree. However, since an amendment introduced by the Decree n 2007-1307 of 4 September 2007, this provision referred only to facilities located outside wind development zones. Thus, the New Order provides for its application not only to facilities referred to in clause 2-2 of the 6 December 2000 Decree, but also to those referred to in clause 10-3 of the 10 February 2007 Law, i.e. the facilities located in a wind development zone. Press release of the Syndicat des énergies renouvelables dated 15 December 2008.
5. New Measures as part of the National Plan for the Development of Renewable Energy On 17 November 2008, MEEDDAT announced the implementation of a national plan for the development of renewable energy (the "National Plan") 4 with a view to bringing to at least 23% by 2020 the share of energy from renewable sources in final consumption of energy. This 23% threshold corresponds to France s target under a draft directive as part of the Energy and Climate Package, which should be adopted in its current version around June 2010 at the latest. 5 At European level, 20% of all energy consumed is to be generated by renewable sources by 2020, while the previous target was 12% by 2010. 6 To reach this threshold, France s National Plan provides for production targets by sectors (wind, biomass, photovoltaïc, ) 7 as well as 50 specific measures to meet those targets. Regarding the wind sector, feed-in tariffs are to remain at their current level by 2012 at least. "Climatic, air and energy regional schemes" expected to identify areas where wind development will be given priority are also contemplated. Furthermore, a specific regulatory regime is announced due to the forseeable increase of wind farm size". Most of these measures are due to be adopted by the so called environmental transition law (loi de transition environnementale), also referred as "Grenelle 2", which is to be examined by the French Parliament from January 2009. 6. Extension of Building Permits as part of the French Economy Revival Plan As part of the revival plan for the French economy, a one-year extension of the validity period of building permits was announced on 4 December 2008. 4 5 6 7 MEEDDAT, Grenelle Environnement : réussir la transition énergétique. 50 mesures pour un développement des énergies renouvelables à haute qualité environnementale, 17 November 2008. Proposal for a directive on the promotion of the use of energy from renewable sources, COM(2008) 19 final, Article 3 1. In a press release dated 17 December 2008, European Parliament specified that the directive would need to be transposed within 18 months as from publication in the Official Journal of the European Union, which is still expected. Communication of the Commission dated 10 January 2007, COM(2007) 1 final. Very important capacity increases are contemplated for the photovoltaic sector, from 13MW generated by 2007 to 5,400MW by 2020 (i.e. a production multiplied by 400). For this purpose, the MEEDDAT recently announced that it would launch, by the end of 2008, a public tender for the construction, by 2011, of a minimum of one solar power plant in each French region, for a cumulated capacity of 300MW.
A decree dated 19 December 2008 temporarily extends the validity period of building permits, and, more generally, of town planning authorisations, for one year. This measure will be applicable to all building permits granted either: (i) prior to publication of the decree and still valid as of 20 December 2008; (ii) between 20 december 2008 and 31 December 2010 While this measure applies to all sectors, it will be of particular interest for wind farms projects. Indeed, completion of a number of wind farm projects was delayed by several months due to cancellation of the 2006 Order and could have risked cancellation of their building permits without such extension. For additional information on the French revival plan, please refer to our newsletter dated 18 December 2008: French Revival Plan: Spotlight on State support for infrastructure projects.
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