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France

France

Wind tariff referred to European Court

FRANCE: The Council of State, France's highest administrative court, has referred a legal challenge to the country's premium purchase price for onshore wind to the European Court of Justice (ECJ), asking the court to rule if the system constitutes state aid.

A decision could take up to 18 months, but in the meantime the council has declared that the tariff remains in force, much to the relief of the wind industry.

And although the outcome is still uncertain, Damien Mathon, managing director of renewable-energy trade association SER, said that the industry is "pretty confident" that the ECJ will rule that the system is legitimate.

The case follows an appeal to the council by Vent de Colere, an association opposed to industrial-scale wind power, on the grounds that the government had failed to notify the European Commission of the tariff as required for state aid under European law. In March the council's rapporteur had called for the decree establishing the tariff to be annulled.

While the council examined the case, projects were put on hold. Because of the uncertainty, financial institutions refused to sign project finance deals and developers were unable to secure power purchase agreements (PPAs), explained Nicolas Wolff, president of the French Wind Energy Association. He estimated that around 200MW of new capacity has been "lost" already this year, while local industries producing towers and other components have been hit by the slowdown in orders.

Following the council's statement, however, development will now be able to continue based on the existing tariff. First, the industry needs an official statement from the French government outlining the situation so that developers can proceed with negotiations over PPAs, Wolff said. In the medium term it also needs to work with the government to provide reassurance to the banks. "The situation is not ideal, but is better than an outright cancellation of the tariff," Wolff said.

He also welcomed the fact that the council rejected another assertion made by Vent de Colere that the tariff is too high and gives excessive returns to investors.

Not that the wind industry is necessarily out of the woods yet. Vent de Colere president Alain Bruguier said his association was determined to secure the repeal of the tariff and halt wind-power deployment in France. It successfully attacked wind prices as too generous in 2007, when the council ruled in its favour on procedural grounds. The government then quickly issued a new decree reinstating the prices and assuring the validity of existing PPAs.

On the other hand, there is some room for optimism following the election in May of the new socialist president, Francois Hollande. During the campaign, Hollande's team said the new government would work quickly to simplify the regulations for wind power and re-establish a stable and transparent regulatory framework to encourage deployment.

Unlike his predecessor, Nicolas Sarkozy, who was keen to preserve the country's nuclear fleet, Hollande says he wants to cut nuclear's share of the power mix from 75% to 50% by 2025 through boosting renewables and cutting consumption. He plans to launch a debate this autumn leading to a new law laying out how to finance this energy transition.

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