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France bets big on offshore wind

The country will accelerate its move away from fossil fuels and even reduce its iconic nuclear fleet

Growth in French renewables capacity has so far fallen short of expectations. The country will miss its binding EU 2020 target for renewables to account for 23pc of final energy consumption; the share in 2018 was less than 17pc, according to the Eurostat statistics agency.

While it looks impressive that renewables—across hydro, wind, solar and bioenergy—account for almost 40pc of France’s installed power capacity (see Figure 1), it is rather less positive that last year the country generated just 21.5pc of its power from these sources, over half of which from was hydro (see Figure 2).       

The government is now, though, committing strongly to wind—both on and offshore. France’s final 10-year national energy and climate plan, submitted to the European Commission in April, sets a target of 5.2-6.2GW of installed offshore wind capacity by 2028 compared with negligible volumes now.

21.5pc – Generation from renewables in 2019

Improved economics is one factor in its thinking. In last year’s auction, majority state-owned power firm EdF—in partnership with Germany’s Innogy and Canada’s Enbridge—won a tender to build a 600 MW offshore wind facility near Dunkirk to be commissioned in 2026. EdF’s winning bid was just €44/MWh ($50/MWh). This ‘strike price’—which has a duration of 20 years—means the French government will guarantee this level for the electricity produced if the wholesale market price dips below it. But EdF will in turn have to return surplus cash if the market trades above €44/MWh.

In addition to the Dunkirk windfarm, projects are underway in the development areas of Manche Est Mer du Nord in the English Channel, Sud-Atlantique in southwestern France and Ile d’Oleron, an island off the west coast. France could have 2.5-3 GW of installed offshore wind capacity by as soon as 2023.

Hitting targets

The plan is ambitious but should be achievable if the government maintains a stable legal framework for permitting of new projects. “France’s track record on renewables does not speak in favour of these ambitious targets. But the government recently reconfirmed its commitment to the 2028 target despite the Covid-19 pandemic. This is a positive sign,” says Celine Cherubin, a Paris-based senior analyst with bond researcher Moody’s Investor Service.

“Moreover, grid operator RTE has announced it will invest €7bn to connect offshore wind farms to cover the target of the national action plan, which is 10-15GW of installed capacity by 2035. So it seems like RTE has no doubt that these wind farms will be commissioned,” Cherubin adds.

France’s energy transition strategy hinges on rapid development of renewables to replace coal, fuel oil and some of the country’s older nuclear reactors. The 10-year plan confirmed the targets of closing France’s 3GW of coal-fired power plants by 2022 and reducing the share of nuclear in the generation mix from c.70pc in 2019 to 50c by 2035. The latter would mean that 14 nuclear reactors would be closed by 2035.

“France’s track record on renewables does not speak in favour of these ambitious targets. But the government recently reconfirmed its commitment to the 2028 target despite the Covid-19 pandemic. This is a positive sign” Cherubin, Moody’s Investor Service

The 10-year plan also stipulates that no new gas infrastructure projects will be built in the country. Gas-fired plants having grown to reach 9pc of installed capacity and provided 7.2pc of 2019 output. Indeed, all scenarios in the plan point to a sharp drop in the country’s gas consumption by 2030 due to energy savings.

Offshore wind farms are a cheaper and less technologically complex alternative to building new nuclear plants. EdF’s Flamanville 3 EPR reactor is, notoriously, several billion euros over budget and delayed by over a decade. The 1.6 GW unit’s 2024 start-up date is not exactly considered the most likely in world of energy to be hit.

In percentage terms, growth in offshore wind will be the most dramatic change in the French generation mix—perhaps unsurprisingly, given the progress in technology and cost reduction to go alongside offshore’s much higher and consistent wind speeds. But, in capacity terms, offshore wind still lags the onshore sector.

Onshore wind capacity is forecast to more than double from its current 16GW to 33-35GW by 2028. France also has three floating wind projects planned, each with 250MW of capacity. This remains, though, a more expensive technology—reflected in strike prices of €110/MWh or more.

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