… when 3E’s combined market and technical experience matters
As the old Feed In Tariff (FIT) is being phased out and a new Feed In Premium (FIP) is being implemented, the landscape is changing for all wind stakeholders active on the French market. With the FIP, the electricity will be sold at the prevailing market price whilst at the same time the generator will receive a regulated bonus. With the FIT scheme, the only variability in annual revenues was driven by the actual wind variability from one year to the other, as well as the wind farm availability. However the new FIP mechanism is introducing 3 other main sources of variability when it comes to financing a project:
Monthly energy prices
The monthly production of the project will be invoiced at the average electricity price in the month, therefore it becomes important to understand the monthly production profile of the project compared to the average wind farm production profile in France. A decorrelation between the 2 could actually be beneficial to the project. With its database of operational projects (more than 150) of different wind turbine types and locations, acquired through past Due Diligence work for refinancing and its SynaptiQ monitoring system, 3E has a very good understanding of this crucial aspect.
The aggregators will have a crucial role in this new landscape, with their ability to sell the electricity to different markets. A crucial point for future technical Due Diligence works, will be the assess the aggregator’s technical capabilities in terms of forecasting and wind farm control, the type and geographical spread of their portfolio, as well as their price mechanism and guaranties. In total, 3E has developed a checklist to thoroughly review their technical and commercial strengths, this score card being used already on a number of European projects.
Negative electricity prices
Unlike Germany, France has not been impacted by too many negative price hours so far, but as the share of Renewables and interconnection capabilities will grow, so the risk of negative prices . In the future, wind farms will be shut down or de-rated when negative prices occur, and the first 20 hours of negative prices will not be compensated. Beyond 20 hours, a compensation based on a capacity factor of 23% will be granted, for each hours of negative price. Understanding the causes for negative prices as well as the operating conditions in which they could occur for the project, allows to better assess the potential shortfall in revenues, especially for wind projects where the compensation scheme may not apply. 3E has already conducted studies to better assess this potential risk, using different conventional/Renewables mix scenarii.
With its 15 years of experience in market integration of Renewables, along with it leading technical Due Diligence services (more than 20 GW) and its database of operational projects across France, 3E is already supporting a number of Lenders and equity players to navigate in this new landscape.