Pioneering the new French feed-in premium scheme
3E has completed the Technical Due Diligence of probably one of the very first wind farm projects under the new French feed-in premium scheme.
The “Source de la Sensée” project consists of 3 Senvion MM92 wind turbines, located in the Sommes department, in Northern France. The project was acquired and will be constructed by TTR Energy. 3E acted as Lender’s Technical Advisor for Triodos Bank for the pre-construction and the construction phase. In addition to the standard technical and contractual review, this project required to review the new Power Purchase Agreement and the related back-to-back mechanism with the other contracts, in order to ensure that all obligations of the Special Purpose Vehicle under the Power Purchase Agreement were being transferred to the contractors.
“The new support scheme is interesting to review as it introduces 2 main changes with regards to the previous feed-in scheme: the Power Purchase Agreement contract and its integration into the broader contractual structure of the project, and the direct access to the market, meaning that the project can potentially become subject to negative electricity prices in the long run” says Régis Decoret, Country Manager France & North Africa for 3E.
The first negative prices of 2017 occurred on 30/04. However, they are not likely to impact projects in a substantial way before 2025. Since project debts are valid for around 15 years, projects reaching financial close now will be likely to be impacted in the last years of the financing period.
Negative prices occur when energy production is high, consumption is low, and interconnection between countries is not fully available, so the available extra production cannot be valorised in a nearby market.
3E developed a tool to assess the potential numbers of negative price hours for France, and link to the production profile of a given project to evaluate the related revenue losses.
“So far we have taken into account the different energy mix scenarios, as well as the consumption forecast for the French energy regulation commission (CRE) and the increase in interconnection capability (especially the new links with Italy and the UK). The next step will be to integrate storage in the equation, as it is clear that storage will help reduce the impact of negative prices. But this is not for now, as it introduces even more complexity to our model. However, it will be implemented before end of 2017” says Pieter Joseph, head of the Power Grid & Markets team of 3E.