The French energy market is already used to private power purchase agreements (PPAs) among power producers and intensive energy consumers, but these kind of agreements were so far viable for traditional power providers or hydropower producers.
The new lease of life given to renewable energies by the Macron administration (and also by the previous French government), however, seems to have changed an energy landscape that was almost immutable for decades, and in which nuclear power took the largest share.
Indeed, two major energy consumers – Paris Aéroport (formerly Aéroports de Paris – ADP) and the state-owned French National Railway Company, SNCF – have decided to work with renewable energy providers through two separate invitations for bids, and to utilize the private PPA model to meet part of their huge energy demands.
Commenting these new developments, Xavier Daval, VP of French renewable energy association, SER and CEO of KiloWattsol SAS, told pv magazine that the French energy market is now ready for such a solution, as the share of nuclear power is expected to fall from around 75% currently, to roughly 50% in 2025.
“The size of nuclear power in the French electric mix has always provided a stable power price over the past decades, but now this is going to change,” Daval stated. “Private PPAs may now become a substitution to this safety-net, as the changes in the energy mix will be associated with price unpredictability, especially during the initial phase.” He expects that power prices will increase in France over the next few years, although in the long-term, the increasing share of renewables may become a factor for a general price drop.
But it is not only about prices and economics, according to Daval. In fact, big corporations in France, as everywhere else in the world, are seeking visibility while committing to becoming greener. “These are first movers, but I am sure that more big energy consumers will follow their steps in the near future,” Daval said.
When asked what kind of financing conditions are currently on offer in the French market for projects relying on PPAs, Daval said that, due to the fact the costs of financing are still the largest portion of a project’s budget, financial engineering will be key for securing these kind of contracts.
“It is just about securing the proper money for the adequate level of risks,” he stressed. He also highlighted that the choice of the off-taker will also be key. “Airport of Paris and SNCF are big consumers and have both solid balance sheets,” Daval said.
In its expression of interest issued in June, SNCF announced it is aiming to cover around 20% of its electricity demand with renewables by 2025. As for Paris Aéroport, it published its call to seek proposals from renewable energy producers in May.
French newspaper, La Tribune further reports that another PPA has recently been signed by French renewable energy company, Akuo Energy and French internet company, Qwant.
That the PPA segment is now attracting the interest of solar industry was also confirmed by Bruce Douglas, the Deputy CEO of European association, SolarPower Europe and Coordinator, RE-Source Platform.
“The latest private sector tenders confirm the attractiveness and potential of the French market for renewable corporate PPA’s, and renewable energy investments generally,” he said in a statement to pv magazine.
“SolarPower Europe, as part of the RE-Source Platform, is committed to working closely with the French government to ensure this huge potential can be fully exploited in the coming years,” he continued, adding, “At the Member State level, it is now crucial to remove all barriers and implement the policies that have been agreed in the Renewable Energy Directive to see PPAs meet their full potential in France.”
When asked if large-scale solar projects, like the 1.2 GW “Allons” PV facility, which is currently being planned in the Lot-et-Garonne Department, in southern France, may take advantage of the new opportunities offered by the PPA module, Jean-Yves Leber, spokesman of the project’s initiator, French consultancy company, Eco Solution Energie, told pv magazine that there is little doubt that some of the producers involved in the project are considering this option, either directly or through aggregators.
“Getting out of government tenders should allow significant cost cuts and trigger a shift towards more PPAs, but there are few big individual consumers in the vicinity actually,” he added.
The big solar plant, however, may be complementary to the 800 MW of hydropower capacity located in the region, which is operated by Engie’s unit Shem. Engie, meanwhile, is also involved in the Allons project through an independet developer, Green-Lighthouse. “Our project seems particularly well fitted to get the best value of the mix,” Leber said.
“We will see more large-scale renewable energy capacity coming from this segment, and outside of France’s current tender scheme, over the next months,” Daval said. “In the latest tender for large-scale solar, final average price for solar over 5 MW was around €52, which means that the lowest price was very likely already under €50,” he continued. “This means that the current price level already enables French developers and energy consumers to consider a PPA as a viable option.”
In the above-mentioned tender, the French government allocated around 720 MW of solar capacity.