Wind turbine construction costs rise, France lets new parks sell at market prices

The French government has approved an 18-month deferral during which new wind farms may sell electricity directly on the wholesale market. The safeguard measure is intended to increase power generation revenues and thereby offset higher construction costs.

Rising wind turbine construction costs, driven mainly by post-Covid inflation, the war in Ukraine and increasing material prices, have already required intervention by the French government. It has adopted a regulation under which projects with no more than six turbines may sell electricity directly on the wholesale market for up to 18 months.

During this period, operators of smaller wind farms can secure higher revenues than they would receive under the support scheme, which in this case is provided in the form of a contract for difference (CfD). The government hopes the measure will minimise the number of projects that ultimately fail to go ahead because of higher costs.

Rising wind turbine construction costs are illustrated, for example, by the average selling prices of one of the leading manufacturers, Danish company Vestas. While the average selling price of an onshore wind power plant was 830 000 EUR/MW in 2021, it had reached 1 060 000 EUR/MW by the third quarter of 2022.

The new measure applies to projects that were or will be commissioned from last September until the end of 2024 and for which support was requested before 1 July 2022. The guaranteed price under the CfD should also be indexed to inflation to ensure sufficiently high future revenues. Likewise, additional revenues from sales at market prices should not, according to Montel, be subject to the temporary price cap of 100 EUR/MWh recently approved for wind power plants by the lower house of the French parliament.

The government measure also shows that, at current prices, it is more advantageous to sell on the wholesale market. Previously, support levels were generally set above the market price of electricity. In the current energy crisis, however, the situation has reversed, with market prices now higher.

The advantage of state support, however, lies in its long-term guarantee. Support is generally guaranteed for at least 15 years, but much more often for 20 years.