The Energy Transition in Europe: towards a low carbon European power sector Initial lessons from France Uncertainty as a prevailing issue

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1 The Energy Transition in Europe: towards a low carbon European power sector Initial lessons from France Uncertainty as a prevailing issue CERRE Executive Seminar, Brussels, 6 May 2015 Institut du Développement Durable et des Relations Internationales 41 rue du Four Paris - France 06/05/2015 1

2 /kwh gco2/kwh Current situation: France as a frontrunner? The current French power system: 75% nuclear; 16% RES; 9% fossil Comparatively cheap electricity prices The French power sector already has one of the lowest carbonintensities in the world Carbon intensity per kwh ,30 0,25 0,20 France Germany United Kingdom Average electricity prices (2013) High level of electrification in buildings: 1/3 heated with electricity 0,15 0,10 0,05 0,00 EU28 DE FR UK Large industrial consumers Domestic consumers 2

3 Current challenges Despite an almost carbon-free power mix: 70% of final energy consumption is based on fossil fuels Import energy bill: 65 Bn. per year (>1000 per capita) Record peak demand of 102,5 GW in 2012 : France represents 50% of winter peak demand in Europe (+3300 MW per C under average) Final energy consumption in France by source (2013) 2% Oil Gas 21% Coal and lignite 43% Thermal electricity 8% Biomass 2% Decarbonised electricity 3% 21% Heat 3

4 The energy transition: objectives Energy transition bill currently in debate, adoption planned by July GHG emission reductions (base 1990) -20% Share of RES in gross final consumption 23% Reduction in primary energy consumption (vs. Baseline) -20% Reducing the share of nuclear from 75% to 50% by GHG emission reductions (base 1990) -40% Share of RES in gross final consumption 32% Share of RES in electricity generation 40% Reduction in fossil fuel consumption (base 2012) -30% 2050 GHG emission reductions (base 1990) -75% Reduction in final energy consumption (base 2012) -50% 4

5 Uncertainty as the main challenge /1 1) The need for a comprehensive energy scenario: New planning tools but so far not providing any visibility Very ambitious objectives for energy efficiency, but no clear targets for future electricity demand in both ways High potential for electricity savings but no policy measures 2) The pending issue of the future of nuclear power in France: General objective of decreasing the share to 50% by 2025, but: No clear strategic vision on the level of electricity demand No tangible policy measures for implementation High uncertainty over future costs of retrofitting and new built The issue of political capital and will 5

6 Uncertainty as the main challenge /2 3) Policy framework for renewable electricity: Very ambitious targets (40% by 2030), but missing policy signals: The legacy of the past: lack of policy stability and confidence Lacking fundamentals: administrative and financial barriers Way behind short term objectives The current reform for improved market integration: Uncertainty around implementation of market premium scheme and subsequent evolution towards tendering further risk of instability No clear policy justification for this evolution Potential impact on market structure (SME vs. incumbents) and costs 6

7 Potential of renewable sources per capita A comparatively very high potential for RES in France for most sources Source: PBL

8 Uncertainty as the main challenge /3 4) The French capacity mechanism Introduced to deal with security of supply issues regarding winter peak load by securing secure capacities (DSM & supply), but not necessarily adapted to foster flexibility & RES integration Potential spillover effects for interconnected neighbours and compatibility with EU rules? Alternative solutions to permanently reduce peak load have not been considered 5) Market liberalisation Strong culture of centralised state intervention and historic market structure Weakened role of the regulator Redefining the notion of public energy service: tackling the issue of energy poverty. 8

9 Conclusion The French transition is not only about technological transformation but mostly a transition of governance models: state vs. market; centralised vs. decentralised. A structural tendency to rely on the status quo further increases uncertainty over future evolutions in the absence of a credible long-term trajectory and underlying implementation measures. The current transition strategy opens up new opportunities for regional cooperation: EU policy remains a strong push factor for France. 9

10 Thank you for your attention Contact : Andreas Rüdinger Pôle Energie Climat andreas.rudinger@iddri.org Rüdinger, A., 2015: Éléments d analyse pour une approche stratégique du financement de la transition énergétique en France, Working Paper 01/2015, Iddri Rüdinger, A. et al. 2014: Getting out of the Perfect Storm: towards coherence between electricity market policies and EU climate and energy goals, Working Paper 12/2014, Iddri. Saujot et al., 2014: Gouvernance locale de l énergie: clarification des enjeux et illustration par la planification territoriale. 10