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1 GENERATION ADEQUACY ACY REPORT on the electricity city supply-demand balance an in France 216 EDITION IO EXECUTIVE SUMMARY

2 RTE Réseau de transport d électricité shall not be liable for damages of any nature, direct or indirect, arising from the use, exploitation or circulation of the documents, data and information contained in the Generation Adequacy Report on the electricity supply-demand balance in France 216 Edition, including any operational, financial or commercial losses.

3 EXECUTIVE SUMMARY 216 GENERATION ADEQUACY REPORT EXECUTIVE SUMMARY 216 Generation Adequacy Report Executive Summary The year 216 marks a real turning point in climate and energy policy. Taken together, the decisions made during the year will have a lasting impact on security of electricity supply in France. With energy efficiency gathering so much momentum, for the first time, scenarios have been drawn up calling for a reduction in power demand over five years. A decline in consumption in France from 479 TWh in 215 to 471 TWh in 221 is now envisaged. Peak demand forecasts follow a similar trend. Energy efficiency measures, notably in the residential and service sectors, will keep consumption in check despite a surge in new end-uses for electricity and a more favourable economic climate. Solar photovoltaic and wind power continue to steadily gain ground in France, and a new roadmap prepared in 216 sets higher targets for 218 and 223. This is a crucial time for fossil-fired capacity given the economic challenges the sector faces. A number of factors are creating uncertainty for generators: the absence of end-markets for semi base load and peak generation, the lack of visibility on how the French capacity mechanism will be implemented given the investigation launched by the European Commission, and the debate under way about the carbon price. Some producers are waiting to have a better idea of the economic outlook for fossil-fired generation before deciding what to do with their gas and coal plants. The implications may vary depending on the strategies and generation portfolios of the players in question. For all of these reasons, RTE has drastically revised its assumptions about future trends in fossil-fired capacity relative to the 215 edition. The 216 Generation Adequacy Report explores a series of possible trajectories with high and low scenarios that reflect the most recent statements from generators. Projected trends in the different technologies over the next five years, within these limit scenarios, have a major impact on the conclusions of the security of supply assessment. Margins available to the French power system show a gap of more than 5 GW between the high and low scenarios starting in the winter of 217 and lasting through 221. The risk of imbalances between supply and demand appears to be greatest in the winters of 218 and 219 under the scenario with the lowest thermal capacity (shortfall of more than 2GW). These elements of analysis shed some light on the impact changes in thermal generation capacity will have on the power system. GENERATION ADEQUACY REPORT on the electricity supply-demand balance in France I 216 EDITION 3

4 EXECUTIVE SUMMARY 1. For the first time, electricity demand forecasts assume a contraction over the medium term Annual domestic electricity consumption in mainland France (at reference temperatures, excluding uranium enrichment) TWh Dotted line represents 215 Generation Adequacy Report Historical Baseline Low variant High variant Drivers of domestic demand growth in mainland France Baseline scenario Electricity demand in France has been stabilising for several years. Energy efficiency measures will gain momentum over the coming years, such that forecasts now point to a contraction in power demand in spite of sustained demographic growth, an uptick in economic activity and a climate that is favourable to new uses for electricity. Total electricity demand in mainland France is thus seen declining by 1.5% between 215 and 221 under the Baseline scenario. Peak demand forecasts follow a similar trend. As in the 215 Generation Adequacy Report, peak demand growth is aligned with energy demand growth here. Forecast trend in one-in-ten peak indicator Dotted line represents 215 Generation Adequacy Report TWh Demand TWh Volume and other 1 TWh o/w EV/PHEV: 1.7 TWH New end-uses and transfers -36 TWh 479 TWh 471 TWh Energy efficiency Demand 221 GW High variant Baseline Low variant 4

5 216 GENERATION ADEQUACY REPORT EXECUTIVE SUMMARY 2. Renewable energy growth trajectories reflect new multiannual energy programme targets Sustained renewable energy growth lifts installed capacity to around 55 GW (including 17 GW of wind power and 1 GW of solar photovoltaic) at the end of the study period. A high variant considers a doubling of the wind and solar power growth rates (to 2 GW a year for each technology starting in 218), in keeping with the targets for 223 set forth in the multiannual energy programme (MEP). Forecast trend in onshore wind power capacity Forecast trend in photovoltaic capacity 3, 25, 25, 2, Installed MW 2, 15, 1, 5, Historical Baseline, 216 GAR MEP variant MEP MEP (low option) MEP (high option) Installed MW 15, 1, 5, Historical Baseline, 216 GAR MEP variant MEP MEP (low option) MEP (high option) 3. Decisions taken in 216 will impact future of thermal generation capacity Following several years of economic difficulties, France s fossil-fired generation capacity is entering a critical period given the economic challenges facing the sector. Forecast trend in oil-fired capacity A number of factors are creating uncertainty for generators: the absence of end-markets for semi base load and peak generation, the lack of visibility on how the French capacity mechanism will be implemented given the investigation launched by the European Commission, and the debate under way about the carbon price. Some producers are waiting to have a better idea of the economic outlook for fossil-fired generation before deciding what to do with their gas and coal plants. The implications may vary depending on the strategies and generation portfolios of the players in question. Installed MW 6, 5, 4, 3, 2, 1, Available 215 GAR GENERATION ADEQUACY REPORT on the electricity supply-demand balance in France I 216 EDITION 5

6 EXECUTIVE SUMMARY Forecast trend in coal-fired capacity High thermal and Low thermal scenarios Forecast trend in combined-cycle gas capacity High thermal and Low thermal scenarios 3,5 8, 3, 7, Installed MW 2,5 2, 1,5 1, Installed MW 6, 5, 4, 3, 2, 5 1, high low high low high low high low high low high low high low high low high low high low high low high low Available Mothballed Undergoing maintenance Available Mothballed Undergoing maintenance Current plans call for all centralised oil-fired units to be shut down gradually between now and 218, even those that have recently been brought into compliance with new environmental standards. As for other technologies (gas and coal plants), with so many sources of uncertainty, deliberately contrasting high and low scenarios are examined to show the upper and lower limits of the future potential of each. The High thermal scenario assumes an economic and regulatory climate that is generally favourable to thermal power plants being kept in service. Under this scenario, installed thermal capacity is broadly stable with, in particular, nearly all combined-cycle gas plants remaining in service over the entire study period. Coal-fired capacity declines somewhat at the very end of the period, in line with multiannual energy programme guidelines pointing to a possible phase-out of coal power by 223. Conversely, under the Low thermal scenario, signals sent to players in the French market including the principle of a 3 per tonne carbon tax to be applied from 1 January 217, as well as uncertainty about the capacity mechanism could in theory result in the closure of all coal-fired plants and the mothballing of half of all combined-cycle gas plants along with some combined heat and power plants. Under the High thermal scenario, total installed capacity, taking oil-, coal- and gas-fired plants together (not counting Forecast trend in oil-, coal- and gas-fired capacity High thermal and Low thermal scenarios MW 14, 12, 1, 8, 6, 4, 2, high low high low high low high low high low high low Coal Combined-cycle gas Oil those mothballed or undergoing maintenance), contracts from about 13 GW in 216 to 8 GW in 221. Under the Low thermal scenario, it would fall to 3 GW in 221. It is assumed here that the trend in thermal power capacity over the next five years will be between the high and low scenarios examined. Ultimately, its evolution will depend on choices made by market players. Above and beyond issues of economic equilibrium, generators will probably take other factors into account, particularly the political and social climate, in deciding whether to keep their thermal plants in service. 6

7 216 GENERATION ADEQUACY REPORT EXECUTIVE SUMMARY 4. A variant exploring the consequences of a partial reduction in nuclear capacity The 216 Generation Adequacy Report assumes that installed nuclear power capacity will not change, in line with the scenario in the 215 edition calling for Fessenheim to go offline when the EPR is commissioned. One variant presented here also considers capacity contracting by around 1 GW in 219 and then another 1 GW in Outcome: The economic challenges facing the thermal power sector make uncertain the availability of more than 5 GW to ensure security of supply starting in the winter of 217 Thermal power capacity will have a decisive impact on security of electricity supply in France. Under the High thermal scenario, there would be a significant margin starting in the winter of 216 (4,7 MW) thanks to the presence of all combined-cycle gas plants plus the commissioning of a new unit. The system would still have comfortable margins of at least 3,6 MW over the following winters and the entire medium term. With the Low thermal scenario, the decommissioning of coal- and gas-fired plants starting in the winter of 216 reduce the margin to 6 MW. A deficit appears the following winter and reaches almost 2,5 MW in the winters of 218 and 219 as plants, notably oil- and coal-fired, continue to be gradually taken out of service. Margins stabilise in 219 under both scenarios as the EPR gradually ramps up to full power, offsetting the decrease in output resulting from the Fessenheim closure. At the same time, the first offshore wind farms developed through calls for tenders come on stream, and demand continues to decline. In the last winter of the study period, margins become positive again under the Low thermal scenario but remain well below those seen under the High thermal scenario. This improvement reflects the simultaneous commissioning of two interconnections with Italy and Great Britain, together representing capacity of about 2 GW, and the fact that the EPR will be operating at full power by then and more offshore wind farms will be connected. There is uncertainty surrounding the effective completion of these projects, and it affects this assessment. Non-completion would result in a downward revision of margin estimates. Capacity margins or deficit High thermal and Low thermal scenarios MW 8, 6, 4,7 4, 2, -2, -4, 6 5, Low thermal scenario 3,6 3,7-2,5-2,4 Winter 6, High thermal scenario GENERATION ADEQUACY REPORT on the electricity supply-demand balance in France I 216 EDITION 7

8 EXECUTIVE SUMMARY Capacity margins or deficits and unserved energy High thermal and Low thermal scenarios Expected energy not served 2. GWh 1.4 GWh 2.5 GWh 2.7 GWh.8 GWh High thermal scenario Loss of load expectation (+/- 15 min) h45 h3 1h h45 h15 Capacity margin or gap 4,7 MW 5,4 MW 3,6 MW 3,7 MW 6,6 MW Expected energy not served 8.6 GWh 13.4 GWh 26.5 GWh 26.2 GWh 7.6 GWh Low thermal scenario Loss of load expectation (+/- 15 min) 2h3 3h45 6h45 6h15 2h15 Capacity margin or gap 6 MW -7 MW -2,5 MW -2,4 MW 9 MW 8

9 APPENDIX SENSITIVITY ANALYSES Sensitivity analyses Analysing the sensitivity of results to assumptions about demand, renewable energy development and installed nuclear power capacity makes it possible to evaluate the impact of these determinants on the evolution of margins in the coming years. 1. Sensitivity to demand forecasts The sensitivity of results to demand forecasts is measured through high and low variants applied to all European countries considered in the Generation Adequacy Report. Applying the low demand variant, the adequacy criterion is met over the entire study period under both the High thermal and Low thermal scenarios. Reduced energy as well as peak power demand creates margins over the whole period. These margins are slightly positive between 217 and 22 under the Low thermal scenario and exceed 6 GW over the entire period under the High thermal scenario. Conversely, the stronger demand growth considered under the high variant results in a sharp increase in the shortfall risk. A capacity gap larger than that observed under the Baseline scenario appears in the winter of 216 under the Low thermal scenario, and it approaches 6 GW in the winter of 219. Under the High thermal scenario, margins are positive over the entire study period though they are very small in the winters of 218 and 219. Sensitivity of capacity margin or deficit to demand low variant Sensitivity of capacity margin or deficit to demand high variant MW 12, 1, 8, 6,6 6, 4,7 4, 5,4 3,6 3,7 2, 9 6-2, -7-4, -2,5-2,4-6, Winter MW 12, 1, 8, 6,6 6, 4,7 4, 5,4 3,6 3,7 2, 6 9-2, -7-4, -2,5-2,4-6, Winter Low thermal scenario Baseline demand forecast High thermal scenario - Baseline demand forecast Low thermal scenario Low demand forecast High thermal scenario Low demand forecast Low thermal scenario Baseline demand forecast High thermal scenario Baseline demand forecast Low thermal scenario High demand forecast High thermal scenario High demand forecast GENERATION ADEQUACY REPORT on the electricity supply-demand balance in France I 216 EDITION 9

10 APPENDIX 2. Sensitivity to renewable energy growth forecasts The sensitivity of results to renewable energy growth appears less significant than sensitivity to demand. Indeed, the very sharp increase in wind and photovoltaic power capacity considered only has a minimal impact on the level of risk facing the country. This is proof that these technologies contribution to covering the shortfall risk does not result in the creation of substantial additional margins, as the shortfall risk is still concentrated during peak demand hours on winter evenings. 3. Sensitivity to nuclear capacity forecasts A theoretical decrease in nuclear power capacity, of 1 GW in the winter of 219 and then 2 GW in the winter of 22, has a stronger impact on the shortfall risk. While margins remain positive in the last two winters under the High thermal scenario, the situation worsens under the Low thermal scenario, with the capacity margin turning into a deficit late in the period due to the withdrawal of 2 GW of nuclear capacity. Sensitivity of capacity margin or deficit to renewable energy capacity Sensitivity of capacity margin or deficit to nuclear capacity MW 8, 6,6 6, 5,4 4,7 4, 3,6 3,7 2, , -2,5-2,4-4, Winter MW 8, 6,6 6, 5,4 4,7 4, 3,7 3,6 2, 9 6-2, -7-2,4-2,5-4, Winter Low thermal scenario Baseline RES forecast High thermal scenario - Baseline RES forecast Low thermal scenario RES variant High thermal scenario - RES variant Low thermal scenario Baseline nuclear forecast High thermal scenario Baseline nuclear forecast Low thermal scenario Nuclear variant High thermal scenario Nuclear variant 1

11 All you need to know about electricity in France and each region Track trends in electricity across France in real time See how the energy transition is becoming reality in each region Compare market electricity prices in Europe An educational application that enhances transparency Acting as a sort of energy clock, éco 2 mix gives you access to regional and national power system data on an hourly basis RTE provides the public with data based on metering on its network and information provided through Enedis, local distribution companies and some generators. Download the app now it s free! d3images - Fotolia.com

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