The French capacity market: lessons learnt and way forward

Transcription

1 The French capacity market: lessons learnt and way forward Sécurité d approvisionnement en électricité : Regards croisés France-Allemagne Thomas Veyrenc Director, Markets Department

2 The French capacity market in a nutshell A market-based solution SUPPLIERS - Demand for Certificates - Based on effective consumption of customers 4years ahead CAPACITIES OPERATORS - Offer for certificates - All capacities are participating on a level playing field Transparency platforms provided by RTE Market surveillance by CRE

3 On the road towards the first delivery year (2017) April 2015 Oct End 2015 Oct Certification starts Certification deadline for generation assets 1 st market auction Certification deadline for DR assets (and planned generation assets) First delivery year OTC trading

4 A first feedback on the certification process 10 balance responsible parties for capacity have signed their cooperation agreement with RTE and are compliant with the rules: 4 balance responsible parties for capacity are independent DR operators (Smart Grid Energy, Energy Pool, Actility, Valoris). 1 balance responsible party is an industrial consumer (acting directly on the French capacity market and selling its DR capacity). 1 balance responsible party is a foreign capacity owner (with assets located in France). 5 other balance responsible parties for capacity are about to sign their cooperation agreement with RTE. Several DR capacities have already received certificates for CCGTs have been certified.

5 A first feedback on the certification process 10 balance responsible parties for capacity have signed their cooperation agreement with RTE and are compliant with the rules: 4 balance responsible parties for capacity are independent DR operators (Smart Grid Energy, Energy Pool, Actility, Valoris). 1 balance responsible party is an industrial consumer (acting directly on the French capacity market and selling its DR capacity). 1 balance responsible party is a foreign capacity owner (with assets located in France). 5 other balance responsible parties for capacity are about to sign their cooperation agreement with RTE. Several DR capacities have already received certificates for CCGTs have been certified.

6 Lesson 1: Capacity markets are structural measures the design of which requires careful attention and time

7 The development of the French capacity market was a long process NOME Law Decree Sets the principle of a capacity mechanism. It follows the conclusion of a parliamentary group RTE Report Proposes main design principles Choice of a decentralized market, implicit XB participation, technology neutral, forward looking, DR oriented Consultation of stakeholders Market rules and technical parameters Adoption of capacity market rules by the Minister of energy Proposition of market rules and its supporting report to the Regulator and the Minister for Energy Operational contracts + certification process for the 1 st delivery year 1 st delivery year

8 Lesson 2: Capacity markets need to be defined based on the physical needs of each country

9 Capacity schemes need to reflect the physical needs of each country s power system Most countries in Europe have implemented / are implementing capacity remuneration schemes. UNTIL 2020 Design differences reflect different adequacy issues in European countries: SINCE 2007 Flexibility needs with large RES penetration SINCE 2001 (suspended) SINCE 2006 Coordination (investment cycles) Peak load SINCE 1998 In operation Under discussion No mechanism Capacity payment Capacity market Reserve strategic

10 In France, the capacity market has been designed to tackle a specific peak load issue The French electrical demand increases drastically during cold waves need for consumers to hedge against this risk on security of supply Extreme volatility of the French peak load need to provide adequate economic signals to trigger the investments proportionate to the needs 20 GW Russian roulette = 40 CCGT = 20 nuclear units Evolution of the peak load in France since 2001

11 Lesson 3: the French capacity market is one of the tools to achieve energy policies goals

12 The French capacity market is embedded in an in-depth market design reform European electricity market integration: completion of the electricity regional initiatives Revision of RES support schemes to integrate RES in the markets Direct participation of demand-response to all market structures (day-ahead, intraday, bal., reserves, ancillary services, energy, capacity) Allow markets to give the right incentives Security of supply : implementation of a capacity market

13 This program starts to provide tangible results: example of DR Demand-response (DR) is able to compete directly on a level playing field with other market players in all existing market structures. SEDC has ranked France as the 1 st country regarding the integration of DR in markets. Market signals are improving and competition is increasing in the French market. The full potential of DR will be revealed once the market design is complete (especially regarding capacity products).

14 DR will play a major role in the French capacity market as a specific design has been developed to ensure this Two different methods of participation (within the structure of the supplier s obligation or the certification process) Allows the demand-side management to choose its method of participation Capacity market 1 Implicit participation through obligation reduction Suppliers can hedge with DR SUPPLIERS - Demand for certificates 1 4 years ahead CAPACITIES OPERATORS - Offer for certificates 2 Explicit participation through certification Similar process to generation 2

15 Lesson 4: the European integration of capacity schemes is at the heart of the Energy Union debate

16 Increased EU integration of the French capacity market The French capacity market already takes into account the participation of the interconnected system to the security of supply in France (around 7 GW): statistic approach. In 2014, RTE has described one possible scenario for XB participation and its technical prerequisites: Ability to guarantee the effective contribution of capacities to security of supply Definition of control process Political and operational rules to be defined in case of simultaneous shortage situations Since 2014, several contributions have completed those first ideas: Eurelectric: proposition of capacity markets coupling UK: proposition of explicit valuation of interconnectors Today, XB participation to capacity markets can be considered based on 3 main scenarios: Valuation of interconnections Valuation of XB capacities Valuation of XB capacities + interconnections

17 RTE has been mandated by the French Minister on the European integration of the capacity market Increased European integration of the capacity market Identification and analysis of possible evolutions Proposition of evolutions of the French capacity market which can be differentiated by borders Impact assessment of the benefits in terms of security of supply and of the social welfare linked to those evolutions Input for a regional approach Identification of prerequisites linked to the definition of a regional target model Identification of market design issues linked to XB participation Identification of the technical and legal conditions required to elaborate a coordinated regional solution for capacity markets (incl. emergency situations)

18 An extended consultation process from April to Dec April May June July August Sept. Oct. Nov. Dec. Jan. 1 What kind of evolutions for the French CRM? Definition of a check-list to assess XB solutions Public consultation Assessment of XB solutions 2 Regional approach White paper for the French Minister and Regulator to propose short and long-term evolutions Public consultation Review of existing CRMs Key principles for regional approach

19 An important range of studies will be conducted by RTE in order to properly assess the impact of XB solutions A first set of studies has already been delivered in showing that: the impact on consumers of the French capacity market is moderate, especially if consumers choose to participate in the market through demand-response programmes. the French capacity market should not distort the signals of the internal energy market. This assessment needs to be completed, especially in the context of the European integration of the French capacity market. RTE will published a 2 nd set of studies in order to be able to assess the impact of XB solutions for social welfare and on French consumers. These studies will also deepen the effects on the internal energy market. They will play a major role in order to define the possible way forward regarding the European integration of the French capacity market.

20 Thank you for your attention in French in English