Launch of the capacity mechanism in France


The goal in implementing a capacity mechanism in France is to guarantee security of supply over the medium term by covering risks during peak periods in winter. It was approved with conditions by the European Commission on 8 November 2016, and then by the French Ministry of Energy and Energy Regulatory Commission on 29 November 2016.

2018 was the second delivery year for the mechanism.

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How the capacity mechanism works

The capacity mechanism rests on two pillars. First, it creates a requirement for obligated parties – mostly electricity suppliers – to obtain capacity certificates to contribute to the security of supply of their customers. Holding suppliers responsible in this way is notably a way to contain peak demand growth by creating an economic incentive to limit their customers’ consumption.

Second, RTE certifies the capacity of operators that agree to make their capacity available when demand peaks in winter. The capacity mechanism allows them to realise value on the availability of generation and demand response capacity by selling capacity certificates.

Actors trade capacity certificates through auctions or OTC transactions. During the delivery year, RTE notifies them of the peak days when they must uphold their individual commitments. After the delivery year, RTE informs suppliers of their final obligation level and calculates the actual availability of their capacity. Differences result in financial payments.

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Forward indicators for the capacity obligation


RTE’s capacity obligation forecasts for 2019 are presented in the table below:

 

Demand variants in the Generation Adequacy Report Forecast total capacity obligation for France in 2019 (GW)
High scenario 94.2
Intermediate scenario 3 93.7
Intermediate scenario 2 93
Low scenario 92.7

Suppliers can take measures to reduce their customers’ consumption. Total demand response measures are published in the Registry of Consumption Control Measures

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Breakdown and level of certified capacity


Note : The figures for 2018 are different from those in the chart in the 2017 Annual Electricity Report because actors can re-declare their available certified capacity throughout the delivery year.

Certified entities and their production methods are defined at the site level.

Certified volumes for 2019 total 89.7 GW. For the purpose of transparency, exchange volumes and prices (€/certificate) are published on the EPEX SPOT website.

The reference market price for the delivery year (DY) is defined, per the methodology created by the CRE, as the simple arithmetic average of prices revealed by auctions on organised exchange platforms between the 1st of January in DY-4 and the 31st of December in DY-1.

Delivery year Reference market price
2017 9,999.8 €/MW
2018 9,342.7 €/MW

 

Details of these transactions can be found in the capacity certificates register.

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Evolution of the capacity mechanism


Revising the mechanism rules was the last step in bringing it into compliance with the European Commission decision of 8 November 2016 relative to State aid. The new capacity mechanism rules took effect on 29 December 2018, after being approved by the ministerial order of 21 December 2018 defining the rules for the capacity mechanism and taken in application of article R. 335-2 of the Energy Code and the decision of the Energy Regulatory Commission of 20 December 2018.

To bring the mechanism into compliance with the European Commission decision, the following adjustments were made:

  • Explicit participation of cross-border capacities in the mechanism,
  • Long-term tenders for new capacities.

Steps were also taken to simplify and improve the operation of the mechanism in the following areas:

  • Capacity obligations,
  • Certification,
  • New sources of flexibility,
  • Functioning of the capacity market.

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