A new capacity market scheme is set to come in operation in France on January 1 2017 which will be open to foreign players' participation, the French energy regulator Commission de regulation de l’energie (CRE) and the ministry for Climate and Energy announced.
The new measures are aimed at “ensuring the security of supply of the French power system,” CRE said, adding that the new system is expected to lead to a “better monitoring, of the behaviour of the players, better transparency of the market” and to put in place “mechanisms to better prevent manipulations by large players.”
Under the scheme, capacity obligations are traded between electricity capacity providers, such as power plants or demand side operators and electricity suppliers. Capacity providers offer capacity when demand is highest, for example at peak winter time. In return for their available electricity capacity they receive certificates. Suppliers need to purchase certificates from capacity providers in order to cover the peak demand of their customers. These certificates can either be traded bilaterally between providers and suppliers or through regularly organised public auctions.
The first capacity auctions will be held in December. The price cap for the remuneration is set at 20 €/kW for 2017, 40 €/kW for 2018 et 2019, 60 €/kW for 2019.
The announcement follows approval by the EU Commission in early November.
Capacity scheme complies with EU state aid rules
The EU Commission had said on November 6 that it had approved the capacity mechanism scheme under EU State aid rules, after it had asked for some revisions to be made.
The Commission had opened an investigation into the measure in November 2015, because it had concerns that the planned capacity mechanism might favour certain companies over their competitors and hinder the entry of new players.
In response to the concerns raised by the EU Commission, France has agreed to implement the following changes: new capacities can obtain certificates with a seven-year duration instead of the standard 1-year duration, if they are shown to be more competitive than existing capacities. “The longer contract duration will give sufficient investment certainty for new projects and facilitate the entry of new market players” the EU Commission said in a statement, adding that “to give new projects enough time to be developed, new capacities will be contracted through an organised public auction in four years' time”; the French capacity mechanism will also be open to capacity providers, both generators and demand response operators, located in neighbouring member states, subject to the expected capacity of the interconnector at peak times (around 7 GW in total), making it“the first mechanism to explicitly include and remunerate foreign capacities, thereby also contributing to building an Energy Union in Europe”; moreover, France will introduce a series of measures to prevent possible market manipulation. In particular, capacity declarations of providers will be compared to historical benchmarks “to prevent providers from under-certifying their capacities to artificially drive up capacity prices” the EU Commission said, adding that “large capacity providers will have to offer specified minimum amounts of certificates during the organised auctions, to increase liquidity on the capacity market.”
“The French capacity mechanism will be open to all capacity providers, including those located across the border, and allow new players to enter the market” the EU Competition commissioner Margrethe Vestager said, adding “this ensures that the measure is cost-effective and competitive.”