Energy Transition Act redesigns the French energy market: a boost for renewable energies
In the context of the implementation of its national Energy Transition Act in July 2015, France sets itselfnew ambitious energy targets which prospect a promising future for the renewable energy market. In a nutshell, French authorities aim through the new legal framework to reduce in terms of electricity production the proportion of nuclear from 75% to 50% by 2025, to source 40% of electricity from renewables in 2030, and overhaul the countries subsidy regime. The Energy Transition Act seeks to better integrate renewable energy projects into the internal electricity market in a gradual way.
In this respect, for the gradual replacement of the existing Feed-in-Tariffs (FiTs), a new support mechanism, the contract for difference (CfD), is introduced, coming into force in January 2016.
In consequence of the implementation of the new support mechanism – only applicable for renewable energy projects located on the metropolitan territory -, power producers shall sell their produced electricity on the wholesale market (marché de gros), and can choose for one of the three available options:
- The European Power Exchange market (EPEX spot);
- A commercial power purchase agreement (PPA) concluded with an off-taker, a local entity in charge of the public electricity network or any electricity suppliers, with negotiated price and duration;
- A commercial PPA concluded with an aggregator who purchases the electricity at a certain price and is responsible for the sale of the electricity on the spot markets.
The producers will receive a “reference market price” based on the price earned on the wholesale market. When the reference market price falls below the target price, the producer receives a top-up payment or premium (complément de rémuneration), and pays the difference back to the government when the inverse happens.
In this regard, the introduction of the aggregator as a new type of actor in the electricity market in France is expected to become relevant with regard to a proper demand response, which is a crucial element of any sustainable energy market. The main objective of the aggregator, as buying agent, is the optimization in terms of energy capacity and financial valorisation. The aggregator assumes the functions of representing its customers by purchasing the produced electricity at a certain price, as well as to forecast, supervise and control the production and the consumption of its portfolio to valorise the electricity of their portfolio in the wholesale market.
Although uncertainty still surrounds the forthcoming transition, total onshore wind and solar power targets have been set to reach an overall 24 GW by 2018 and an overall 36-43 GW by 2023. The aim to allocate 4,350 MW of PV power through solar auctions that will be held over the next three years, as well the onshore targets which offer for 2023 an annual build rate of 1.5-3.25 GW, clearly benefit the renewable energy markets in France.
The development of competitive bidding processes seeks to increase cost effectiveness and limit distortions of competition. The Energy Transition Act provides the possibility for the French government to organise calls for tender under which the awarded projects will benefit from the available support mechanisms (FiT versus CfD).
Vector Cuatro started its business activities in France already back in 2012. Today the Firm counts on a considerable track record within the French market.
The local team is composed of highly qualified native professionals with various engineering backgrounds and a proven experience in the renewable energy industry, who always aim to best respond specific needs of each of their clients, in accordance to local characteristics. Concerning the new evolvements within the renewable energy market in France, the professional team is available to render any kind of support to interested market players, in terms of legal, technical and financial assessment, for already operating green power plants in terms of production forecasts or maintenance information, but also for any new solar PV or wind power plants during the bidding processes as well as their subsequent construction, selling, financing and operation phases.