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French government to reveal electricity capacity scheme soon - source

22 Nov 2012 17:33:06 | edem

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The French government is expected to issue a decree over the coming days to implement a capacity mechanism to improve generation available during periods of peak demand, according to a French energy analyst, who wished to remain anonymous.

Officials from the French energy ministry were unavailable for comment.

The mechanism, which was outlined in 2011's Loi NOME legislation, would require electricity suppliers to buy capacity certificates to show they can cope with peak demand.

According to the French government, one of the scheme's main aims is to encourage new participants into the French electricity market.

Analysts spoken to indicated that the system could improve security of supply, but doubted whether it would encourage new entrants to France's electricity markets, suggesting that the capacity mechanism would effectively reward incumbent EDF for its existing capacity.

According to a source close to the matter, the system is expected to require suppliers to obtain capacity guarantees each year. The value will be calculated on the basis of the supplier's clients' capacity requirements, together with a "security coefficient" calculated to take into account the risk of supply-demand imbalances, said the source.

Capacity market

Under the proposed system, certificates, corresponding to standard units of capacity, would be issued by the transmission system operator. The certificates would be tradeable assets that could be exchanged by players on a capacity market to ensure security of supply.

Sources close to the matter said the scheme is expected to be implemented in two phases, the first in the winter of 2015-2016, and the second during the following winter.

Auction system

According to a French electricity trader, another possibility the government is considering is creating an auction mechanism that would allow producers to sell capacity to the grid operator, which would make bids according to hedging needs. BM

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