Legislation may help French guarantees of origin market exit stalemate

LONDON (ICIS)–A draft decree aiming at disclosing all types of energy sources has potential to bolster the French market for guarantees of origin (GOs), Lyon-based lobby QuiEstVert told ICIS.

The draft law, expected to be adopted by the end of the year, is based on European directives 2018/2001 on the promotion of the use of energy from renewable sources, and 2019/944 on the internal electricity market.

“Once incorporated into national law, this regulation will constitute a sizeable step forward for both the French and European market for guarantees of origin, as it sets out full disclosure at production level,” Ivan Debay, president of the advocacy group said.

With a monthly auction volume of roughly 2-3TWh, France is the leading EU country for GOs tendered, a figure prompting some market participants to criticise the country’s aggressive selling strategy flooding the market and depressing prices.

Full production disclosure (FPD) defines a system in which every power producer is given a certificate for every MWh of electricity delivered to the grid, regardless of the type of technology. This system is currently operational in a handful of countries, namely the Netherlands, Austria and Switzerland.

Under regulation in most member states, guarantees of origin are only issued when electricity is produced by renewable-fired plants and co-generators, with no label to trace conventional sources.

TRANSPARENT PRODUCTION

The new regulation is expected to solve a long-lasting issue of inaccurate reporting of declaring electricity production.

“The implementation of full disclosure on the production side will result in a scrapping of the production declaration, which in the past caused the same power production to be counted twice,” Debay said.

Alongside guarantees of origin, French power producers can use two avenues to disclose their own generation – residual mix and production declaration.

Residual mix refers to the proportion of power from each conventional energy source remaining in the grid after all certified electricity is taken into account.

As opposed to production declaration, GOs appear specifically designed to prevent double counting with a life cycle of only twelve months.

RAISING PUBLIC AWARENESS

At the same time, a second draft legislation intended to set out a clearer framework for renewable contracts was said to have positive spill-overs for GOs in France.

The initiative, which was tabled by the French Ministry for Ecological Transition over the past months, is meant to provide a reliable comparison tool for renewable contracts on the National Energy Ombudsman (Médiateur national de l’énergie, or MNE).

“The MNE decree will be pivotal in informing household consumers about the contracts on offer,” Debay said. “This looks all the more meaningful in a market characterised by low shares of renewable consumption through cancellation of GOs as a result of a rather slow liberalisation process and lack of awareness.”

The French electricity market fully opened up only in 2016, later than its German equivalent liberalising in the early 2000s.

According to Liesbeth Switten, secretary general with the Association of Issuing Bodies (AIB), the French draft is a flagship example of growing interest for green credentials: “We continue to see a rising demand for GOs from corporates and countries are stepping up their game to make renewable electricity contracts available to household consumers, as the French draft legislation […] shows.”

Yet, while Debay agrees with the need of a similar tool, he noted some of the employed criteria risk misleading consumers: “For instance, the tool confuses the market related to balance responsibility, that has nothing to do with the origin of electricity nor financing renewable energies, with the market of GOs, which aims to do that specifically,” he said, “this may only spark confusion among end-consumers.”

VOLUNTARY VS MANDATORY

Both regulatory changes are set to reinforce the French GOs market, but the system will continue to operate on a voluntary basis.

If some market players voiced scepticism regarding the efficacy of an entirely discretionary system and consider a mandatory framework the only way to stimulate demand for GOs, lobby QuiEstVert reiterates the benefits of a progressive approach.

“A voluntary market tends to be more dynamic. Subsidies do create impulses, but they do so in a rather inefficient way,” Debay said. “Furthermore, a voluntary market guarantees a smoother acceptance by the population and this makes it more stable as a policy tool.”

”We should not forget what has happened in France following the introduction of the carbon tax,” Debay added, referring to grassroots protest movement launched in response to the tax in 2018.