The reform for a greater integration of support schemes in the electricity market is not a marginal development, and should allow for a transition period for market actors to adapt. Lessons from the experience of neighboring countries will be valuable, especially in view of greater regional harmonization in the future. Better integration of solutions for reducing demand and greater system flexibility would also be advisable going forward. Finally, it is also essential to evaluate the impact of the reform on the risk of electricity market concentration and a reduced diversity of actors; as well as of the potential increase in barriers to entry which could hinder the emergence of collaborative or citizen projects, as these are crucial for improving project acceptance and sharing RES costs.
KEY MESSAGES:
- SUPPORT SCHEME REFORM CAN FACILITATE INTEGRATION IF THE MECHANISMS ARE PROPERLY CALIBRATED
Through stronger exposure to market signals, market premia can assist the technical and economic integration of renewable energy (RES). The resultant advantages in terms of improvements in forecasting and marketing tools, negative price management and support for more valuable technologies and practices in the system closely depends, however, on the precise calibration of the mechanisms involved. To address this, it seems essential to learn from the experiences of neighboring countries and to plan an adequate transition period for all actors to adapt to the change in regulation.
- EVOLUTION IN REGULATION SHOULD TAKE DIRECT AND INDIRECT COSTS INTO ACCOUNT
The rise in transaction costs and risk premia can lead to additional costs under the new mechanisms. Direct costs, which are linked to the marketing of electricity and to rules aimed at curtailing negative prices, remain limited. However, a cost-benefit analysis must consider the impact of changes in regulation on risk perception and the cost of capital for financing projects—a determinant factor in the economic viability of the project. This further implies a need to consider complementary measures aimed at reducing the financial risks to limit production costs and incremental costs for society.
- INTEGRATION IN THE MARKET: A GOVERNANCE ISSUE
The push towards increased competitiveness and market-accountability for RES producers at the same level as other actors in the electricity market via market premia and calls for tender could lead to market concentration. If the mechanisms are not calibrated to adjust for this development, citizen and local appropriation of the transition—a priority for France and Europe—could be endangered.
