Decree 2017-690 of 2 May 2017 issued by the French Ministry for the Environment, Energy and the Sea substantially raised the obligation levels for the fourth period of energy savings obligations running from 1 January 2018 to 31 December 2020, to 1,200TWhc for the “standard” obligations and 400TWhc for the obligations that are intended to benefit households in situations of energy poverty, compared to 700TWhc and 150TWhc respectively for the previous period.
This significant increase, combined with a shallow market for energy savings certificates and doubts over that market’s future liquidity, exposed EDF in 2018 to the risk of a fine payable to the Treasury (under Article L2 21-4 of the Energy Code) of €15 per MWhc of shortfall in respect of its obligation, due to insufficient certificates for the fourth period of the scheme.
In order to meet these requirements, EDF is making every effort to gradually increase its number of energy savings certificates, taking advantage of the “Coup de pouce” operations launched in France early in 2019 (financial aid for replacing oil heating by heat pumps, 50% additional energy savings subsidy for heat pump users, special offers for heat pump maintenance contracts). The volume of certificates earned doubled between 2017 and 2019, with a particularly notable increase of 44% between 2018 and 2019.
The law no. 2019-1147 of 8 November 2019 relating to Energy and the Climate, as well as prolonging the fourth period of the energy savings certificates scheme, includes a chapter on measures against fraud concerning these certificates designed to make controls and sanctions more efficient.
Subsequently, decree 2019-1320 of 9 December 2019, published in the Journal officiel on 11 December 2019, extended the fourth period by one year to 31 December 2021 under identical annual obligations. Also, Article 143 of the “PACTE” law for business growth and transformation broadens the scope of energy savings certificates to include facilities classified for environmental protection that are subject to greenhouse gas emission trading systems, by modifying Article L. 221-7 of the Energy Code.
EDF currently considers that due to the combined effect of the increase in certificates held and the extension of the fourth period, there is no risk of a shortfall in energy savings certificates at 31 December 2021.
For the ARENH applications of November 2018, demand from alternative suppliers totalled 132.98TWh excluding EDF subsidiaries, more than the maximum total volume of100TWh. EDF thus delivered 100TWh in 2019 under the ARENH system for supply to competitors’ final customers. Subscriptions to cover network losses amounted to 20.4TWh.
These applications were made at a time when the ARENH price (which includes a capacity guarantee in its €42/MWh) was competitive in comparison to forward baseload prices for 2019.
No modifications were made to ARENH applications during the May 2019 session, and consequently no changes were made to the ARENH deliveries for 2019 after that session.
In decisions no. 2018-222 of 25 October 2018, no. 2019-090 of 9 May 2019 and no. 2019-237 of 30 October 2019, as required by the Energy Code the CRE set out the method for allocating ARENH volumes when applications exceed the maximum total volume defined for the year concerned (2018 or 2019). These decisions stipulated that if the ARENH was oversubscribed in November 2018, May 2019 or November 2019, curtailment would only apply to new ARENH applications made in the session that exceeded the maximum, and that EDF-controlled subsidiaries’ excess applications would be fully curtailed (this does not apply to network operators). Finally, the decisions stated that EDF-controlled subsidiaries could enter into contracts with the parent company replicating the ARENH system and the terms of supply, particularly the curtailment rate for alternative suppliers. In the method proposed by the CRE in decision no. 2019-028 on the calculation of regulated sales tariffs for electricity, this curtailment mechanism, when applied, makes reference to market prices more influential in determining regulated sales tariffs.
The Energy and Climate law introduced new measures. It raised the ceiling for the ARENH system, initially set at 100TWh, to 150TWh from 1 January 2020, allowing the French government to raise the maximum total volume above 100TWh, and to revise the ARENH price by ministerial decision during a transition period. However, the Ministry for the Ecological and Inclusive Transition announced that no change would be made to the ARENH price or volume for 2020.
Against this background, ARENH applications during the November 2019 session for delivery in 2020 totalled 147TWh (excluding applications from EDF subsidiaries). Since the maximum total volume has not been modified, only 100TWh will be supplied and as in the previous year the CRE will determine the curtailment of each supplier’s application.
In January 2020, the French government launched a consultation process concerning the reform of regulation of existing nuclear facilities (ARENH), involving actors from the world of energy (ARENH) (see note 3.1).
