Implemented on 1 July 2011, the ARENH scheme grants alternative suppliers the right to purchase electricity from EDF to supply their end clients, once a framework agreement has been entered into, at a regulated price for set quantities determined in line with the provisions laid out in the French Energy Code. This mechanism can also be accessed by network operators for their losses. The CRE(1) is responsible for managing the mechanism and for calculating entitlements of which it notifies the co-contracting parties. Thus, suppliers wishing to exercise their right to access the ARENH can do soby submitting a request to the CRE. The detailed consumption forecasts, along with the entitlements calculated for each supplier, are only known to the CRE and the supplier. The payments are managed by the Caisse des Dépôts.
The price of the ARENH, determined by the Minister of Energy and the Minister for the Economy, upon proposal by the Energy Regulation Commission (CRE), has been maintained at €42/MWh since January 2012. It includes the supply of electricity and the issue of the related capacity certificates. The maximum ARENH overall volume that can be sold to suppliers, which make a request to cover the needs of the ultimate customers, is set at 100TWh per year.
France’s “Climate and Energy” Act introduces new provisions that allow the government to alter the total ARENH amount up to a ceiling of 150TWh and, for a transitory period, revise the ARENH price by means of an Order. Article L. 337-16 of the French Energy Code also specifies that changes in the consumer price index andin the maximum global amount that may be transferred may be taken into account when revising the ARENH price. However, no direct link is established between any increase in the price and any increase in the maximum overall quantity. In any case, the French Ministry for Ecological and Solidarity Transition has announced that neither the ARENH price not the quantity would be changed in 2021.
ARENH demand for 2020 amounted to 147TWh. In view of the maximum global quantity being exceeded, the CRE carried out capping of alternative supplier demand. In 2020, EDF supplied 100TWh to alternative suppliers for the needs of their end clients, plus 26.2TWh to offset losses by network managers.
ARENH demand for 2021 came to 146.2TWh. Alternative supplier demand capping mechanisms were therefore implemented by the CRE. In 2021, EDF will supply 100TWh to meet the needs of alternative suppliers and customers, plus 26.3TWh to offset losses by network managers.
The capping of ARENH requests from alternative suppliers is mirrored in the regulated tariffs for electricity sales, pursuant to the method adopted by the CRE in its resolution dated 11 January 2018.
Pursuant to CRE resolutions nos. 2019-237 of 30 October 2019 and 2020-277 of 12 November 2020, all ARENH quantities requested by subsidiaries controlled by EDF for 2020 and 2021 were also capped. In view of this, EDF and its subsidiaries have implemented contracts that mirror the ARENH terms of supply (See also section 2.2.1 “Market regulation: political and legal risks”, risk factor 1B “Changes in the regulatory environment (ARENH, regulated sales tariffs, environmental legislation, and SNBC (national low carbon strategy)”).
Articles L. 335-1 et seq. of the French Energy Code, originating from the NOME Law, institute the obligation for each electricity supplier to contribute in mainland France to the security of electricity supply, in compliance with a default criterion set by the government. For this purpose, each supplier must acquire capacity guarantees corresponding to its obligation, calculated by reference to the power and energy consumption of its customers during a peak period defined by RTE.
To comply with this obligation, each supplier must therefore get capacity guarantees from producers, which must certify all their means of generation, or from demand response managers.
Once up and running, a number of auctions to exchange capacity will be held, beginning four years before the delivery year and ending three years thereafter.Over-the-counter transactions remain possible.
Similarly, for integrated players such as EDF, which possess capacities as producers and have an obligation as vendors, internal capacity transfers are authorised in order to cover their obligations. They will be made at the market price.
The DOAAT, in charge of the management of this system, proceeds with the certification of all the EDF means of production in France for the next few years. If necessary, these certifications will be the subject to regular rebalancing, either upwards or downwards. As on the energy market, the sales/purchases of capacity managed by the DOAAT on behalf of EDF, are carried out via EDF Trading.
Market reference prices for 2017, 2018, 2019 and 2020 were respectively set at€10.0/kW, €9.3/kW, €17.4/kW and €19.5/kW.
For delivery year 2021, the six market sessions in 2020 revealed the following prices, in chronological order: €19.5/kW, €19.22/kW, €47.4/kW, €29.5/kW, €32.7/kW, and€39.1/kW.
2020 saw a major increase in capacity prices for 2020 and subsequent years, from the June session onwards. This was due mainly to the reduced availability of the fleet in this period amid the Covid-19 crisis.
EDF is a mandatory purchaser of the electricity generated by the generation facilities the government wishes to support and develop (renewable energy sources and energy efficient cogeneration). By law (Article L. 121-7 of the French Energy Code),the additional costs stemming from this obligation are offset for EDF on the basis of an electricity market benchmark price (concept of “avoided cost”).
Following the CRE resolution of 16 December 2014, all electricity purchased in this manner is managed within a dedicated “balancing perimeter” for installations subject to Purchase Obligation (OA) agreements, implemented on 1 July 2015. TheDOAAT organises the sale of the energy produced by the installations under PurchaseObligation contracts directly on the energy markets, which makes the management of this perimeter completely independent of that of the EDF portfolio. Thus, since 4 November 2015, electricity volumes under Purchase Obligations that can before cast over the short-term (one day for the next, known as the “random component of the Purchase Obligations”) are sold on EPEX Spot. As for the volumes which are foreseeable over the long term (share of the Purchase Obligations referred to as“quasi certain”), since January 2016 they have been sold via transparent and non-discriminatory requests for bids.
Similarly, within a dedicated Purchase Obligation perimeter, the Upstream-Downstream Optimisation & Trading Division (DOAAT) carries out certification of the capacity of production installations subject to PurchaseObligations, together with the necessary rebalancing and sales to the market of the related capacity guarantees.
Since 1 January 2017, the management costs for this public-service mission have also been offset.
(1) French Energy Regulatory Commission.
