Energy transition

The electricity industry at a crossroads

A series of analysis by Claude Crampes and Thomas-Olivier Léautier also published on the Florence School of Regulation blog.

  • In today’s new world, an aspect of the energy transition is the intention to decarbonise energy production. It follows that tomorrow’s energy sources will be predominantly electric. There are nevertheless major differences of opinion as to the qualities of electricity production methods, whether they be nuclear, wind, photovoltaic, hydraulic or the burning of fossil fuels. By contrast, consensus seems to reign when it comes to the quality of electricity at the point of consumption. 

  • Decarbonising electricity production is an essential step in reducing our society's greenhouse gas emissions and limiting global warming.  Many countries have therefore engaged in the transition towards a new world in which the majority of megawatt hours are produced using renewable energy sources, mainly wind or solar energy.  To that end, they have distributed massive subsidies over the past decade: 101 billion dollars in 2012 alone, 57 billion of that in the European Union.[1]  A recent academic study using British data provides a clearer understanding of this "new world". This post presents two of the study's key findings: first, the difficult coexistence of renewable and traditional technologies, and second the need to maintain renewable energy subsidies.

  • The French transmission system operator, RTE, has recently started implementation of an electric power capacity mechanism, to be operational on 1 January 2017,which aims at ensuring France’s generation adequacy, i.e., ensuring that installed generation capacity will exceed demand under almost every circumstance. Other European countries are implementing or considering implementation of capacity mechanisms.  This post describes the genesis of these mechanisms, then examines their pros and cons.

  • The recent visit of President Hollande to French West Indies is an opportunity to discuss one of the components of France’s Contribution to the Public Electricity Service, namely the compensation for higher cost of production in zones that are not connected to the continental French power grid (Corsica, overseas departments, Saint Martin, Saint Barthélemy, Saint Pierre and Miquelon, the Brittany Islands of Molène, Ouessant, and Sein, the Glénan archipelago and the Chausey Channel Islands).

  • In France, while the Energy Transition for Green Growth legislation remains in draft form due to disagreements between the Senate and the National Assembly, the Senate is debating draft legislation on promoting Growth, Activity and Equal Economic Opportunities (known as the Loi Macron), which the government passed through the Assembly using Constitutional Article 49-3. In the course of this debate seventeen senators have tabled an amendment to regulate the access of big industrial consumers of energy to megawatt hours generated by renewable energy sources. To not use the Energy Transition bill as the vehicle for this initiative is part of a parliamentary strategy, an analysis of which does not fall within the remit of the authors of this blog. However, because yet again the issue of distorting market mechanisms has been raised, economic discussion is warranted.

  • The European Commission has just published its strategy to strengthen the European Energy Union. Many issues are addressed, in particular proposals to further the integration of European electricity markets. While the objective is obviously very important for Europe’s citizens, the proposed approach, which relies on numerical goals for construction of new electricity transmission infrastructure between Member States, is difficult to implement. This paper advocates a different approach: the focus should be instead on increasing the coordination of the operations of the existing grids.

     
  • In its simplest form, price discrimination is selling the same product at different prices according to the buyers, volumes, locations, dates, payment methods, and so forth. This commercial practice has very bad press, as well as being prohibited under competition law. And yet, it also has qualities of efficiency and fairness that merit consideration. To understand the difference of opinion between economists and lawyers on the subject, let’s take a closer look at the example of the British retail energy market.

  • Les installations hydroélectriques produisent environ 14 % de l’énergie électrique en France, avec de fortes variations saisonnières en fonction de l’hydraulicité. Malgré d’importantes disparités entre pays, le pourcentage moyen est du même ordre au sein de l’Union européenne et dans le reste du monde. Mais l’importance de cette technologie dépasse la dimension purement quantitative de sa production. En effet, la flexibilité des centrales donne à l’énergie hydroélectrique un rôle essentiel pour répondre à la versatilité de la demande et des sources d’énergie intermittentes. Par ailleurs, après turbinage pour produire de l’électricité, l’eau peut satisfaire d’autres usages en aval des retenues. Pour valoriser au mieux les ressources en eau, il faut donc trouver un cadre institutionnel qui permette à l’opérateur des centrales de tirer profit de la flexibilité de ses installations tout en répondant aux besoins des autres usagers de l’eau. Les grands barrages fonctionnent actuellement sous un régime de concession à des opérateurs privés, que le gouvernement souhaite remplacer par des sociétés d’économie mixte. Peut-on en attendre plus d’efficacité collective ?   

  • Aficionados of the French electricity market - including the authors of this blog- have noticed an intriguing silence during the Christmas break: at the time of this writing, the government has not (yet?) published “l’arrêté prime”, which would set a bonus granted to residential demand response operators.  This silence is excellent news for electricity consumers, who will not have to pay for the strategic errors of these operators. This blog post explains this situation, and also presents the economics of demand response in electricity markets, an issue of interest for all electricity consumers, not only French ones.

  • Aficionados of the French electricity market - including the authors of this blog- have noticed an intriguing silence during the Christmas break: at the time of this writing, the government has not (yet?) published “l’arrêté prime”, which would set a bonus granted to residential demand response operators.  This silence is excellent news for electricity consumers, who will not have to pay for the strategic errors of these operators. This blog post explains this situation, and also presents the economics of demand response in electricity markets, an issue of interest for all electricity consumers, not only French ones.

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