Oil Security Toolkit
Profiling IEA oil security legislation of IEA member countries
France’s natural gas emergency response policy reflects its position as a gas importer. To ensure the availability of sufficient supply and reduce the gas system’s vulnerability in case of a crisis, public service obligations are assigned to the transmission system operators (TSO) and distribution system operators (DSO), operators of liquefied natural gas (LNG) terminals, underground storage operators and gas suppliers. Due to the high share of gas consumption for heating, French gas demand is highly weather correlated, with average daily consumption that can be more than four times higher in February than in August. France can also block exports in case of a crisis as a sovereign state, but such a measure undermines international emergency co-operation if taken unilaterally and not as part of cross-border solidarity agreements.
Networks: transmission and distribution
In the past, France considered building new gas pipelines within France and between France and Spain (MidCat and South Transist East Pyrenees projects), but abandoned these plans in the face of expected reductions of gas consumption in France and overcapacity of the grid. Neither project was included in the latest list of projects of common interest of the European Commission.
The natural gas transmission network is operated by two TSOs: GRTgaz and Teréga. GRTgaz operates 8 110 km of the main network and 24 043 km of the regional networks (together around 87% of the total gas transmission network in France). GRTgaz is controlled by Engie, which in July 2021 sold its 11.5% share in the company to financial institutions Caisse des Dépôts and CNP Assurances, and together now control 39% of GRTgaz, while Engie retained 61%.
Teréga, TotalEnergies's former subsidiary, operates the remaining 13% of the system, with 650 km of the main network and 4 450 km of the regional networks in the south-west of France. The two networks interconnect in Castillon-la-Bataille (Department of Dordogne) and Cruzy (Hérault).
Distribution networks are owned by local communities and are managed through a concession-based system whereby concession agreements govern the relationship between local authorities and Gaz Réseau Distribution France (GRDF), a subsidiary of the Engie. GRDF operates 95% of France’s distribution grids, while 22 local distribution companies cover the remaining 5% and offer their own regulated tariffs. The French gas distribution network totals 195 000 km, the second-longest gas network in Europe after Germany. Both transmission and distribution networks are open to third-party users.
LNG terminals and interconnections
France has four LNG terminals (two in Fos sur Mer on the Mediterranean, one in Montoir de Bretagne on the Atlantic and one in Dunkerque on the North Sea). Terminals in Fos Tonkin and Montoir are owned by Elengy (a 100% subsidiary of Engie). The Fos Cavaou terminal is owned by Fosmax LNG, a subsidiary of Elengy and Total (shares of 72.5% and 27.5% respectively), and is operated by Elengy. The Dunkerque terminal is majority owned by Belgium’s Fluxys with a minority held by Korean investors.
The average utilisation rate of the French LNG terminals was 41% in 2019. The Dunkerque and Montoir terminals have no plans to expand over the next decade, while the terminals in Fos sur Mer are studying an expansion.
Three out of four LNG terminals are functioning on the basis of full third-party access. Following a Ministerial order of 18th February 2010, the Dunkerque LNG terminal is exempted from regulated third-party access and tariff regulation for all regasification capacities of the terminal for a period of twenty years from the date of commissioning.
Gas storage facilities
France has a number of commercial natural gas storage facilities located across the country. There is no public or strategic natural gas storage in France and underground natural gas storage facilities are an essential tool for allowing operators to balance their systems and optimise their gas use. Storage facilities are used to manage pipeline flows and seasonal demand swings, as well as to capture price arbitrage opportunities.
The total gas storage capacity in France amounts to 12.2 billion cubic metres (bcm) (29% of yearly consumption). There are two underground gas storage operators:
Third-party access to gas storage capacities is ensured by legislation (Energy code). The 2017 Law on Hydrocarbons eliminated the government-imposed storage obligations for suppliers. Now suppliers themselves determine the level of stocks to be acquired to cover their customers' needs for the year. The other major change in this reform concerns the way storage capacity from essential gas storage facilities is sold. Booking of capacity in these storages is now conducted through annual auctions organised by operators, Storengy and Teréga, in which all suppliers can participate, whether established in France or in another country. The conditions for holding these auctions (marketing schedule, reserve price, etc.), are set by the Energy Regulatory Commission (CRE). Storage operators are granted a minimum revenue, and if the auctions do not create enough income to meet this minimum, the difference is levied on consumers via the transmission tariff. If the auction revenues are higher than the set minimum, the surplus is handed back to transport network users via a lowered transmission tariff. In 2020, tariffs covered between 26% and 66% of the allowed revenues of the storage operators, which seems to indicate a lack of incentives or regulatory flexibility to fully grasp the market value of this mechanism.
In February 2020, the European Commission launched an investigation as to whether there was sufficient justification for the method used to value the regulated storage assets, and whether the new mechanism would have a negative impact on competition and trade between member states. On 28 June 2021, the Commission concluded that the mechanism strengthens the security and diversification of the energy supply without unduly distorting competition.
The French gas infrastructure would remain resilient to any sudden supply shocks. The value of the French security of supply criterion (N-1) is higher than 100% (at around 144%), ensuring the theoretical possibility to cover peak demand if the largest piece of infrastructure fails. The single largest infrastructure of the French gas system is the entry interconnection point at Taisnières H that imports gas from the Netherlands and Norway.
French policies to enhance natural gas security of supply are based on two pillars:
The latest multiannual energy plan, Programmation Pluriannuelle de l’Énergie (PPE) aims to forecast the possible evolution of the energy system and identify investments needed to ensure security of supply during the energy transition. The regulatory mechanism for essential gas storage from 2018 lists 13 essential gas storage sites (facilities whose operations have to be maintained at all circumstances), which are needed for the efficient functioning of the network and security of gas supply, mostly to deal with sudden cold spells and help manage flows in the gas network.
To ensure the availability of sufficient gas supply and reduce the vulnerability of the gas system in case of a crisis, public service obligations are assigned to the TSOs and DSOs, operators of LNG terminals, underground storage operators and gas suppliers.
Suppliers must guarantee supply to their clients (except to industrial customers with interruptible contracts) in case of:
Due to natural gas mainly used for heating, French gas demand is highly weather correlated. The average daily consumption can fluctuate fourfold between August and February. Considering a cold spell with an occurrence of once every 50 years. To meet demand on a peak day, the French system relies on entry capacities (65% by import pipelines and 35% by LNG), as well as technical storage withdrawals and minor demand reduction measures.
Since the 2018 reform and introduction of a single trading zone, all gas providers must offer their unused and technically available gas stocks from essential gas storage facilities and LNG terminals when the TSO is conducting a tender to balance the system, although the prices at which stocks are offered are determined by their owners.
The General Directorate for Energy and Climate Change in the Ministère de la Transition Écologique (MTE), and more precisely its Directorate for Energy, is responsible for the management of oil and gas emergencies. During a crisis, suppliers and infrastructure operators are required to regularly transmit their analysis of the situation to the National Emergency Strategy Organisation. Suppliers could also be asked to transmit information to their consumers. Emergency response exercises are regularly organised for a range of gas disruption scenarios. The main objective is to test the emergency plan’s implementation and its communication with the national crisis organisation.
The TSOs and DSOs have a leading role during a natural gas emergency. When preventive actions (increase of supply, by-passing of certain infrastructure, etc.), are not sufficient to satisfy French customers demand, specific measures are foreseen.
The emergency plan foresees three crisis levels:
When an emergency is declared by the minister in charge of energy, non-market based measures could be taken, notably to ensure supply to protected customers in France (although according to the government, the EU definition of “protected customers” is impossible to apply in practice, as these customers are connected to the same distribution grid as non-protected customers), or to assist another member State of the EU. Such non-market-based measures are:
France does not co-operate significantly on emergency policies with neighbouring countries. The centralised odorisation of natural gas in France makes it technically difficult to physically accept gas from neighbouring countries in the event of a crisis. The government has not taken significant steps to conclude solidarity agreements according to the provisions of regulation (EU) 2017/1938 on measures to safeguard the security of gas supply, although the government has started to adapt its regulation on gas curtailment to enable such solidarity agreements.
France has fewer flexibility tools on the demand side than in other countries; in particular, there is little gas-fired power generation that could be substituted by other fuels in case of a gas emergency. However, a new regulatory framework was introduced in 2020 to increase demand side flexibility. Industrial consumers using above 5 GWh of gas per year can enter into an interruptible contract with the operator of their gas network (DSO or TSO), for which they are rewarded with a lower tariff. In case of gas shortages, the system operators can activate the interruptible contacts’ provisions and reduce gas supplies to these customers on a very short notice.
The Energy and Climate Law of 2019 introduced an additional regulatory measure to assure security of gas supplies to customers in case of an emergency, appointing emergency suppliers on the basis of geographical distribution and the candidate’s capacity. These companies take over the responsibilities of a gas supplier which is unable to satisfy the demand of its customers. In such a situation, the appointed emergency supplier contacts the customers and quotes an additional service fee to operate as emergency supplier. The customers can refuse this service if they are able to find another supplier.
Obligation for emergency gas storages
Following changes to the storage regime in 2018, the government expects suppliers to hold a certain level of stored gas at the beginning of the winter, depending on their consumers’ consumption levels, whereas the exact volumes are decided by the respective suppliers themselves. TSOs hold storage to fulfil their obligation as a last resort gas supplier, which is to supply the essential social services for five days in the event of the failure of the incumbent suppliers. Demand side response by means of interruptible contracts offers a flexibility which represents only 2% of once-in-50-years peak demand. Supply curtailment for industrial customers represents 5% of peak demand.
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