IEA welcomes France’s commitment to combating climate change and urges the government to pursue electricity sector reforms

The International Energy Agency (IEA) commends France’s efforts to increasingly adapt its energy policy to global energy and climate challenges. At the launch of the new publication Energy Policies of IEA Countries – France 2009 Review today in Paris, IEA Executive Director Nobuo Tanaka said, “The government’s goals to decrease CO2 emissions by 75% by 2050 and to reduce greenhouse gas (GHG) emissions in the transport sector to 1990 levels by 2020 are both ambitious and encouraging.”

The comprehensive environmental programme, Grenelle de l’Environnement, including the recent law Grenelle II, sets priority directions for French energy and environment policy and outlines concrete actions towards achieving the ambitious targets. Although some of the initially planned measures have proven challenging in the context of the economic slowdown and budget constraints, the Grenelle-II law still has many positive provisions. It is particularly encouraging that it prioritises emission reductions and energy efficiency improvements in the buildings and transport sectors. These two sectors account for the bulk of France’s GHG emissions, and reducing them is a daunting task, especially for the transport sector.

France is one of the least CO2-intensive industrialised economies, thanks to the substantial role that nuclear power plays in its energy mix. Praising France for its commitment to the development of commercial nuclear power in its efforts to combat climate change, Mr. Tanaka said, “The government has a huge responsibility to ensure that the nuclear waste management is addressed in a sustainable way.” He also highlighted the potential role the competitive French nuclear sector might play in the emerging European electricity market.

Mr. Tanaka welcomed the strong government support for research, development and demonstration of other low-carbon technologies, such as renewable energy. He also praised the French government for having implemented various measures to secure gas supply. Despite these clear successes, Energy Policies of IEA Countries – France 2009 Review identifies a number of challenges, particularly in the electricity sector.

“While the generation and retail sectors are fully open to competition, in line with EU directives, competition is in reality still rather limited,” noted Mr. Tanaka. The French utility company EDF controls a large nuclear fleet, with production costs generally lower than wholesale electricity prices. This gives EDF a significant competitive advantage and limits the scope for its competitors to develop market share. EDF is required to sell power at regulated tariffs, co-existing with market prices offered by its competitors, which is not a sustainable market structure. “The proposed legislation that would allow all electricity suppliers in France to get access to EDFs ‘historic’ nuclear power capacity at a regulated tariff constitutes a significant step in reforming the current market towards more competition,” said Mr. Tanaka. However, in the longer term, it will be important to ensure that the French nuclear sector is put on solid economic and commercial footing, and that sufficient investment incentives exist in a competitive market environment.

“The French electricity system also faces a structural imbalance between the baseload capacity and increasingly peakier demand,” added Mr. Tanaka. Electricity demand in France is highly seasonal with peak demand in the winter because of extensive use of electricity for heating. “While France has surplus baseload nuclear capacity that allows it to be a major electricity exporter, it has to rely on imports to meet its peak demand.” In addressing this challenge, the government is encouraged to promote demand-side measures, enhance grid flexibility, boost investment in peak capacity and, more importantly, continue strengthening cross-border interconnections. “For both electricity and gas, the growing interconnections between markets in Europe are contributing to regional security of supply. Regarding the Spanish-French electricity interconnection for example, significant progress has been made.”

To conclude, Mr. Tanaka praised the government for its efforts to address the three pillars of energy policy – energy security, economic efficiency and environmental sustainability – in a balanced way, and highlighted the need for a stronger policy focus on energy security, taking into consideration medium and long-term challenges. He also encouraged the government to ensure timely implementation of the policies and measures established by the Grenelle de l’Environnement process, and urged it to pursue the proposed electricity sector reform.