France Ushers in Power-Capacity Market as Risk of Shortage Grows

France will issue within days rules for a power-capacity market designed to ensure supply meets peak demand as the risk of winter shortages grows.

The system will “guarantee over the long term France’s electricity supply” amid increasing possibility of deficits, Energy Minister Segolene Royal said today in a statement.

The mechanism for trading certificates to secure reserve capacity in Europe’s second-biggest electricity market will provide incentives for operators to keep power stations online when it starts up next winter.

Suppliers need to prove they can provide for all customers during demand spikes and producers have to guarantee plants are available and working, according to today’s statement. The framework is designed to stop generators from closing uneconomic stations and to maintain enough capacity to meet national demand. Producers will be able to sell any extra certificates they’re left with if customers curb demand.

France, which gets about three-quarters of its power from Electricite de France SA’s 58 nuclear reactors, has become more dependent on imports in the past decade as demand outstrips supply in peak periods. It faces possible shortages in the next few years due to the planned closing of old fossil-fuel plants and two reactors, according to EDF’s power grid.

Europe faces blackouts if cold snaps are sustained this winter, GDF Suez SA Chief Executive Officer Gerard Mestrallet said this month. Low demand because of economic weakness, along with cheap coal imports have led to the closing or mothballing of gas-fired plants, including 12,000 megawatts at GDF Suez.

French demand is the most sensitive among European nations to cold spells due to a high dependence on electric heating, grid operator RTE says. With each degree Celsius drop in winter temperature, demand for power rises by 2,400 megawatts.

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