Shaping the Future of Regulators

Enhancing foresight capacity to enlighten the future of the energy sector and its regulation in France: Case study on the Energy Regulatory Commission (CRE)

Context

The French energy regulator, i.e. Commission de régulation de l’énergie (CRE) was established on 24 March 2000 by the French law on the modernisation and development of the public electricity service of 10 February 2000. The creation of CRE is part of the impetus for the energy market liberalisation following the first electricity and gas European directives, respectively in 1996 and 1998. However, the law of 10 February 2000 exceeds the initial requirements of the directives, which did not impose the creation of a regulatory authority. This will require waiting for Directive 2003/54 of 26 June 2003.

CRE aims at contributing to the smooth functioning of the electricity and natural gas markets for the benefit of consumers, and at ensuring that there is no discrimination, cross-subsidisation or interference with competition. Composed of a board of five members appointed based on their legal, economic and technical qualifications for a non-renewable six-year term, CRE is currently chaired by Jean-François Carenco, appointed by presidential decree of 16 February 2017.

Legally speaking, CRE is an independent administrative authority. According to the French Senate report for the evaluation of legislation on 15 June 2006, it is “the adaptability of independent administrative authorities to their missions, which makes each of them an original entity, and constitutes one of their main assets”.

As a consequence of its legal DNA, CRE has continually evolved and sought to anticipate future challenges in the energy sector, in order to adapt the regulatory framework and to foster energy markets. This need to adapt has never been so important at a time of structural changes in the energy sector and participate to the so-called “dynamic regulation”.

Issues

Indeed, energy stakeholders face today two major developments: the energy transition and the digital revolution. Regarding the energy transition, it shall be recalled that the Paris agreement of December 2015, the energy transition law for green growth of 2015 and the European Package for clean energy of 2016 outline collective actions to be carried out, regarding industrial, social and economic challenges. The need to reduce CO₂ emissions leads to limiting the share of fossil fuels in the energy mix while the consequences of Fukushima require, in public opinion, to diversify energy sources. A major industrial development is underway. On one hand, renewable energies succeed in lowering their production costs, on the other hand, grids need to be adapted, upstream to the increased intermittence of generation and, downstream the downward trend in energy demand. The energy world therefore has all the tools it needs to design an industry and consumption that respects a preserved planet. Subject to an energy policy of great control, generating and consuming non-polluting energies is possible in the medium term and on a large scale without declining prosperity, the quality of supply or jeopardizing collective progress.

At the same time, the pace and scale of digital integration in society do not only create new tools but also transform productive and consumption capacities. The entire energy chain will be affected: from a more affordable renewable generation, supported by innovative storage technologies, to the new power of consumers who can have consumption (and production) control means.

These major developments create a particularly uncertain future and challenge the functioning of the energy markets.

Approach and intervention

For the above mentioned reasons, the President of CRE, Jean François Carenco decided to create an area dedicated to reflection, exchange and information sharing, namely the Comité de prospective (foresight committee).

Created on 17 October 2017, this committee is an innovative approach for the market, as well as for CRE, to assess how regulators can face future challenges. By doing so, it supports CRE to anticipate, identify and understand forward-looking main issues in the energy sector at medium and long-term (2030 and 2050). The foresight committee has two objectives: i) to provide expertise to CRE and energy stakeholders; ii) to implement successful energy transition and to put the digital revolution at the service of all electricity and gas consumer, in a multidisciplinary and collective prospective action.

It gathers all energy stakeholders from:

• generation (EDF, Engie, Total, etc.);

• transportation and distributions operators (RTE, Enedis, GRT gaz, Téréga, GRDF, etc.);

• private (Schneider electric, Gimélec, Atos, etc.), alternative (Anode,FIEG) and environmental entities (ADEME);

• representatives of the energy sector (AFG, UFE,etc.);

• renewable energies companies or unions (SER);

• mobility sector (Avere France); consumers association (AFL); a think tank dedicated to urban innovation (La Fabrique de la Cité);

• consulting firm specialised in energy (NégaWatt);

• academics (Tours, Paris-Dauphine Universities); French energy ombudsman (MNE);

• elected local officials and members of the Parliament.

To prepare its prospective approach, CRE commissioned a first external preparatory study elaborated by the E-Cube Strategy Consultants, with nine monographs. This general study, published1 on 30 May 2018, enriched the work of the foresight committee and reported on major global reflections on structural energy issues. Twelve issues (Table 2.1) were then chosen to propose national (and perhaps European) level regulatory approaches, to adapt to a rapidly changing sector. They describe a largely remodelled energy sector, under the combined effects of technological evolutions and public politics in response to social stakes. They were submitted to a board of 80 international energy experts, not related to the foresight committee. The results of this study2 were presented at European level during the General Assembly of the Council of European Energy Regulators in September 2018.

Chaired by the President of CRE, the 46-member steering committee of the foresight committee includes business and academic leaders and representatives of institutions and associations in the energy sector. Each year since 2018, the steering group launches new research on three different topics, divided into three working groups articulated around the energy chain logic: upstream issues (energy mix), grids one (flexibility, storage) and downstream issues (consumer). Due to its success, a fourth working group was created in 2020, with a focus on integrated vision, from upstream to downstream of the energy chain.3

Table 2.1. Twelve reflection paths for the regulator

1	In France as in Europe, adjusting regulatory approaches to account for a faster deployment pace of innovative technologies (storage, flexibility, metering, data), and their impacts on operators.
2	Generalising frames experiments to answer the complexity of emerging market design issues, through approaches such as the “regulatory sandboxes”.
3	Developing a regulatory framework to improve coordination between new generation capacities deployment and grids development.
4	Exercising caution in new natural gas system investments (except those related to security of supply or green gas development), to avoid stranded costs if low gas demand scenarios were to realise.
5	Improving the quality of economic signals conveyed to economic actors, to avoid long-term and costly repercussions of faulty mechanisms.
6	Applying these principles to self-consumption.
7	Ensuring that the market configuration produces relevant long-term economic signals for investments.
8	Facilitating the emergence of incentive mechanisms other than subsidies, relying as much as possible on market-based mechanisms, to encourage renewable energy development.
9	Setting-up a governance allowing for the coordination between TSO and DSO operations when mobilising distributed flexibility resources.
10	Improving the coordination between operators and actors of the electric and gas systems, to facilitate an overall approach to the development and operation of the energy system.
11	Allowing for distributed storage development.
12	Ensuring consumer trust in the context of a rapidly evolving sector.

In parallel, the committee also carries out international observation and study missions in places representative of an ambitious investment in the energies of the future. Thus, the first season of the foresight committee led its members in two countries: i) the first study visit took place in California around the Silicon Valley, which has set ambitious goals: 40% of CO₂ emission reduction in 2030 compared to 1990, to reach 50% renewable energy and 5 million electric vehicles – with major issues management of its new forms of energy in the grid and an important need for storage; ii) members of the committee then went to China, world's leading producer of original electricity photovoltaic and wind power with a strong state will to massively develop electric cars and to lower the cost of batteries. The second season field trips took place in French territories, as the main topic focused on decentralisation.4

Results, impact and lessons learnt

On 5 July 2018, the CRE foresight committee presented its first three reports. Based on monthly working groups, which gathered over 200 experts, these reports aimed at favouring the emergence of several long-term consensus, and to suggest solutions to support the transformations of the sector.

After two seasons, the foresight committee has successfully fulfilled its missions. As it is intended, it definitely appears as a multidisciplinary area for exchanges and analyses for energy experts. The work of the foresight committee also expands CRE horizons in two ways. On one hand, international and European benchmarking studies are fully integrated in the foresight committee works. In addition, various field and study trips in France, within the European Union and abroad, offer different ways of thinking and possibilities to achieve market mechanisms.

As the energy regulator is the place of independence, neutrality, public service, equality and the general interest, the foresight committee is actually the unique forum in France for various energy stakeholders where they can freely debate with a high level of expertise on medium and long-term trends.

Such area gives opportunities to build relations, to anticipate possible conflicts and to identify major future stakes. Furthermore, the publication of this abundant work is a major and unique source of information, open to all, on innovations and their consequences, which can enlighten decision-makers in their own field skill.

The work done was highly appreciated by all the members of the foresight committee, which now appears as the front door of the regulatory strategy and innovation. Thus, the collective reflection and the very wide and diverse panel of actors are also of great interest for CRE teams. Indeed, two mains reports of the foresight committee have brought attention: the impact of green mobility on the energy mix, notably the part on electric vehicles, and the storage one. Those two reports had significant impact on visions and works of the committee, but also of CRE services. This led CRE to be aware of two large scales topics and to publish two dedicated reports from a more regulatory and technical perspectives.

It is why CRE launched in October 2018 a broad reflection on the electrical networks serving electric vehicles. For several months, the services met with around fifty actors, organised a forum, three workshops and interviewed their European counterparts. Based on all these exchanges, CRE published the first conclusions and lines of study arising from this project in order to inform the public debate, in particular the discussions around the mobility orientation bill.

CRE also undertook work on storage issue and published in September 2019 its roadmap to set up a legal, technical and economic framework enabling sustainable storage development, in line with the French energy system and the national energy policy. Following the call for contributions launched in the first quarter of 2019, CRE defined a work program, addressed requests to grid operators and formulated recommendations to public authorities for actions within their competencies. Since then, grid operators have clarified and adapted some of the market rules to enable the participation of storage (in particular the FCR and the RR) and simplified the connection rules for storage. Some of the actions defined in the work program will be done at a later time: connection rules will gradually take into account characteristics of storage and the market - rules will be adapted, for instance, to enable the participation of hybrid sites (renewable generation and storage). At the same time, CRE organises workshops with stakeholders to communicate on the progress of the roadmap.

The works of the foresight committee are not predictive but they help regulator to be fully aware of the scale and quick changes, and to adapt his regulatory methods in order to not only encourage innovation among market players, but also innovate on his working methods.

A dedicated website Eclairer l’avenir (“enlight the future”) is available at: http://www.eclairerlavenir.fr/ (only in French for the moment).

Notes

← 1.  CRE, 2018, Étude sur les perspectives stratégiques dans le secteur de l’énergie [Study on strategic perspectives in the energy sector], http://www.eclairerlavenir.fr/etude-sur-les-perspectives-strategiques-dans-le-secteur-de-lenergie/ .

← 2.  CRE, 2018, Presentation of the Sounding Board Results – Study on strategic perspectives on energy, http://fichiers.cre.fr/Etude-perspectives-strategiques/4PanelExperts/Sounding_Board_Results_EN.pdf.

← 3.  Programme for 2020 can be accessed at the following link: http://www.eclairerlavenir.fr/edition-2020-du-comite-de-prospective-plaquette-de-presentation/

The working themes for the 2020 season are :

• WG1 Bouquet énergétique, "Marine energies" co-chaired by Marc LAFOSSE, President of Énergie de la Lune and President of the Marine Energies Commission of SER and Jérôme PECRESSE, President and CEO of GE Renewable Energy who delegated his co-chairmanship to Hugh BAILEY, CEO of General Electric France;

• WG2 Energy Networks and Systems, "New Cities, New Networks" co-chaired by Claude ARNAUD, President of the Efficacity Research & Development Institute and Bernard BOUCAULT, Honorary Prefect of the Region;

• WG3 Consumer and Society, "Downstream metering" co-chaired by Cécile MAISONNEUVE, President of the Fabrique de la Cité and Fabien CHONÉ, co-founder of Direct Energie and President of Fabelsi ;

• WG4 Integrated Vision, "The Hydrogen Vector" co-chaired by Olivier APPERT, member of the Académie des Technologies and Patrice GEOFFRON, Professor of Economics at the University of Paris-Dauphine and Director of the Centre for Geopolitics of Energy and Raw Materials (CGEMP).

← 4.  Twenty-two trips are envisaged for all the WGs either in the “small committee” format, governance of the Foresight Committee and co-chairs, or in the “extended group” format for all the members of the working group. These visits accompany the Season 3 guideline: industry (The second guideline of Season 3: socio-technical issues, is approached via bilateral talks between the Foresight Committee and social science researchers).

These visits concern industrial and demonstrator sites as well as meetings with local elected officials in charge of energy skills or project management to hear their needs and expectations concerning the evolution of the legislative and regulatory framework that would facilitate the conduct of their innovative development projects.

Most of the trips concern France: Nice metropolis, Jupiter 1 000 demonstrators, Dunkerque wind power plant, offshore wind farm in Brittany, Marne-la-Vallée eco-neighbourhood, etc. And one in Germany is under discussion.