IEA Praises France's Energy Policy Achievements

IEA Praises France's Energy Policy Achievements

Sep 07 - Oil & Gas Journal

In its 2004 in-depth review of France's energy policies, the International Energy Agency was full of praise for the country's successful achievement so far of the famous "three E's of energy policy"-energy security, economic efficiency, and environmental protection.

"In energy security France's nuclear park has dramatically reduced its dependence on oil, and the national electric and [natural] gas utilities have a near-spotless record of providing uninterrupted service to their customers," the review said.

"Environmentally, France has one of the lowest carbon intensities of any [Organization for Economic Cooperation and Development] country, largely owing to the predominance of nuclear power plants in the electricity sector. The only concern in this regard is the long-term environmental liabilities associated with plant decommissioning and waste treatment.

"As for economic efficiency, French consumers consistently enjoy some of the lowest energy prices in industrialized countries for electricity, natural gas, and petroleum products," the review said.

These successes were achieved, the review points out, with a policy that "stresses centralization, a nation-based approach to energy, and strong government involvement."

IEA Executive Director Claude Mandil said, "France has satisfied all its IEA obligations, including oil and product strategic stocks."

Review details

Recently presenting the review together with France's Industry Minister Patrick Devedjian, Mandil noted, "France was at a turning point of its energy policy." France will, however, face the challenge of adapting to the changes brought about by newly liberalized electric power and natural gas markets.

In addition, Mandil admitted that neither a liberalized nor a pan- European market would necessarily deliver lower energy prices.

The review acknowledged that the government's highly ambitious plans to reduce by 75% its carbon dioxide emissions by 2050 and to build up its wind power capacity to 10,000 Mw by 2010 will mean additional costs for end-users.

In this transitional period, most of the recommendations made in the review are already being taken into account by the French government, Devedjian explained.

Opening markets

One of the review's key recommendations concerns the obstacles to a real market opening of both electric power and gas in the current French context. IEA is worried about the current dominant position of Electricit de France (EDF), which generates more than 90% of France's electricity, a position that "could potentially influence price levels and deter new entrants."

In addition as part of it energy security mandate, the government has the option to launch tender offers or deny plant authorizations to achieve a desired generating portofolio under the Long-Term Investment Programme. "Care should be taken," advised the IEA, "that these options do not create market distortion, which could lead to economic inefficiency and higher prices for consumers."

Likewise, the full opening of the gas market to competition is hindered by the lack of entry points for imported gas in southern France. Three quarters of imported gas comes from entry points in the northeast and through two LNG terminals-one on the Atlantic and the other on the Mediterranean.

The regulator has tried to solve these constraints on third- party network access through a gas release program concerning both gas line operators Gaz de France (GDF) and Total SA.

The program is due to be launched soon on 15% of the volumes supplying southern France (see related story, this page).

The most recent development in market liberalization that complies with IEA recommendations is the changed legal status of EDF and GDF, both of which became "ordinary companies" (socits anonymes) in July following parliamentary approval, placing them on the same legal and regulatory basis as other market competitors.

To calm fierce trade union opposition, the state will retain a 70% stake in the utilities. Of the 30% balance, 15% will he reserved for the firms' employees and 15 % available for a capital increase or through an exchange with other European Union entities.

The new status also will scrap the "specialty principle," which prevented EDF from becoming involved in gas and GDF in electricity.

Devedjian also was at pains to reassure IEA that its recommendations are being followed in the government's policy described as "ambitious, balanced, and European," as it combines energy conservation with the fight against greenhouse gases. France's policy also combines renewable energy with keeping open the country's option for the use of nuclear energy.

Devedjian said that an energy policy memorandum would be sent to EU member countries possibly as early as September, for Europe "must go further in the definition of a common energy policy."

He also said that he would propose a "transparent and frank" debate on the share of nuclear energy in Europe's electric power production, implying this could be a solution to both problems.

Doris Leblond

OGJ Correspondent