Multi-Year Energy Plan: Key Points to Consider

By Justine Mossé – Consultant, Energy Division - Carbone 4

Definition and Background

The Multi-Year Energy Plan (PPE) is a technical document that “sets the action priorities government agencies in the energy sector in order to to achieve the objectives energy policy as defined by law1 ". Along with the National Low-Carbon Strategy (SNBC), it is one of the two major policy tools established in 2015 by the Energy Transition for Green Growth Act² (LTECV). An initial PPE, approved by decree in 2016, covered the period 2016–2018. The second phase, which is the focus of this discussion, covers the period 2019–2028 and beyond for certain topics, such as nuclear power. This document has been in the works since 2017 and has been the subject of several consultations and debates, including a public consultation held between March and June 2018. We are currently in a new phase of public consultation, which will end on February 19, 2020. It will result in a decree that will serve as the basis for all other energy planning documents and will have normative value for:

• EDF, which is required to take into account the various objectives of the PPE in its strategic plan.
• the quantitative targets of the calls for bids, namely renewable electricity generation capacity, electricity demand response capacity, and biomethane injection capacity;
• criteria for the reliability of the electricity supply (average duration of outages and load shedding)
• the natural gas storage capacity necessary to ensure security of supply;

As we've said, The PPE is the roadmap for achieving the legal energy goals that France has set for itself. This includes, in particular, the goal of carbon neutrality3, with a target date of 2050, enshrined in the Energy and Climate Act of November 8, 2019. In this law, France has made a firm commitment⁴ to reduce national emissions to a level low enough that they can be offset by carbon sinks—both natural and, to a lesser extent, technological—within our territory. The net balance of greenhouse gas emissions would then stand at zero.

Carbon Neutrality and Energy: What's the Connection, and What Are the Challenges?

The connection between these two concepts is summed up by a single number: in France, in 2018, 70% of our greenhouse gas emissions come from our energy consumption. This actually encompasses all emissions except for certain emissions from the agriculture, industry, and waste sectors.⁵ In this regard, the PPE is therefore a cornerstone of the SNBC, with which it is designed to be consistent—that is, in accordance with the planned carbon budgets. To achieve carbon neutrality, the PPE calls for a A 13% reduction in greenhouse gas emissions from our energy consumption by 2023 and a 29% reduction by 2028, compared to 2018. There are two key strategies that would make this possible:

1. First, reduce our energy consumption. A 15.4% reduction in our final energy consumption is projected between 2018 and 2028.
2. We must also make our energy mix greener by reducing our consumption of fossil fuels and increasing the share of carbon-free energy. The carbon content of the energy we consume must decrease by 15.5% between 2018 and 2028.

1. Reduce our energy consumption

The legal objectives in this area have two components: a. the reduction of our final energy consumption6 (regardless of its origin) b. the reduction of our primary consumption6 fossil fuels (oil, gas, and coal; nuclear energy is not included in this scope). This point relates both to the previous point and to the goal of “greening” the energy mix, which we will discuss next. In 2018, according to provisional data from the General Commission for Sustainable Development (CGDD), 47% of our primary energy mix consisted of fossil fuels, with oil leading the way at 28.6% of the mix, followed by natural gas (14.8%) and coal (3.7%). In accordance with the new Energy and Climate Law, which raised the targets set by the LTECV7, the PPE aims to reduce this consumption by 32% between 2018 and 20288. Point (a) is worth considering: beyond simply reducing our final energy consumption, the real issue here is to improve energy efficiency, that is, to ensure “that each euro of GDP consumes less energy.” This is, in fact, the only way to maintain economic growth AND reduce our energy consumption. The improvement in GDP energy efficiency inherent in the PPE is -2.4% per year on average compared with 2018 through 2023, and -2.5% per year between 2023 and 2028 (We are referring here to final energy consumption.) This calculation is based, on the one hand, on the targets for reducing final energy consumption and, on the other hand, on an assumption of average annual GDP growth of 1.34% between 2020 and 2030 (an assumption derived from the PPE itself). Such a rate is much more ambitious than the historical and current trend, as the rate has remained stable at -1.5% per year for the past 20 years. The measures put in place—in particular the Energy Savings Certificates (CEE) program and the increase in the cost of greenhouse gas emissions—will therefore need to be both more ambitious and more efficient than in the past. The PPE does not detail the implementation procedures for these energy efficiency policies, which will require particular attention in the coming months. We have discussed the pace of improvement in energy efficiency… It is important to keep in mind that:

1. our final energy consumption,
2. our primary fossil fuel energy consumption,
3. and their corollary : greenhouse gas emissions resulting from our energy consumption,

are declining at a pace that is far too slow given the level of ambition we have set for ourselves, which means we will need to redouble our efforts in the coming years. The graph below shows the average annual reduction rates for the three metrics we just mentioned over various time periods. For a reduction target that remains unchanged over the period, The low reduction rates in the past and currently require a much faster pace going forward.

Sources: Draft PPE, Carbone 4 analyses

2. Making our energy mix greener

This second major tool at our disposal involves: a. a reduction in our fossil fuel consumption. b. an increase in the share of renewable and recovered energy in the energy mix. Regarding the second point, the PPE provides for:

• a 25% increase in 2023 and 40% and 60% increases in 2028 in renewable heat consumption compared to 2017 (which totaled 154 TWh);
• a doubling of renewable electricity capacity by 2028 compared to 2017 (installed capacity in 2028 would be between 101 and 113 GW);
• an increased share of biomethane in the gas mix, thanks to a four- to six-fold increase in biogas production compared to 2017.

Source: Draft PPE

A recent Eurostat report (press release titled “Renewable Energy in the EU in 2018”) indicated that France was, after the Netherlands, the country furthest behind in meeting its renewable energy targets. In 2018, only 16.6% of our energy mix was renewable, as a percentage of gross final energy consumption,⁹ compared to a target of 23% for 2020. Since 2015, the share of renewables has been increasing by an average of 3% per year. In 2019 and 2020, it would need to jump by 39% for the target to be met.

Source: Eurostat, press release dated January 23, 2012, “Renewable Energy in the EU in 2018”

A Closer Look at the Gas Mix

Let’s take a look at the case of the gas mix, which clearly illustrates the dual challenge of reducing fossil fuel consumption on the one hand and increasing the share of green gas on the other. The PPE thus provides for the following:

• to reduce our consumption of (fossil) natural gas by 13% by 2023 and by 25% by 2028 compared to 2017 consumption levels;
• to increase the share of renewable gas to 10% of consumption by 2030 (a target set by the LTECV).

For biogas, in addition to reporting the volumes of biogas produced and injected into the gas grid, the PPE sets the purchase rates for biomethane injected into the grid, specifying a “target” purchase rate and a “maximum” purchase rate .” The purpose of these rates is to bridge the gap between the market price of natural gas and the cost of producing biomethane. Compared to the version of the PPE published in January 2019, the 2023 purchase rates have been slightly increased: they were previously 67 and 87 €/MWh PCS, the “target” and “maximum” values, respectively. As for the target biogas production volumes, they remained unchanged between the two versions of the text. It turns out that the increase in the “target” feed-in tariff for 2023 exactly offsets a potential lack of price increases for fossil gas caused by a continued freeze on the carbon component.¹⁰ In fact, the TICGN¹¹ increase projected for 2023 was nearly 8 €/MWh PCS compared to 2018, which corresponds to the increase in the feed-in tariff for 2023. Without a resumption of the carbon component’s trajectory, this would mean that the budgetary effort made to increase the funding allocated to biogas producers would, in fact, yield no additional benefit compared to what was provided for in the previous version of the PPE. It is worth noting in this regard that the High Council for Climate, in its report “Acting in Line with Ambitions ” (June 2019), called for reforming¹² the current carbon tax system to enable the full implementation of this “powerful economic tool for achieving the goal of carbon neutrality at the lowest cost to society as a whole.”

Sources: 2018 and 2020 PPE drafts

The PPE asserts that the measures it contains would make it possible to achieve the following level of biogas penetration in French energy consumption:

• 3% in 2023,
• from 6 to 8% in 2028,
• from 7 to 10% by 2030, which would therefore potentially fall short of the LTECV target.

The factor limiting biogas penetration into the energy mix will be economic rather than related to availability. In terms of volume, GRTgaz reports a registered capacity (i.e., projects awaiting capacity allocation on the gas network) of over 24 TWh, which already corresponds to 85% of the average production target for 2028. With the budget now set, biogas producers are being told that they will need to lower their production costs in order to qualify for the feed-in tariff on the largest possible volume. Achieving the target is therefore in the hands of the producers. We should note, however, that without a sufficiently high carbon tax, the target is unlikely to be met, especially since the feed-in tariff increase applies only to the 2023 milestone, not the 2028 milestone. The trajectory of the carbon component must therefore absolutely resume its upward trend to reduce the price gap between fossil gas and biogas.

Notes:

1Definition taken from the summary of the draft PPE currently under public consultation. 2Law No. 2015-992 of August 17, 2015 3The goal of carbon neutrality is first and foremost a global goal, as set forth in the Paris Agreement in 2015 (in Article 4), and which has been adopted by various jurisdictions, from the supranational to the urban level. 4It should be noted that the European Union is also setting a course toward net-zero emissions: this ambition was adopted by the Parliament in March 2019 and is now part of the “European Green Deal.” After passing the Council of Europe’s review last December, it will be the subject of a “Climate Law,” which will be proposed by the Commission in March 2020. 5Emissions not resulting from energy consumption include, in particular, emissions from enteric fermentation and the use of nitrogen fertilizers in agriculture, emissions from certain industrial processes and solvents, and emissions from the decomposition of organic waste. 6Primary Energy is energy derived from nature (the sun, rivers, wind) or contained in energy products derived from nature (such as fossil fuels or wood) before they are processed. Final Energy is the energy consumed by end users—households or businesses (excluding the energy sector)—in various forms (electricity, fossil fuels, renewable fuels, or heat). It does not include the energy used to process the primary source, or losses during transmission and distribution (CGDD definitions). 7 The LTECV called for a 30% reduction in primary energy consumption from fossil fuels by 2030 compared to 2012. The new Energy and Climate Law raised this target to a 40% reduction. 8The 32% reduction applies to the 2017–2028 period as stated in the PPE text, but France’s primary energy consumption remained stable in 2018 according to provisional data from the CGDD. 9Gross final consumption is the sum of final consumption and grid losses. 10It should be noted that the carbon price was frozen at €44.6/tCO2 at the end of 2018, and that raising it is still not on the agenda. In the first draft of the PPE, the trajectory used as input for the model was the one initially planned by the government in its 2018 budget law, and an assumption of 225 €/tCO2 had been made for 2030. In the current version, the value of 44.6 €/tCO2 has been maintained throughout the entire period. 11Domestic Tax on Natural Gas Consumption; its calculation depends in particular on the value of the carbon component. 12According to the High Council for Climate, the need for reform concerns the following points: “ (1) an explanation of the carbon tax’s incentive-based and non-budgetary objectives; (2) a review of transparency requirements regarding the use of tax revenues; (3) an overhaul of the tax base to ensure it covers as many stakeholders as possible; (4) a review of how the revenue is used, particularly its redistribution to the lowest-income households; and (5) investments in infrastructure to reduce dependence on high-emission practices.” Sources:

• Draft PPE for Public Comment, January 2020
• Final Summary of the PPE Draft, January 2020
• CGDD, France's Energy Balance Sheet for 2018, April 2019, preliminary data
• CGDD, Energy-Related CO2 Emissions in France from 1990 to 2017, September 2019
• Citepa - Secten Report – 2019 edition, Preliminary 2018 figures
• CGDD, Key Climate Figures: France, Europe, and the World, 2019 Edition
• Eurostat, press release, Renewable Energy in the EU in 2018, January 23, 2012
• CRE, Monograph No. 6 on Gas Infrastructure, May 2018
• AFG, Note on Energy Taxation, March 2019
• ADEME, Costs of Renewable and Recovered Energy in France, January 2020
• High Council for Climate, Acting in Line with Our Ambitions, June 2019
• Carbon 4 Analyses