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The transformation of the capacity mechanism

Write by Amélie Janin and Aléxis Gléron, june 2024

You are a market player concerned with capacity certification, but you are struggling to keep up with the changes in the mechanism? In this article, we will primarily discuss the changes expected in the certification process for your production or demand response capacities starting in 2026 and the end of the existing scheme.

How auctions work

The new capacity auctions will be organized by RTE, which defines the capacity requirement in a centralized manner for a given year A.

These auctions are called 'market-wide': all capacity providers can participate in the auctions.

Two auctions are currently planned: one in A-4 and one in A-1 to adjust the available capacity if it was incorrectly assessed in A-4.

One of the objectives of the capacity mechanism is to promote the development of flexibility resources. Here, flexibility refers to storage and demand response.

Flexibility has specific constraints, so the auctions must be compatible with these.

During the second auction (A-1), a volume would be reserved for flexibility capacities, but other capacities can be selected depending on the need for the residual volume.

Certification

An operator who has overestimated or underestimated their available capacity will have to go through the secondary market to rebalance.

To access the secondary market, the following must first be completed:

  • Signing a participation contract between the operator and RTE

  • Certifying capacities

  • Participating in the auctions (whether selected or not)

The participation agreement allows for the registration of participants in the mechanism. Certification is essential to participate in the auctions.

Certification represents the maximum capacity that can be contracted, but the availability commitment corresponds to the capacity selected after the auctions.

Be aware that if the volume has not been auctioned (whether selected or not), it cannot be traded on the secondary market (certification alone is not sufficient).

 

The PP2 window is expected to change compared to the current PP2 window, but all the details (duration, time frame, number of days) have not been finalized, yet.

The operational process

régime de certification.png

​​​​​​​​​Les EDC Normative certification would open prior to standard certification.

  • EDCs

Principles:

The certification process will differ depending on whether you are connected to an RPT EDC or an RPD EDC.

Your EDC will need to be declared either as injection or withdrawal.

The aggregation threshold is expected to increase from 1 MW to 5 MW to reduce operational workload.

Creation:

The creation of an EDC will only be possible during the designated windows.

Some questions remain unanswered and will be addressed later by RTE:

  • PP1 vs PP2: How many days?

  • What will become of the coexistence between multi-annual auctions and the capacity mechanism? Will only one of the regimes be chosen?

  • Could an EDC have dual roles: injection/withdrawal?

SOURCES

 RTE GT n°10 – Refonte du mécanisme de capacité, 6 juin 2024

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