* France lacks flexible power capacity to meet peak demand
* System will pay utilities for keeping plants available
* Decree to be issued in next few days
By Muriel Boselli and Marion Douet
PARIS, Nov 14 France is putting in place a
capacity market to improve the availability of its flexible
power plants during periods of peak demand to prevent supply
gaps, several sources close to the matter said on Wednesday.
The French government is expected to issue a decree in the
next few days that would force electricity suppliers from the
end of 2013 to buy peakload production capacity certificates to
match their forecast needs three years ahead of time, the
To offset output gaps, the French government aims to build a
system to prevent closures of uneconomical plants and encourage
utilities to construct plants that can be easily turned on and
The new system means utilities will be paid partly on the
basis that their peakload production tools are available and not
just on electricity sales.
France's power grid RTE said earlier this year that the
country's power supply was expected to weaken by 2016 due to the
planned closure of old and dirty fossil fuel-fired power
capacity, in line with European Union directives.
E.ON said earlier this year it planned to close
four of its seven French coal-fired power plants by end-2015.
Germany's industry association (BDEW) has said it also
needed a new power market system by 2015 at the latest to manage
the shift towards more renewable resources.
While France generally has steady power supplies thanks to
its 58 EDF-run nuclear reactors, it lacks flexible
capacity - usually generated by gas, coal or oil-fired plants -
to meet peak evening-time demand during cold snaps, when people
return home from work and switch on heating and appliances.
"Each supplier will be forced to buy enough capacity
certificates to match their client portfolio," an industry
source told Reuters. "The decree will also include a tender
system one or two years ahead of time in case of foreseen lack
of capacity," the source added.
However, industry observers said it would be tough to put a
system in place by end 2013 because the issue was highly
complex. "The devil is in the details," one said.
(Editing by Anthony Barker)