Thomas Reverdy, Laboratoire PACTE, Grenoble Institute of Technology
Thibaut Fonteneau, Université Grenoble Alpes
Gilles Debizet, Laboratoire PACTE, Université Grenoble Alpes
As renewable energies are intermittent and cannot be controlled, their connection to the grid potentially leads to an imbalance between production and consumption, which is often compensated for by flexible production facilities, such as hydro, gas combined heat and power (CHP), or potentially by storage facilities, or finally by consumers withdrawing their electricity. Given the challenges of CO2 emission mitigation and the limited hydraulic potential, flexible demand response is one of the conditions for the development of renewable energies.
Several configurations can be considered: suppliers can develop incentives for consumers to switch off, aggregators can take control of electrical equipment with the agreement of consumers, the adaptation of consumption can be encouraged in a decentralized way by developing autonomous production and self-consumption.
As they require an involvement of consumers and the investment in new technical devices, the promotors of these activities are searching for an economic model. While renewable energies have been the subject of specific support, the institutional choice until now in France has been to let the market create incentives for the development of this solutions. Unlike investment in renewable electricity power, where the economic agent’s remuneration was secured by a feed-in tariff or a call for tenders (Cointe, 2015; Pallesen, 2016) , load-shifting is therefore exposed to uncertain economic equilibria, as it is closely linked to the electricity tariffs or formation of prices on the electricity market, and should develop if the market conditions are favorable for demand response. The economic calculation for self-consumption is indirectly associated with anticipation of electricity offers, as it reduces the consumption from suppliers: the equivalence between the cost of a local installation and the total cost of supply is considered a condition for a switch to self consumption. Some additional revenues can be also allocated, considering the benefits for collective concerns (Frankel et al., 2019) as the electricity network maintenance.
Through interviews and document analysis, we have reconstructed the regulatory process concerning distributed load shedding and individual and collective self consumption. The aim was to examine how the various contributors to the regulation deal with technical and institutional resources to define valuation mechanism (Pallesen, 2015) . Entrepreneurs, regulators, policy makers, participate in these negotiations while calculating the potential effects of these rules, which combine to define the economic value of these activities. Subordinated to the European rules of State Aid Control, and also influenced by a doctrine of control of public expenditure, the autonomous regulator and part of the administration seek to integrate these activities into the existing institutional framework of the electricity market (Breslau, 2011; Reverdy et al., 2021; Reverdy and Breslau, 2019) . The regulation should avoid any form of “implicit revenues” that could interfere in individual decision (Davies, 2016) . The regulation of the activity must ensure a certain neutrality with regard to the different possible technical strategies. They defend also the issue of guaranteeing that the network, which is considered a natural monopoly, can be financed in proportion to the needs, and that the benefits for the network are clearly identified. This regulation must also be independent from the economic conditions, so as to avoid undue rents in favorable conditions. The political authorities should then be free to decide, in a transparent manner, on the level of additional aid they wish to provide, while justifying it on the basis of “common interest”. This aid should be justified under the State Aid Control doctrine, be voted on in the Finance Act and be reversible.
On the side of the Ministry of the Environment and parliamentarians, the approach is more pragmatic: they are searching for favorable regulation that could directly finance the activity, avoiding as far as possible having to resort to budgetary arbitration and Finance Act. These actors are influenced more by the entrepreneur’s representatives. They take into consideration the difficulties of developing any new activities, and the need for securing revenues. Considering economic conditions, they generally argue from the current economic context, considering that the rules are sufficiently flexible to be revised in the case of economic changes. This struggle takes place in an institutional landscape made up of a system of economic conventions that frame the various economic calculations, in particular regulated sales tariffs, network access tariffs, taxes, etc. The economic rationality of the electricity market is itself the result of an assemblage of conventions, which are partly technically justified, but which are also inherited from past political
choices. Controversies reveal the arbitrary nature of these conventions in particular, if they are inadequate when dealing with distributed shedding or self-consumption. The deconstruction of these conventions and the creation of new rules are unpredictable processes that combine political authority choices, highly complex technical work and judicial control. The regulation process can fall into several traps: inertia, manipulation, implicitness, and arbitrariness… The result is generally a fragile institutional bricolage, rarely coherent, and regularly revised according to circumstances and controversies.
