The French Energy Regulatory Commission (CRE) has proposed an initial framework for implementing the country’s new capacity mechanism ahead of the first long-term auction, covering the winter of 2030-31.

The mechanism is designed to reduce the risk of electricity supply shortages during periods of system stress, particularly at times of peak demand. It compensates operators of generation, storage and demand-response assets for committing to make their capacity available during critical periods.

Once fully implemented, the new mechanism will rely on two complementary auctions: a long-term auction held approximately four years before the delivery period and a short-term auction held around one year in advance. The first short-term auction took place on July 6, 2026, for the winter of 2026-27.

Based on a report submitted by French transmission system operator RTE following extensive stakeholder consultations, CRE has proposed a methodology to the French energy minister for determining the demand curve and the technical and economic parameters for the first long-term auction, covering the winter of 2030-31.

New capacity needs estimated at up to 2.5 GW

The auction comes during the transition from France’s previous capacity mechanism to the new system. Under the current timetable, market participants will have to make commitments for the winter of 2030-31 before securing capacity contracts for the three preceding winters, from 2027-28 to 2029-30.

This creates uncertainty for investment and contracting strategies. However, RTE’s analysis suggests that risks to security of supply remain moderate, with additional capacity requirements estimated at between 0 GW and 2.5 GW, depending on the scenario.

Against this backdrop, CRE has opted for a cautious approach to setting the economic parameters to limit costs for consumers. The regulator said the approach could evolve in future auctions as market participants gain experience with the mechanism and CRE and RTE assess the results.

Auction to target 82 GW of capacity

For the first long-term auction, CRE has proposed a target volume of 82 GW, including 3 GW eligible for multi-year contracts. According to the regulator, the proposed volume is consistent with France’s security-of-supply objectives, electrification plans and expected growth in electricity demand.

CRE has also proposed certification parameters intended to support the development of different capacity technologies. Particular attention has been given to battery storage, which is expected to play an increasingly important role in providing flexibility and balancing services to the electricity system.

On pricing, CRE has proposed maintaining the mechanism’s two price caps, known as PPG and PPI, at €72 ($80.4)/kW and €15/kW, respectively. The regulator said the caps are intended to contain costs for consumers while allowing different capacity technologies to recover their costs.

CRE also plans to continue refining the methodology for future auctions, taking into account the initial results of the new mechanism and feedback from market participants.