- Recent advancements in the French grid-scale battery storage market signal substantial opportunities for developers and operators, with improved profitability and new regulatory frameworks driving growth.
- As of July 2024, France had achieved 1 GW of installed grid-scale battery capacity. An average of 200 MW per year between 2019 and 2024.
PARIS (AURORA ENERGY RESEARCH)—Aurora Energy Research, a global energy markets analytics provider, has released a new Flexibility Market Report showing improved market conditions in France for grid-scale battery projects. Aurora’s updated forecasts reveal a more than 2% increase in IRR for investment scenarios, driven by high short-term aFRR capacity prices and greater opportunities from energy trading. Particularly, Aurora estimates that investment scenarios based on the preliminary TURPE 7 grid tariffs offer significant upsides in high-production areas.
France transitioned to a pay-as-clear mechanism for its aFRR capacity market on 19 June 2024. Since its introduction, the aFRR has significantly boosted short-term revenues. Aurora expects high prices in the aFRR market to persist until 2028, stabilising by 2030. Coupled with an increase in spot market price spreads in the short term, driven by higher gas prices, these updates result in a more than 2% increase in IRR for battery investment scenarios with commercial operation date in 2025.
The French Energy Regulatory Commission (CRE) will release the new TURPE 7 tariff structure in January 2025, covering the period until 2028. Aurora has modelled several investment scenarios for batteries, considering the new TURPE 7 grid tariff structure currently under consultation by the CRE, with the final version expected in early 2025. One of the key features of TURPE 7 is an optional grid tariff for batteries, which would apply different rates when an asset consumes in a high-production zone or produces in a high-consumption zone. Aurora estimates an additional upside of 2% above the reference case, driven by consumption during peak production periods. However, batteries in consumption zones are not expected to see major benefits, as higher import tariffs would offset peak-hour revenues.
In August 2024, RTE (the French TSO) unveiled specifications for the Appel d’Offres Flexibilités Décarbonées tender, which provides financial incentives for demand response and storage assets with durations exceeding four hours. This tender includes a fixed premium added to capacity market revenues. However, participation in ancillary services (FCR and aFRR) would be restricted, impacting investment scenarios. France and Germany are the leading contributors to FCR demand, jointly accounting for 72% of the region’s requirements in 2023.
If the proposed TURPE 7 tariff under public consultation is implemented, it could create significant opportunities for batteries in high-production zones. As this tariff is optional, understanding the different tariff structures available in various locations will be key for battery investors aiming to optimise returns. While ancillary services revenues currently play a pivotal role in the battery business case, increased market competition is likely to saturate these opportunities over time, making strategic planning essential for long-term success.
Christina Rentell, Research Lead (France and Iberia) at Aurora Energy Research, commented:
“Aurora’s analysis shows that understanding the costs and benefits associated to the grid connection is a key driver of battery profitability. IRRs can vary up to 5 percentage points depending on the tariff structure and whether the battery connects to the transmission or distribution network.”
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Notes to Editors:
The report “French Flexible Energy Market Forecast” is available now for subscribers. Get in touch for further information.
Media Contact:
Gonzalo Montes, Press Officer
+34 682 414 582
Gonzalo.montes@auroraer.com
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Established in 2013, Aurora Energy Research is a leading global provider of power market forecasting and analytics for critical investment and financing decisions. Headquartered in Oxford, we operate out of 15 offices worldwide covering Europe, North & South America, Asia, and Australia. Our comprehensive services include market outlook packages for energy industry participants, advisory support, and innovative software solutions. We foster diversity with a team of over 800 experts with backgrounds in energy, finance, and consulting, offering unparalleled expertise across power, renewables, storage, hydrogen, carbon, and fossil commodities. Our mission is to ease the global energy transition through widely trusted quantitative analysis and high-quality decision support.
