Aurora predicts bright future for grid-scale batteries in France: Market outlook and new reforms

Recent developments in the French grid-scale battery storage market are creating significant opportunities for developers and operators. With improved profitability and updated regulatory frameworks, there is a positive outlook for growth in this sector.

Aurora Energy Research, a global energy markets analytics provider, recently published a Flexibility Market Report highlighting the favorable market conditions in France for grid-scale battery projects. Their analysis shows a more than 2% increase in the Internal Rate of Return (IRR) for investment scenarios, thanks to high short-term aFRR capacity prices and expanded opportunities in energy trading. Specifically, investment scenarios based on the preliminary TURPE 7 grid tariffs in high-production areas are expected to offer substantial upsides.

In June 2024, France transitioned to a pay-as-clear mechanism for its aFRR capacity market, resulting in significantly boosted short-term revenues. Aurora projects that high prices in the aFRR market will continue until 2028, stabilizing by 2030. Additionally, an increase in spot market price spreads due to higher gas prices is contributing to the improved IRR for battery investment scenarios set to begin commercial operation in 2025.

The French Energy Regulatory Commission (CRE) will introduce the new TURPE 7 tariff structure in January 2025, covering the period until 2028. This new framework, currently under consultation, includes an optional grid tariff for batteries that applies different rates based on consumption and production zones. Aurora estimates that consumption during peak production periods could result in an additional 2% upside for battery investments.

RTE, the French Transmission System Operator, unveiled specifications for the Appel d’Offres Flexibilités Décarbonées tender in August 2024. This tender provides financial incentives for demand response and storage assets with durations exceeding four hours, including a fixed premium added to capacity market revenues. However, participation in ancillary services such as FCR and aFRR may be restricted, impacting investment scenarios.

Overall, the anticipated implementation of the TURPE 7 tariff following public consultation could create significant opportunities for batteries in high-production zones, provided investors understand the different tariff structures to maximize returns. While ancillary services revenues are essential for battery profitability, increased market competition may limit these opportunities over time, emphasizing the need for strategic planning for long-term success.

For those interested, Aurora Energy Research has released the report “French Flexible Energy Market Forecast.” Media inquiries can be directed to Gonzalo Montes, Press Officer, at +34 682 414 582 or [email protected].

Aurora Energy Research, established in 2013, is a leading global provider of power market forecasting and analytics. With a team of over 800 experts, they offer comprehensive services for energy industry participants, supporting critical investment and financing decisions. Their mission is to facilitate the global energy transition through trusted quantitative analysis and high-quality decision support.