Self-consumption accelerates the energy transition

rosenquist/ August 31, 2018/ News

Recent French legislation now allows individuals, companies and public entities to come together to produce electricity, consume it and sell the surplus to third parties. This is a clear way to accelerate the energy transition and participate in the transformation of today’s electric system by producing and consuming electricity differently.

New regulatory mechanisms

Recent developments in French regulations governing self-consumption have been included in the new law on “Energy Transition to Foster Green Growth” and will facilitate implementation and application of these new energy production and consumption modes. From now on, any electricity producer using renewables and/or co-generation methods (simultaneous production of two different types of energy) at voltage less than 100 kW will be allowed to form local partnerships with other producers to share the energy produced and sell the surplus. One condition, however, remains obligatory: to be part of a legal entity specifically created for this purpose and that integrates both energy producers and end users. The energy market is evolving from a centralized production model to one that produces and consumes energy locally.

Towards grid-parity in France

Germany has been rolling out self-consumption projects for the last several years because, since 2012, the cost to self-produce electricity has become cheaper than buying it off the grid. It’s this “grid parity” that France has yet to achieve that explains the differences in investments made by both countries (the cost per kWh is 29.8 cents on the other side of the Rhine, whereas, in France, it fluctuates between 15.6 and 15.8 cents – source: Eurostat, 2016). But this figure is set to change as the price of electricity in France should increase by 6% to 7% per year over the next few years, which will most likely spur the development of self-consumption.

From individual to collective self-consumption

Today, there are three ways to produce your own electricity: either on a strictly individual basis, both individually and as a group, or only via collective self-consumption. The first is based on the idea that you consume all the energy you produce. This is the case, for example, with a shopping mall that uses the energy produced by the solar panels installed on the buildings and/or parking lots for the mall’s own operating needs (heating, electricity, cold storage…). The second approach, using both individual and collective self-consumption, means you want to transfer any production surplus. A school equipped with solar panels, for example, would[, on bank holidays,] sell the surplus generated during school vacations. And finally, the third approach of collective consumption, recently authorized by the law referred to above, allows various participants, energy producers (self-producers) and end users, members of the same legal entity, to decide what to do with any energy surplus. Only one condition: to be connected to the same public medium and low voltage electricity station. What we’ll see, at the level of a neighborhood, for example, is groups made up of individuals, companies, businesses and local authorities with the resources to produce energy and local end users, so the latter can take advantage of the surplus not consumed by the other members of the collective.

The sharing economy as a source of financing?

Financing projects for this type of collective self-consumption can also be imagined from a sharing economy perspective, to promote new business models. A rural community can use a crowdfunding platform to fundraise amounts needed to roll out solar panels at a school, childcare facility, city hall… Energy produced would supply the power to run the buildings, the public electricity grid and third party institutions. This implies, however, the creation of new and very rigorous technical, economic and legal structures that require the participation of various experts in these fields.

Faced with the high-level stakes of the energy transition, it is crucial to develop new ways to consume electricity today: ways that are more local, more responsible and more sustainable. Within this context, and thanks to recent regulatory developments and reaching grid-parity, self-consumption seems like such a key alternative.

By Jean Sonnet, Omexom Director in charge of self-consumption