French Market Design in Practice: Some Lessons from the 2022 Energy Crisis

Nicolas Astier ()
Additional contact information
Nicolas Astier: PSE - Paris School of Economics - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris Sciences et Lettres - EHESS - École des hautes études en sciences sociales - ENPC - École nationale des ponts et chaussées - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement, ENPC - École nationale des ponts et chaussées, PJSE - Paris Jourdan Sciences Economiques - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris Sciences et Lettres - EHESS - École des hautes études en sciences sociales - ENPC - École nationale des ponts et chaussées - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement

PSE Working Papers from HAL

Abstract: Between 2005 and 2021, France has generated more electricity from fossil-free resources (491 TWh/year on average) than its gross domestic consumption (481 TWh/year). Therefore, in terms of total surplus, the French electricity sector should have been barely hit, if at all, by the surge in fossil fuel prices during the 2022 energy crisis. In practice, however, the French government spent billions of euros in subsidies to electricity consumers, the incumbent utility – who operates the whole nuclear fleet – recorded its worst yearly financial result to date, and total electricity imports exceeded exports for the first time in more than 40 years. Although these outcomes can largely be attributed to bad luck, the extent to which they could have been mitigated through better market design and public policies is an open question. This article argues that existing policies, through their implied incentives to share and manage long-term risks, played a critical role in how France navigated the energy crisis. Consistently, reforming long-term risk-sharing mechanisms has emerged as the most pressing issue to address. Looking forward, however, updating short-term wholesale market design so as to better support a low-cost and reliable energy transition will likely prove increasingly important.

Keywords: Market design; Energy crisis; Risk management; Incentives (search for similar items in EconPapers)
Date: 2025-02-03
New Economics Papers: this item is included in nep-ene and nep-reg
Note: View the original document on HAL open archive server: https://pse.hal.science/hal-04893886v2
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://pse.hal.science/hal-04893886v2/document (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:hal:psewpa:hal-04893886

Access Statistics for this paper

More papers in PSE Working Papers from HAL
Bibliographic data for series maintained by CCSD ().