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The French hydropower park is the second-largest in Europe and a significant asset for the country's energy transition. However, current regulatory uncertainty prevents operators from fully exploiting the potential of the dams.
From the control center's height, it feels like being in a cockpit. Below, a vast expanse of water spanning 132 million cubic meters, held back by 13 million cubic meters of rocks and other materials, such as clay, stacked over 630 meters: the Grand'Maison reservoir, an hour's drive from Grenoble. Under the motionless blue veil, nestled between two mountains, hides a true monster, buried in the rock.
At the request of the French electricity transmission network operator (RTE), EDF can produce 1,800 megawatt-hours of electricity in less than fifteen minutes, equivalent to two nuclear reactors' output. At full power, 217 cubic meters of water are injected every second into a pipeline network carved into the mountain. After a frantic 7 km run through the heart of the massif, it plummets 1 km, activating 12 turbines at the Verney reservoir.
But the water cycle at Grand'Maison doesn't end there. This dam is a Pumped Storage Hydroelectric Plant (STEP). Eight of its turbines are reversible. So, when there is excess electricity on the grid, they turn into pumps and lift the water from the lower reservoir to the upper reservoir. This occurs mainly at night and on weekends. The installation operates in a quasi-closed circuit, following weekly cycles.
Even though this dam has been in service for thirty-five years, it and other STEP facilities are a key element of France's energy future, as they are currently the only means of storing electricity sustainably and on a large scale. Essentially, they are XXL batteries.
However, increasing capacities in France is challenging today. It's not a lack of will, neither from energy companies nor from the government. Still, the sector is tied hand and foot by legal uncertainty against the backdrop of a mismatch between French legislation and European regulation.
To understand, let's go back to 1919. EDF does not exist, and after World War I, the idea of a European single market is far off. France adopts its first law on hydropower, still in effect today. It stipulates that "no one can dispose of the energy of tides, lakes, and rivers [...] without a concession or authorization from the State."
From then on, all large installations that flourish in the territory are granted to operators for a duration of about eighty years. When the concessions expire in the late 1990s, the legislator is unsure of what to do. Thus, it decides to temporarily place the dams under a regime of "sliding deadlines," allowing the concessions to be extended without setting a term or reopening them to competition.
However, this status quo is deemed incompatible with the European legislation that has emerged in the meantime, with France's approval. The Concessions Directive states that, upon expiration, concessions must either be reopened to competition or transition to a quasi-public regime, allowing the State to delegate the management of a public service to a private company while maintaining strict control. In 2015 and 2019, France was warned by the European Commission to align with European law.
The situation is particularly problematic because the regulation stipulates that even for an unconcluded concession, a significant investment significantly increasing a dam's power automatically triggers its reopening to competition. Naturally, this hinders major initiatives by operators, who are too concerned about losing equipment.
Today, the State has three options. The first, reopening to competition, is a priori ruled out in the name of France's energy sovereignty. It also raises many questions, particularly about the future of less profitable dams. For EDF, the options are therefore either the quasi-public regime under the concession system or a shift to an authorization regime.
The second option, the quasi-public regime, is no longer in favor. The "Hercule project," a restructuring plan for the group presented in 2020, caused an uproar and was ultimately abandoned. By hermetically separating hydroelectric assets from EDF's governance, this hypothesis was seen by unions and part of the political class as the first step towards dismantling.
Therefore, the energy company shook things up earlier this year by proposing a shift from a concession regime to an authorization regime. In concrete terms, this would mean transferring ownership of the assets to EDF, with the State setting the precise conditions for the operation and future exploitation. "EDF's goal is not to make a hold-up but to enable the development of additional capacities and STEP facilities," said Emmanuelle Verger, director of EDF Hydro, last September. "And all of this would be done with mechanisms to allow the State to maintain control," she added.
This solution now also has the favor of the Ministry of Energy Transition. Appearing before the Senate's Economic Affairs Committee on November 15, Minister Agnès Pannier-Runacher stated that she is "on the same page as EDF" and has "sent a note to the European Commission" to announce this.
Paris and Brussels should, in this scenario, agree to ensure that the transfer of hydraulic assets from the State to managing companies is not considered a concealed state aid, which would be illegal under European law. This is a particularly challenging task given EDF's dominant position in the market.
EDF's competitors are quick to emphasize that the chosen solution, whatever it may be, must be "fair" and apply to all players. They explicitly state that it would be "shocking" if the new system only protected EDF from reopening to competition. The shift to an authorization regime "must be applied to the entire sector," reassured Agnès Pannier-Runacher last week.
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For large-scale installations, France currently counts, in addition to EDF, mainly two other hydroelectric operators: Compagnie Nationale du Rhône (CNR) - owned half (49.97%) by Engie and a third (33.2%) by Caisse des Dépôts - and Société Hydro-Electrique du Midi (SHEM), 100% owned by Engie.
For EDF, a solution must be found quickly if France wants to meet its energy transition goals. "On the first projects that could be launched, we have already advanced feasibility studies," says Emmanuel Verger.
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A concrete example: at Grand'Maison, three of the non-reversible turbines have been modernized, and the fourth is scheduled for 2025, allowing a power gain of 10% per turbine. A significant but modest progress that does not trigger a reopening to competition for the concession.
On the subject of Pumped Storage Hydroelectric Plants (STEP), another question is also pending: profitability. These installations are very expensive, and their development can only happen in a more remunerative framework that compensates for the service of energy storage. "We managed to do it with demand response [temporary electricity cut by a voluntary site during consumption peaks, Ed.]," assures the Ministry of Energy Transition.
The stakes are crucial for the country's energy future, with the imminent abandonment of fossil fuels. To handle consumption peaks, it is necessary to have controllable tools available on demand. This can be achieved through polluting thermal power plants - gas or coal - or through dams.
Hydropower provides just over a tenth of France's electricity production. Pumped Storage Hydroelectric Plants (STEP) have an additional advantage: they can smooth out production peaks, preventing energy loss due to lack of demand.
The government aims to increase French hydroelectric capacities by 2.8 gigawatts by 2035, including 1.7 GW of STEP. Few new dam projects exist because the capacities offered by nature in France are already largely exploited. One notable project is the CNR's plan on the river, between Saint-Romain-de-Jalionas (Isère) and Loyettes (Ain), which faces strong local opposition.
Asked on November 24 on France Info, Luc Rémont, CEO of EDF, also deemed it "possible, in limited proportions," and "desirable" to build new structures. "We always have ideas," he said, acknowledging that this would require "a lot of consultations at the local level" given social and environmental consequences.
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There are primarily possibilities for increasing existing capacity, involving equipment renewal and dam raising. In Montézic (Aveyron), for example, EDF plans to build an extension of 460 MW adjacent to the existing STEP.
In total, the company, which manages nearly 80% of the hydroelectric park, claims to be able to "increase the installed capacity of its existing park by 2 GW within ten years, and at least 2 GW more after 2035, representing an increase of 15% to 20% in the installed capacity" of its park.
One remaining unknown is the impact of climate change on hydroelectric installations. "In 2050, there is no certainty about the decrease in average annual flows of the Rhône," explains Pierre Guiollot, director of finance and strategy for Engie's renewable energy branch. "But the way volumes are distributed throughout the year will change," with more water in winter and less in summer, he adds. This will inevitably affect the production profile over time, especially since most facilities on the river operate "run-of-the-river," without substantial storage capacity.
For reservoirs with water reserves, these variations can be somewhat more easily managed thanks to the reservoirs. However, the question of the amounts of water released by operators, especially in summer, could become a source of tension with local authorities and other economic actors in the event of an increase and worsening of droughts. Moreover, beyond 2050, scenarios remain uncertain and highly dependent on the policies that governments will or will not implement.