EDF / 2020 Universal Registration Document

1 THE GROUP, ITS STRATEGY AND ACTIVITIES Description of the Group’s activities

1.4.3

Optimisation activities in France

Since electricity cannot be stored, EDF has to supply just the right amount of electricity, matching customer demand, at all times, at best cost. The aim of optimisation is to predict this demand and implement the necessary trade-offs between the resources available to satisfy demand (production resources, long-term supply contracts, purchases on wholesale markets, etc.). Optimisation of EDF’s production also consists in covering physical, financial, and market risks.

Regulatory notice

Wholesale energy market – REMIT regulation Regulation (EU) No. 1227/2011 (REMIT regulation) on the integrity and transparency of wholesale energy markets entered into effects on 28 December 2011 and is designed to enhance consumers and market players confidence in the integrity of electricity and gas markets. Strengthening wholesale energy market integrity and transparency must foster open and fair competition on these markets, in particular so that prices set on these markets reflect a fair and competitive interplay between supply and demand. The regulation prohibits insider trading and market manipulation, and establishes an obligation to publish inside information as defined in the REMIT. The European Agency for the Cooperation of Energy Regulators (ACER) is primarily responsible for monitoring wholesale trades in energy products, in order to detect and prevent transactions based on inside information and market manipulations. ACER also collects the data needed to assess and monitor markets. The regulation provides that market participants, or a person authorised to do so on their behalf, provide ACER with a detailed statement of the transactions in the wholesale energy market.

Market participants that perform transactions for which a declaration to ACER is mandatory must register with the national regulatory authority of the Member State in which they are established (the CRE in France) or, if they are not established in the European Union, that of a Member State in which they do business. At a national level, national regulation authorities also work together and monitor wholesale energy product trading; Member States determine the the Brottes Act 2013-312 of 15 April 2013 entrusts the duty of ensuring REMIT is observed to the CRE, and the responsibility for sanctions for REMIT breaches to CoRDiS (the CRE’s Sanctions and Dispute Settlement Commission); Order 2016-461 of 14 April 2016, specifying the remit of the CRE in terms of collecting information, registration, and the obligations of persons organising professional transactions; Order 2020-891 of 22 July 2020 on procedures brought before CoRDiS (based on Article 57 paragraph II of French Act 2019-1147 of 8 November 2019 on energy and the climate). DOAAT also manages the exposure of EDF’s upstream/downstream portfolio to price variations in the energy and fuel (gas, coal, petroleum products) wholesale markets and in the CO 2 emissions licensing market, with the assistance of EDF Trading. With respect to RTE, DOAAT plays the role of “balance responsible entity” on EDF’s perimeter in mainland France. In this regard, EDF is committed to financially compensate RTE in the case of a deviation onto its balance group. The optimisation consists of offering RTE an offer schedule that is balanced with the demand, which makes it possible to minimise the supply cost of EDF’s contractual commitments. Long-term electricity purchase 1.4.3.2 and sales contracts EDF maintains commercial relations through energy purchase or sales contracts with European operators. These contracts are of many types, and confer: rights to the energy generated by facilities, primarily nuclear, over the duration of the exploitation of the facility (see section 1.4.1.1.2.1 “EDF’s nuclear fleet in France and its operation”); drawing rights for totally or partially guaranteed electrical power, for a duration generally comprised between 15 and 25 years. regime for sanctions applicable to REMIT breaches. In France, the applicable regulations are as follows:

Role and activities of the 1.4.3.1

Upstream/Downstream Optimisation & Trading Division (DOAAT)

The balance between electricity supply and demand is managed right down to a real-time basis, in line with the framework established by risk policies, developed in line with the Directives issued by the Group’s Risk Control Department and validated by EDF’s Executive Committee (see section 2.2.2 “Financial and market risks”, risk factor 2C “Energy market risk”). Climate variations affect this management. Hence, a fall in temperature of 1°C in winter leads to a rise in electricity consumption in France of the order of 2,400MW (1) and EDF’s portfolio bears a large part of this thermosensitivity. In addition, depending on the run-off, the amplitude of hydraulic generation in the EDF scope, between one extreme year and another, can amount to around 20TW hours. The DOAAT ensures that it has, in all timeframes, sufficient resources in order to enable it to meet its commitments. To do this, it manages a set of leveraged actions: scheduling of maintenance operations of generation means (in particular nuclear); management of inventory (fossil fuels, hydro-electric reserves and customer load shedding); purchases and sales in wholesale markets via EDF Trading, which is in charge of market access on behalf of DOAAT (see section 1.4.6.3 “Optimisation and trading: EDF Trading”).

(1) Source: RTE.

51

EDF - UNIVERSAL REGISTRATION DOCUMENT 2020