Montel Logo

    Select your prefered language:

  • * Turkish edition by Montel-Foreks requires separate trial access or subscription.

Light

Technical maintainance

Montel Online is currently unavailable due to technical maintenance.

French power could test EUR 4,000/MWh cap in Q4 – experts

GasPowerPolicy

29 Jul 2022 10:15

Photo: Shutterstock.com

Photo: Shutterstock.com

Oslo

29 Jul 2022 10:15

(Montel) French day-ahead power could test a EUR 4,000/MWh ceiling this winter should nuclear power availability – currently at just 40% of capacity – remain low when cold weather spikes demand for heating, traders and analysts said.

France’s nuclear power plants have been beset by extended maintenance outages and corrosion issues at a time when Europe is facing a gas supply shortage exacerbated by Russia cutting flows over the Nord Stream 1 pipeline to Germany.

“French nuclear is the joker for the European power balance. I am a bit nervous about what is going to happen in October,” said Bengt Longva, senior power analyst at Storm Geo, an Oslo-based energy consultancy.

“It’s the month which has the lowest renewable production of the year but rising demand, so if nuclear output is still low and you get a few colder days coupled with lower imports, that could very well lead to new spot price records,” he said. 

On 4 April this year French day-ahead power hit near the previous EUR 3,000/MWh cap at EUR 2,987.88/MWh between 08:00-09:00 CET amid low nuclear power and cold weather.

The record coincided with unusually low import capacities from Germany, as high wind output there caused so-called loop flows which limited cross-zonal trading opportunities for France. 

Following this, power exchanges in Europe raised the ceiling to EUR 4,000/MWh in May. 

Bourses could be forced to raise this yet again to EUR 5,000/MWh if France or other countries reach an hourly spot price of EUR 4,000/MWh. 

Nuclear at 30-year low
Output of the French nuclear fleet in 2022 has slumped to the lowest in 30 years. Currently it is at 25 GW, or just 40% of total capacity and 15 GW less than in late July last year.

“It has never been as tight as this year,” said a trader with a large utility, confirming that France may well see new records in spot prices this winter. 

Another trader said the levels of spot and balancing prices depended a lot on the weather but also on how much transmission capacity neighbouring TSOs offered on the interconnectors.

“The UK remains a question mark. If it is cold and especially if there is no wind, the UK has showed it can be really tight,” he said.

5 GW huge difference
Longva hoped EDF would be able to restart several nuclear reactors over the coming weeks, with 5 GW planned for early August and an additional 3 GW from 11 August. 

“Just by adding 5 GW to the grid, prices will fall by quite a lot,” he said, pointing out that even that amount of baseload power over a longer period “makes a huge difference”.

French power prices for Q4 have been hovering near an 11-year high at EUR 925/MWh this week amid fears of a supply crunch due to low nuclear output and cuts in Russian gas deliveries to Europe.

Earlier this week, EU energy ministers reached a political agreement on a voluntary reduction of gas demand by 15% over the next eight months, with some exemptions, while Germany – the EU’s biggest power and gas consumer – is already urging demand curbs before winter.

Earlier this month, French regulator Cre called on its European counterparts to freeze the price cap for the European single day-ahead market, warning that such peak prices could happen again and that the price cap could then be raised several times during the winter at the expense of consumers.

Given forward prices in the market, hourly spot prices in France could reach the price ceiling on around 30 days, corresponding to 200 hours in Q4 2022 and Q1 2023, Cre said. 

But the regulator said forward prices did not reflect the costs of production and had launched an investigation into market practices. Even the most pessimistic scenarios for nuclear output and cold weather don’t lead to “such a high number of hours reaching the price cap as anticipated by market prices”, said Cre. 
 
French TSO RTE’s winter outlook was important to the market as it would give more precise information on any supply-demand balance issues, it added. 

Blackout risk
French energy consultancy Cor-e this week highlighted the risk of blackouts in France next winter. 

In a statement on LinkedIn on Wednesday, it said there were growing concerns over EDF’s 910 MW Blayais 1 nuclear unit, where a strike prevented the company ramping down the unit to start maintenance. This raised the risk of not being able to produce power this winter.

Meanwhile, solving France’s nuclear crisis was “primarily important for the security of supply of France itself”, said Lion Hirth, director at energy consultancy Neon in Berlin. 

“Given the decent capacity margin in Germany and the limited export capacity towards France, I’m quite relaxed about Germany,” he told Montel. 

“But the shortfall of French nuclear and southern European hydropower generation will be mostly compensated by gas, and that puts significant additional pressure on gas markets.”

Share this article on:

URL copied!

English newswire snapshot

Montel uses cookies to improve this website. By continuing to use our website you agree to our use of cookies. Read more about cookies and our privacy policy.