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Scaling back French nuclear generation poses risk to trade deficit - think tank

23 May 2013 13:14:27 | edem

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Increasing electricity costs weigh on the performance of France's exports, and this should lead to "prudence" regarding the rate at which France's nuclear plants are taken out of service, says a report from the council of economic analysis (CAE), an economic think tank that advises the French prime minister.

Reducing the proportion of nuclear energy in the country's generation mix was part of French president Francois Hollande's agreement with the country's green parties during his election campaign and is one of the key issues being discussed in France's energy transition debate. The government has said that nuclear energy's share in the generation mix should be reduced from 75% to 50% by 2025.

The only nuclear plant the government has committed to closing is France's oldest, the 1.8GW Fessenheim plant. It is scheduled to close at the end of 2016, but the move has generated much debate. "Nobody knows why Fessenheim should be closed. Because it's old? So what?" said a legal source close to the French energy market who asked to remain anonymous. "It's a shame that the French energy transition debate is not dealing with fundamental questions. It's too political," said the source.

Trade deficit and power

Low electricity prices are a key factor in maintaining France's economic competitiveness in relation to other European countries, said the CAE report, which was published on 16 May. A 10% increase in power prices paid by industrial consumers would lead to a 1.9% average reduction in the value of France's exports, it said.

The market share of France's exports fell 19% in 2005-10, one of the largest slumps in Europe, according to a report published last summer by the European Commission. The country's current account recorded a growing deficit from 2005 onwards, reaching -2.2% in 2011, with the trade balance for goods accounting for most of this deterioration, said the report.

Although France's trade deficit improved in 2012, driven by aerospace sector sales and weak domestic demand, the market share of French exports compared with their German counterparts lost ground consistently from 2000 to 2010, says the CAE report.

Despite a 16% increase in power prices for French industrial consumers since 2008, they retain on average a 23% electricity price advantage compared to their German counterparts, the CAE report said, quoting data provided by the International Energy Agency.

Maintaining the advantage

The production cost per megawatt hour for other forms of generation that could be implemented before 2030, such as renewable energy, new-build nuclear plants or gas-fired generation, is "noticeably higher" than those of the country's existing nuclear plants, the CAE said.

France should reduce its trade deficit by relying on nuclear generation and renewable energy, said Jean-Jacques Nieuviaert, senior adviser for strategy and economic studies at the French Union of Electricity (UFE). Longer-term, the country should aim to substitute oil and gas with electricity for uses such as rail transport and household heating. France spends €50bn on oil and €15bn on gas every year, he said.

The official goal of the French energy debate is to develop the country's energy policy, but the real question is what to do with nuclear generation, said Nieuviaert. The only relevant groups that support closures of nuclear plants are non-governmental organisations, he said. They are opposed by the UFE, France's association of employers and industry MEDEF and trade unions, all of which support the utilities, he explained.

Power demand

Demand for power in France will keep increasing, said Nieuviaert. Demand for power will outpace the reduction in consumption achieved through greater energy efficiency, mainly because of electricity used for communications and information technology, he said. Information technology use contributes 3-4% of France's total electricity consumption, and this increases 10% per year, he explained.

Industrial power consumption has dropped 5-6% since the beginning of the current economic crisis, but this has been counterbalanced by residential demand - and the country's population is still growing, he added.

The French energy transition debate is a series of discussions among industry members, government representatives, members of the public and representatives of organisations related to the energy industry. The debate will lead to a framework for the energy transition law in the autumn. Beatrice Mavroleon

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