Updated: French winter power hits 2016 high on nuclear disruption warning

The price of French power for delivery during the first half of this winter hit a new high on Wednesday after nuclear producer EDF slashed its output forecast for 2016 and warned of increased supply disruption.

Offers were lifted on the French front quarter baseload product in excess of €39.00/MWh for the first time this year, peaking at an intra-day high of €39.30/MWh, trade data available to ICIS showed. By comparison, on Tuesday the French front quarter was assessed at €37.85/MWh.

A partial sell-off on Wednesday afternoon returned the contract’s value back towards €39.00/MWh. This reflection of intra-day profit taking would indicate confidence that the market had adequately priced in the additional risk related to the nuclear issue, perhaps even overpricing the Q4 ‘16 contract for a short while.

Traders confirmed the news had been the primary driver of strength on the quarter, as well as on the front year which was buoyant but less so.

Outages

The French power system has been dogged by maintenance-related outages across its atomic power fleet this year after nuclear authority ASN warned in June of possible defects in reactors totalling 17.5GW of capacity (see EDEM 24 June 2016).

Then, late on Tuesday, EDF issued a statement warning of further disruption.

“In the second half of 2016, the EDF group has to carry out additional checks to demonstrate that the components, mainly steam generators at the reactors which were the subject of the ASN note … are able to fulfil their function safely,” EDF said.

“Taking into account the time taken by the ASN, EDF Group anticipates that some will suffer outage extensions in the second half of 2016.”

Consequently, the company slashed its nuclear output forecast for the year to 395-400TWh, down from 408-412TWh – a relatively large cut of between 2-3%.

Intervention

The drop in nuclear volume has become quite considerable. In June alone, EDF’s nuclear output was down 7.3% compared with June last year, the company revealed in its statement on Tuesday night. Year to date, output was down 2.5%.

The cut in June underlines the impact of the ASN’s intervention on EDF’s production. This means a similar year-on-year deficit is likely to be the case for July, and there is risk that subsequent months through to the end of the year could see similar declines.

Since the issuance of ASN’s original note on 23 June, the average French day-ahead price has been €31.53/MWh at the over-the-counter market. Being almost flat to the front quarter’s intra-day high on Wednesday, this would indicate traders are now expecting the first half of this coming winter to be characterised by a similar degree of nuclear outages as has been seen in June and July this year.

Back in June, ASN said that, in total, 18 French nuclear reactors could be affected by the same issue of brittle steel from high carbon content as was detected in tests for a new, third-generation reactor under construction at Flamanville.

The reactors concerned are Blayais 1, Bugey 4, Chinon 1 and 2, Civaux 1 and 2, Dampierre 2, 3 and 4, Fessenheim 1, Gravelines 2 and 4, Saint Laurent 1 and 2 and Tricastin 1, 2, 3 and 4. jamie.stewart@icis.com