Lower nuclear availability unlikely to support French power prices

Nuclear availability below average up to May

Tight nuclear availability likely in Q4

Nuclear availability to reduce by 2035

LONDON (ICIS)–French nuclear availability has been below the 2015-2019 average since the beginning of 2020 and it is predicted to continue at a lower level until the end of May, according to grid operator RTE’s data on Thursday.

On 27 February, the nuclear availability for March was 4GW below the five-year average, while April was 1.3GW and May was 1.5GW, but traders believe this will not support prices as temperatures are set to become even warmer and there is a high production from other plants in the generation stack.

“There is still plenty of LNG around, gas storages are full and the hydro situation in France is pretty good as well,” a trader said.

The only scenario where the low nuclear availability could influence prices is if there would be very low wind production in Germany and France as well, which could make the system a bit tight, they added.

The 2020 Q1 nuclear availability was 5.3GW below the 2015-2019 average, RTE showed. Some traders commented this year’s Q1 had the lowest nuclear availability on record.

The third quarter’s nuclear availability is above the five-year average, but summer is typically maintenance period for the nuclear reactors in France, so availability may change before then.

“With the current gas prices and hydro levels, Summer 20 is overpriced,” a trader told ICIS.

Tight nuclear availability is likely the fourth quarter of the year, which may contain a risk premium over the Q4 contract. However, the price for Q4 has been bearish since January 2020 in line with the influence of the wider energy complex.

PRICE DRIVERS

Despite nuclear availability being below norms, the mild temperatures experienced this winter and wind production above seasonal norms helped lower demand and keep prices on a bearish trend.

Taking the French front months and quarters from 26 February’s assessment, prices are expected to deliver under the 2015-2019 average.

“With the build of renewables, especially wind power, we now need the combination of many factors in order to see any price spikes in France,” a trader said.

Higher prices will only be possible if there is low nuclear availability together with low wind production, low hydro and higher prices on neighbouring countries, which will occur once gas prices rise again, a trader suggested.

“A few years ago, there would only be needed the combination of low nuclear availability and high load in order to see pretty high prices, but those days are gone for the time being,” they added.

With the additional renewables in the French system the generation mix is more diverse.

The EDF nuclear production forecast has been inaccurate over the last four years and prices don’t react to it anymore, a trader said.

The likelihood of even lower nuclear availability is minimal as EDF needs to achieve target production for the year.

NUCLEAR ENERGY REDUCTION

In 2018, the French government announced a plans to reduce the share of nuclear reactors in the electricity production from 75% to 50% by 2035.

To reach this goal, 14 out of the 58 reactors will be closed by the date mentioned.

EDF closed Fessenheim 1 on 22 February and is due to close Fessenheim 2 on 30 June, these nuclear reactors provide a total of 1.8GW generation capacity.

The dates of remaining closures remains uncertain.