Forced nuclear shutdown triggers EDF target revision, major increase in winter risk

28 September 2017 17:32 Source:ICIS

French utility EDF revised on Thursday its nuclear generation target for the rest of the year to 385-392TWh after safety watchdog ASN ordered it to temporarily shut down four 915MW reactors at the 3.7GW Tricastin power plant in France.

The news saw additional risk premium immediately priced into wholesale energy products for delivery this winter.

The decision came after an ASN assessment that EDF could not eliminate safety risks in the unlikely case of an earthquake and resultant flooding causing potential nuclear fuel meltdown.

Three of the units are due to remain offline for all of October through to 2 November, according to data from French grid operator RTE.

As a result EDF announced its downward revision from 390-400TWh, a target which the utility had previously pledged several times to reach.

French Q4 ’17 and Q1 ’18 Baseload contracts surged to fresh highs for this year in the wake of the news.

“All the fears over French nuclear could be starting to come true, as well as those over EDF adjusting its production target,” a senior trader at a trading house active in the French market said, adding: “I thought they never would.”

Contagion

The regulator’s statement was published at 12:15 Paris time, and at 13:03 local time EDF announced outages for the four reactors which had an immediate impact on energy markets across the region.

• The Tricastin 1 and 2 nuclear units will come offline on Thursday midnight and are not scheduled to come back online until the evening of 2 November

• Tricastin 3 is due to be taken off the grid on Sunday, returning on 7 October

• Tricastin 4 is also expected to come offline on Sunday, but will only return on 2 November, according to RTE transparency data.

But it was not only products for October and November delivery that were boosted by the news, as contagion spread down the forward curve.

Even the French Q1 ’18 Baseload contract, which was fundamentally unaffected by the capacity losses, was heavily bought as traders scrambled to close up any short positions, or go long underpinned by the increased risk of further nuclear closures hitting the system deeper into the winter.

The French Q1 ’18 Baseload contract opened at €53.10/MWh, but had climbed almost €3.00/MWh to €56.00 by 13:00 UK time, according to over-the-counter trades received by ICIS.

The contract closed at €53.30/MWh on Wednesday.

The first trade that appeared to take into account ASN’s statement changed hands 13 minutes after the announcement at 12:28.

The October ’17 contract, which will expire on Saturday, skyrocketed intra-day from €43.50/MWh at 06:37 Paris time to €49.00/MWh at 11:52. But the contract softened a touch in the afternoon and was seen trading at €48.00/MWh just after midday, indicating the initial buying had been driven by panic and as such overdone in light of the actual fundamental impact.

The interconnected UK power market also saw offers lifted immediately on winter products.

In addition, the British NBP and Dutch TTF gas markets were boosted for winter as traders reacted to a likely loss in the power mix which would see gas- and coal-fuelled power plants fire up to plug the hole.

Safety row

In August, EDF highlighted the risk of rupture of a dyke in the Donzere-Mondragon canal in the case of an earthquake to ASN. The utility told the regulator it was strengthening work on a small section of the dyke to the north of the plant bordering the canal.

In interviews with ASN on Tuesday this week, EDF was not able to eliminate safety risk in the short term, the regulator said in a statement.

“EDF will have to complete its geotechnical investigations in order to characterise more finely the constitution of the part of the dyke in question and carry out the reinforcements necessary to ensure the resistance of the dyke to the maximum earthquake retained in the demonstration of nuclear safety before the restart of the reactors,” ASN said.

But, EDF said on Thursday in a statement that it did not share the view that the four reactors needed to be shut down for the duration of the work.

The utility said it had “demonstrated to ASN that the dyke is capable of withstanding an earthquake known as a ‘Maximum Historically Probable Earthquake (MHPE)’.

“This is an earthquake that is more severe than the historical earthquakes observed in the vicinity of the power plant, located in the most damaging position for the installations,” the company said.

The ASN has labelled the event reported by EDF to level 2 of the international nuclear and radiological event scale (INES), which ranges between 0 and 7. Zero is the least severe rating. herman.moestue@icis.com

By Herman Moestue