Revised French nuclear forecasts are expected to raise electricity prices and burn gas in France and neighboring countries

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This story was originally published
for ICIS Long-Term Power
Analytics subscribers April 27, 2020 at
3:11 pm CET.

EDF recently announced that
nuclear production would drop to 300 TWh in 2020 due
the impact of the coronavirus on the extension
power outages at the majority of
reactors. We modeled a scenario based on
recently announced maintenance schedule
assess the impact it would have on
electricity markets. The modeling shows that the
a significant drop in nuclear production
largely replaced by an increase in gas production,
in France and in neighboring countries. This
leads to an increase in emissions in Europe and a
upward impact of prices on French electricity contracts
and the markets most closely linked to it.

Context

  • On April 16, EDF revised its 2020 downward
    projection of nuclear production from 375-390 TWh at
    only 300 TWh, as well as the forecast of a range of
    330-360 TWh for 2021 and 2022
  • The company announced that the decision was
    driven by the impact of Covid-19 on the assignment
    the maintenance schedule for the reactors and
    reduced energy demand
  • On April 22, EDF published a revised version of the
    schedule, which showed extended outages at 42
    of the company’s reactors, representing 45 GW of
    capacity

Configuration of the model

  • Assess the impact of the revised nuclear
    schedule, we performed two series of models. For
    the two tests we used:
    • Updating fuel price assumptions
    • Update of demand hypotheses at European level
    • All other assumptions were consistent with
      our base case Q1 2020
  • For the “Reference” scenario, we used our
    existing nuclear profile for 2020, 2021 and
    2022, which is based on the historic generation
    profiles. The baseline scenario is included therefore
    to take into account all the impacts on production
    are not driven by the nuclear calendar
    (in particular the request)
  • For the “EDF Calendar” scenario for 2020, we
    created a new profile based on
    so far this year and the new
    maintenance schedule. However, since
    the profile would still lead to more than 300 TWh,
    and as further breakdowns are very likely
    since 7 months ago at the end of the
    year we lowered the profile slightly
    attempt to strike 300 TWh
  • For the “EDF Calendar” scenario in 2021 and
    2022, we adjusted our basic profile to
    attempt to reach approximately 345 TWh (the midpoint of
    forecast forecast)

Results

French production and imports

  • As we previously analyzed, the impact
    of the drop in demand on nuclear generation is
    minimal, largely due to the position of
    nuclear in order of merit. Compared to our T1
    base case (which did not include
    lower demand for coronviruses), nuclear
    production only decreased by 6 TWh in 2020 (to
    383TWh) in the “Reference” scenario for this
    analysis
  • This highlights the fact that the revised version
    the maintenance program is overwhelmingly the main
    due to the anticipated drop in EDF production
    rather than the impact of demand
  • In our “EDF calendar” scenario, production
    nuclear falls to 300 TWh in 2020. The
    83 TWh deficit (compared to the “Baseline”
    scenario) consists mainly of a
    significant drop in net exports (-61 TWh),
    by domestic gas (+ 20 TWh) and coal (+ 2 TWh)
    see an increase
    • In 2021, the nuclear decline of 34 TWh under
      the “EDF calendar” scenario should
      lead to a 25 TWh drop in net exports, 8 TWh
      increase in gas and increase of 1 TWh in coal
    • In 2022, the figures are 34 TWh nuclear
      decrease, decrease in net exports by 27 TWh and 7 TWh
      increase in gas (coal will be disconnected
      2022)

Impact on neighbors
countries

  • The massive reduction in French net exports
    has an impact on the European electricity markets,
    but is most important in countries
    directly connected to France (DE, GB, BE, IT,
    ES), as well as in the Netherlands
  • Given today’s extremely low gas prices
    and the energy mix in neighboring countries,
    gas production is the main beneficiary of
    the fall in nuclear production in 2020. Gas powered
    generation increases by 51 TWh out of the six
    with the largest increases recorded
    Spain (+ 15 TWh) and Italy (+ 11 TWh)
  • Coal production increases by only 2.2 TWh
    (mainly in Germany and the Netherlands),
    lignite production increases by 1.2 TWh (all in Germany)
    • In 2021, we expect to see an 18TWh
      increase in gas production in the six
      neighboring countries, with an additional 2 TWh of coal
      and 0.7 TWh of increased lignite
    • In 2022, the figures are + 21 TWh of gas,
      + 1.6 TWh of coal and + 1 TWh of lignite

Shows

  • Since the lost French nuclear is replaced
    mainly by gas, with a small amount of coal and
    lignite, emissions are increasing
    2020
  • The difference between the “reference” and the
    The “EDF calendar” scenarios in Europe amount to 33Mt
    in 2020, with an increase in French emissions (+ 9Mt)
    representing 27% of the increase
  • The six most affected countries represent
    66% of the increase (+ 22mt), with Germany
    (+ 5.7Mt) and Spain (+ 5.5Mt) the most affected
    • In 2021, we see an additional 14 Mt
      including 3.6Mt in France
    • In 2022, an additional 13.4 million tonnes
      planned, with 2.3Mt in France

Impact on prices

  • The revised nuclear calendar should
    drive up average electricity prices in France in 2020
    € 5.85 / MWh, compared to a scenario in which
    availability was at normal levels
  • In 2021, the upward impact of prices is
    modeled at 2.53 € / MWh, whereas in 2022 it is
    should be 2.42 € / MWh
  • Belgium should see the most
    significant increase in prices among neighbors
    country (€ 2.59 / MWh in 2020, € 1.25 / MWh in 2021
    and € 1.6 / MWh in 2022), followed by Germany
    (€ 1.16 / MWh in 2020, € 0.43 / MWh in 2021 and
    € 0.62 / MWh in 2022)
  • Nuclear profiles used for EDF
    the calendar scenario will become our new basis
    cases since early May

Matthew Jones is a Senior Analyst – EU Carbon
& Power Markets at ICIS. We can reach him
at [email protected]

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