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French Power Prices Drop on Renewed Confidence in Nuclear Fleet

  • Winter prices almost close the difference with German power
  • Signals of improved energy security after volatile period

A steep drop in French electricity prices is signaling increasing confidence that Europe’s biggest fleet of nuclear reactors will be able to operate reliably through the winter.

French power for the first quarter of next year traded at about €156 ($169) per megawatt-hour on Monday. That’s down more than 65% from the highest closing price this year of €453 in April, when values soared on news that stress corrosion had caused cracks in the units after years of underinvestment.

The steep drop in prices represents a cooling of concerns over France’s energy security following months of uncertainty and a crisis last year compounded by risks of a gas shortage in Europe. Earlier this year, the government nationalized the country’s largest utility, Electricite de France SA, as part of a drive to ensure reliable power supply.

Availability of the country’s nuclear plants, which supply about two-thirds of its power, rose above 40 gigawatts on Monday for the first time in months, while 12 of 16 faulty reactors are now repaired, analysts at Engie SA’s EnergyScan said in notes. EDF maintaining its 2023 output target this summer is also bolstering confidence.

That’s helped to tighten the spread between French and German power for the first quarter of next year to €20 per megawatt-hour on Monday, compared with more than €42 at the market’s close on Aug. 25.

While confidence is improving, extensions to existing outages continue to interrupt the fleet’s production. EDF currently has 37 reactors available out of the company’s 56 units, with more outages scheduled in the next few months.

Read More: EDF CEO Is Confident About French Power Supply This Winter

France’s power security has also been aided by a steep drop in demand across the continent thanks to energy efficiency measures and a decline in industrial output. Recurring summer spikes largely due to high temperatures lifting power demand for cooling haven’t disrupted the general decline, according to James Huckstepp, a commodity strategist at BNP Paribas.

“We’re still about 7-9% below the pre-crisis normal across Europe, largely due to the industrial downturn and continued residential and commercial restraint,” Huckstepp said in an interview.

Short-term prices are also reflecting the better position in France, where power tends to be more expensive than in Germany. Day-ahead power for Monday was almost €20 per megawatt-hour cheaper in France, aided by low wind generation in Germany.

Source: Bloomberg