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The French Disconnection: reducing the nuclear share in France’s Energy Mix

January 15th, 2014 by David Buchan, Oxford Institute for Energy Studies

France has entered into a national debate about its energy transition to meet its long range target to reduce CO2 emissions by 75 per cent by 2050, while maintaining security of supply and the competitiveness of French industry. It is a muddled debate, because the trigger for it is an electoral commitment by President François Hollande to reduce the nuclear share in the country’s electricity mix from over 70 per cent today to around 50 per cent by 2025, a commitment that few people in France – and maybe not even the president himself – regard as sensible or feasible to carry out to the letter. Indeed the origin of the commitment is almost an accident of electoral politics. And the national debate has done little to clarify the issue.

Useful though it may have been as a democratic exercise, the 2013 national debate managed to come to absolutely no conclusion about the eventual future of the French nuclear fleet. The final official document summing up the debate had only this to say on the crucial nuclear question: ‘all participants agree on the need – in order to prepare for future decisions – to define a strategy for the evolution of the nuclear fleet [parc nucléaire], whatever the choice of evolution beyond 2025 (renewal, continuation, reduction or phase-out)’. So what guidance can this post which is part of a recent paper offer about these options?

Renewal or replacement?

This is not a question that France needs, or is inclined, to answer soon. The oldest reactors in the current fleet, at Fessenheim, are not yet 40 years old, and there is every prospect (explained below) of prolonging their life to 50 or maybe 60 years, as in the USA. But replacement, if and when it comes, will be difficult. Because so many reactors were built in one decade (1978–88), their replacement would need to be almost as rapid. The EPRs may be bigger, but they also take longer to build. EdF has had a plan to build a second EPR at Penly, but this appears to be suspended until Flamanville is completed. The cost of EPRs is, as we have seen, beginning to appear prohibitive.

Nor does EdF appear to be putting anything like enough money aside to provide for one-for-one replacement of today’s reactors. The amount that the company is putting aside for depreciation runs at over €1bn a year (€1.35bn in 2010, according to the Cour des Comptes). But at this rate it would take EdF eight years to pay for another Flamanville out of its own retained earnings. Moreover, EdF would like to lengthen its depreciation schedule so that it can reduce the amount it has to set aside each year. It has already done this once. In 2003 it changed its accounting schedule for depreciation from 30 to 40 years, in anticipation of the decision which the ASN made in 2005 to extend, in principle, the life of reactors from 30 to 40 years. In 2015, the ASN is due to make its next 10-yearly review of nuclear safety and possible extension of reactor life-cycles. In anticipation of a further extension, in principle, to 50 or even 60 years, EdF is pressing also to be able to spread depreciation over 50 or even 60 years, so that it has more money available to spend on immediate repairs, maintenance and replacement of components.

EdF is a company that carries a heavy debt. It also has a majority owner, the French state, which last gave the company a capital injection in 1982 and which has been slow to reimburse EdF for subsidy payments it must make to renewable electricity producers and for discounts to alleviate energy poverty. The company is supposed to recover these subsidy payments through a charge on its customers’ bills, known as the Contribution to Electricity Public Services (CSPE in its French acronym). But for some years, this tax, whose level is decided by the government, has been insufficient to cover EdF’s costs. The resulting deficit sits on EdF’s books. It stood at €4.3bn at end-2012. The government has agreed to pay off the deficit with interest, but will only fully do so by 2018. Nor is France as open to outside investment as, for instance, the UK. It is hard to imagine the French state allowing EdF to call on Chinese help to invest in the French nuclear sector as the UK government is permitting EdF to do at the Hinkley Point project.

So one-for-one replacement of today’s reactors looks most unlikely, at least from today’s perspective. The picture could change if, at the time when a replacement decision would have to be made, energy prices in general, and electricity prices in particular, were much higher than today’s levels. At present, EdF has to sell most of its electricity at regulated prices. Moreover, at the insistence of the European Commission which wanted to prevent EdF using its cheap electricity to totally dominate the market, EdF is obliged under a system known as Regulated Access to Historic Nuclear Electricity (ARENH by its French acronym) to sell about a quarter of its nuclear power to its competitors at a low fixed price (currently €42 per Mwh). The ARENH price is set at a level that covers EdF’s current reactor operating costs, but because it is aimed at giving buyers the benefit of France’s past investment in nuclear power, it explicitly excludes coverage of the future costs of replacing the 58 reactors. This is yet another indication of the lack of any serious provision for reactor replacement.
Continuation/prolongation of existing reactors?

This is by far the most likely option – for the simple reason that it maintains the status quo which is relatively satisfactory to all concerned, except to France’s Greens and perhaps also President Hollande and a few of his fellow Socialists. French consumers can continue to get relatively cheap electricity either directly from EdF or, through the ARENH mechanism, from EdF’s few rival suppliers in the French market. It also satisfies EdF, because it postpones the headache of planning any replacements for today’s reactors. But it depends crucially on prolonging the life of existing reactors.
This is not a foregone conclusion. In contrast to the USA and Germany, no limit is fixed in advance on the life of nuclear power plants. Instead, France has a process in which every 10 years the ASN reviews the safety of an entire capacity level or palier within its nuclear fleet (for instance, all the 900 Mw reactors). It then makes a decision in principle on whether to prolong the life cycle of this tranche, with actual approval of life extension for individual reactors being decided one by one. The process involves examining the safety record of the type of reactor in question, both in France and abroad, over the previous decade, and reviewing modifications and improvements proposed by the operator (EdF). The declared aim is, at each 10-year milestone, to raise the level of safety above its previous level.

The last decennial review was in 2005, in plenty of time to negotiate modifications and award any necessary upgrading contracts before the oldest of the Mw 900 reactors – Fessenheim passed its 30th anniversary in 2009. The result of the review was to let the Mw 900 reactors go to 40 years. In exactly the same way, the next review will be in 2015, four years in advance of Fessenheim reaching its 40th birthday in 2019. As it happens, the one firm commitment that President Hollande has made is that Fessenheim should close by end-2016, in other words during his current term and before the next presidential election in 2017. In the absence of any generic fault being discovered between now and 2015, there is every expectation that the ASN will take the decision in principle to prolong the life of the Mw 900 tranche of reactors to 50 years. This would include Fessenheim, leaving President Hollande free to take his political decision about its closure.

Reduction of the nuclear share to 50 per cent of France’s electricity mix?

Common sense would indicate that such a reduction would leave France less of a hostage to any future problems in the nuclear sector, and might actually enhance energy security. But closing Fessenheim will certainly not, by itself, reduce the nuclear share to 50 per cent by 2025. Fessenheim is an obvious target for a gesture by President Hollande, both to his Green allies and to Germany where its promised closure has been welcomed; the reactors are located on a canal linked to the Rhine in an area of some mild seismic activity that has always caused some local concern. But some in France have questioned whether President Hollande has the right to close the plant on grounds of policy or politics, and have suggested that any closure decision should be made either by the ASN on safety grounds or by EdF on operational or economic grounds. These complaints would grow if the president were to order other premature reactor closures.
‘Very probably in the long term, nuclear will diminish, given new build costs, popular opposition and systemic risk – all these point to the probability that by, say, 2040 France will not have a 70 per cent nuclear in its mix’, Mr François Lévêque has argued. But, he insists that,‘as an economist, I would say it is completely stupid to close reactors early, it is throwing money out of the window. From an economic point of view there is no debate – it would be destruction of value’.

In theory, the proportion of nuclear generation should automatically decline as the share of renewables grows. France has an EU-agreed target to raise the renewable share of its total energy consumption to 23 per cent by 2020, which would reduce the nuclear share to around 27 per cent of its electricity mix. But the renewable share of electricity, produced and consumed, is still very small. Of electricity production in 2012, hydroelectricity accounted for 11 per cent, but this share has only grown very slowly. All other renewables amounted to another 5 per cent. As one international expert disparagingly puts it, ‘at their present rate of growth, it would take renewables 178 years to replace French nuclear power’. The nuclear share might also automatically shrink if nuclear power output remained constant, while total electricity consumption expanded. But most forecasts predict flat electricity demand or at best a 1 per cent annual increase. If, contrary to these forecasts, electricity demand were to fall, then the nuclear share could actually increase.

David Buchan, Senior Research Fellow, Oxford Institute for Energy Studies

P.S. This post is a short version of a recent OIES paper available here.

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2 Responses to “The French Disconnection: reducing the nuclear share in France’s Energy Mix”

  1. Liang Says:

    This article reminds me just one phrase – companies are more long-term than states. Holland wants to win the election and what he does is just presenting a menu to hungry people. What he could loss is just one presidential term. However, companies have to consider, I would say, mid-term or long-term for their business, especially for a national energy company which could run and serve the country for much longer than several presidential terms. So what politicians and companies concern is not exactly the same thing. In this sense, I think, the decision of a company or an institution is more reliable than the president himself. Just as mentioned in the article, the decision of closure of a nuclear station should not be in the hand of president nor as a bargaining chip for politic concerns. Instead, it should be decided by ASN or by EdF.

    Secondly, nuclear is not a bad thing. There is a Chinese saying that we should not give up eating for fear of choking. Yes, there have been several accidents about nuclear stations and they were serious. I think it is just like the comparison between the airplane and the on-ground transportation. In fact, the people dead in the air crash are much less than the on-ground transportation. But it is the air crash attracts much more attention and more critics, just like the recent Malaysia air crash. When we consider the pro and con of nuclear, we can find that the advantage is more important. Nuclear is clean, cheap and powerful. For big countries like USA, India, China etc., it is a more reasonable solution to choose nuclear as the base. In fact, we do not have alternative solution, at less for the moment, to archive the security of electricity supply and the reduction of CO2 at the same time. France is in its unique position where none other countries have so much proportion of nuclear in their electricity mix. So France should use this uniqueness and explore a road as an example, an alternative solution different from Germany for other countries like China.

    Finally, we should not just close nuclear station tomorrow even if we consider it as dangerous. Germany is an exception. It could not have reached its goal of closing nuclear stations without the help of European electricity grid. In the case of French, I think we should close nuclear stations according to their security condition instead of on politic ground. I always appreciate the French systematical style of organizing thing, although it is relatively slow compared with Chinese speed. But I think it is good in long-term, especially in the case of nuclear. As ASN examines nuclear stations every ten years and one by one, we can consider it quite prudent. As a result we could wait until the nuclear station reaches its time limit.

  2. Ariane Millot Says:

    Although the commitment by President François Hollande to reduce the nuclear share in France’s Energy mix does not seem feasible, it raises the question of the future of France’s energy mix.

    When nuclear plants close down, the government and the electricity producers will have to choose between a replacement or renewal of this nuclear plants. With the significant number of nuclear plants in France, the most important is nevertheless to choose a closure timetable. Even if the safety authority (ASN) decides to extend the lifespan of nuclear plants, in ten or twenty years the plants will have to close. If the closure timetable is well organized, the renewal (or replacement) of nuclear plants could be spread over time, and it will avoid the problem to build plant in one decade as it happened for the current plants.

    However it requires a strong political effort to establish this calendar now and at the moment neither the government, nor EDF have an interest in taking this decision: one for electoral reasons, the other in order to delay this renewal.

    Moreover as it is said in this article, EDF is not currently putting money aside in order to build new plants and it is not planning any renewal. Usually the learning curve of a technology is decreasing, but as we can see since the beginning of nuclear building, the nuclear learning curve is growing. That is why new nuclear plants require huge investment and at the moment it is not a cost effective construction. Only the government is capable of guaranteeing the investment cost of a new nuclear plant (In addition to the fact that the state is the last insurer in case of an accident).

    But should the government take any decisions in the renewal or replacement of nuclear plants? With the energy market liberalisation wished by the European Commission, the government should withdraw from the energy sector and it shouldn’t be the one to decide on the closure timetable.

    Thus there is a conflict between the government who wants to have control of energy policy and the liberalization of energy market. It is reflecting in the debt that EDF is carrying, because among others reasons, it doesn’t receive enough subsidies for renewables energies that it must buy.

    If the decision is made to renew the nuclear plants, and as the risks associated with the nuclear power implies the commitment of state, it is important that the government keeps having a control on EDF’s strategy. Public pressure could be more important and it seems unlikely that someone other than EDF would have the right to build a nuclear plant.

    With a strategy of replacement, we can imagine that the state will have less influence on EDF. However, in any case the government will have to face other challenges linked with the growing share of renewables (in order to reach the EU-target): the intermittency production of renewables and the associated costs – huge investment in electricity network which has to support this new input among others…

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