Looming elections and upcoming energy reviews have thrown the prospect of a possible French nuclear retreat firmly into the spotlight, with recent progress on the country’s offshore wind plans only fueling speculation further. So what’s going on and is the French industry eventually in danger?
By Gail Rajgor
The French government still believes nuclear power will remain “a pillar of France’s energy policy” long into the future. No surprise for a country that gets over 75% of its electricity from nuclear and is the world’s largest net exporter of electricity too, gaining over €3bn a year in the process.
Yet media speculation is mounting that a major withdrawal could be on the cards and it’s been sparked by a flurry of recent events.
Fukushima’s looming influence
Of course, there’s the impact of Fukushima. While events in Japan have not deterred President Sarkozy from announcing a €1bn investment into nuclear development, plant operators are having to conduct comprehensive analyses as part of the post-Fukushima safety assessment audits, to be submitted to the Nuclear Safety Authority in coming weeks.
Costs will inevitably rise in a post-Fukushima safety culture and project timetables affected, as EDF made clear in late July when it confirmed construction of Flamanville (Manche) EPR – one of two new nuclear builds planned for France and the first EPR in the world – will be delayed, in part, for this reason.
Meantime, public concerns over nuclear are mounting since the Fukushima disaster, while simultaneously economic pressures mount: France is embroiled in the Euro-zone financial crisis with its own credit status now being reviewed for a possible downgrade by Standard & Poor’s.
Against this backdrop, EDF’s explanation that “structural and economic reasons” are mostly to blame for the two-year delay of the Flamanville EPR, which will now come online in 2016, has not helped. Some civil engineering costs are “much higher than initial estimates” and overall project costs are now slated at €6bn.
On the flipside, the company’s latest results show a 6.2% improvement in operating profit from last year, driven largely by its nuclear activities, both at home and the UK.
“The improvement in the operating performance reflect permanent efforts to improve safety and performance at nuclear power plants,” says EDF. “The Group is making the investments needed to ensure the safe operation of its plants, to increase capacity and extend operating life beyond 40 years.”
Diversifying France’s energy mix
Indeed, while diversifying its energy mix and banking on overseas markets like the UK and China for new build projects (in partnership with fellow French nuclear giant Areva), EDF says it remains confident of a nuclear future in France. But the issue is fast becoming a vote chasing one as political parties prepare themselves for the presidential and general elections due next year.
The specter of an alliance between the pro-nuclear Socialist Party and the anti-nuclear green party, Europe Ecologie, which is pushing for the country to become a nuclear free zone, has been raised.
A possible full exit from nuclear by 2040 or 2050 was also confirmed in early July by current industry minister Eric Besson as one of the options being assessed in a forthcoming review of the country’s energy policy to 2050.
"We will study all possible scenarios for the energy mix. It will be done with total objectivity, in full transparency, without avoiding any scenario,” he said on radio. “A pullout [from nuclear] is not my conviction, it is not the choice of the government or the president but at the same time we can't exclude anything."
He conceded that at the very least nuclear’s share of the domestic supply mix should fall to around two-thirds, perhaps even 50% eventually. With the country’s plans for offshore wind now moving forward (government issued a call for tenders to build five projects totaling 3GW) some have said this indicates a new direction for France. But, according to most industry experts, that’s just not necessarily the case.
Dropping nuclear’s share of electricity supply to two-thirds simply accommodates France’s mandatory EU obligation to increase the share of renewables in its electricity supply from 12.4% today to 23% by 2020. The offshore wind plan will meet a hefty chunk of this target. “I wouldn't see the development of renewable power to be a major threat to the nuclear industry in France,” says an analyst at Ernst & Young (EY). “The volumes are comparatively low.”
It may, he says, present more of a challenge for grid balancing and transmission constraints, but “the French have shown an impressive capability to load-follow using nuclear”. Meanwhile, any potential impact on the cost of decommissioning and power availability (including for exports to the UK, Germany, Italy, Belgium and the Netherlands) “are even more negligible”, he believes.
Meantime, the financial fall-out of Germany’s revised policy is clearly taking a heavy toll on its four major utilities (E.On, RWE, Vattenfall and EnBW) and the general economy, too. Write-downs, due to earlier than planned decommissioning of projects, are already stacking up in the billions. Announced job losses are in the tens of thousands.
Phase-out trauma not for everyone
While France’s EDF has reported positive results and expects to employ thousands of new staff in the next few years, E.On’s CEO, Johannes Teyssen, was forced to report a 72% drop in income and a 45% fall in earnings. He blamed the “dramatic deterioration” directly on the phase-out policy. “This had an adverse effect of €1.7 billion in the second quarter alone," he said.
With the government being the major shareholder in the firms responsible for France’s nuclear fleet (EDF and Areva), it would, as one analyst puts it, be a brave administration that follows the German path. So for now at least, the French nuclear sector looks safe.
Nuclear industry suppliers in Europe and US must improve the management of their resources between projects as they respond to increased domestic competition in the Chinese market, Colin Elcoate, Vice President of Market and Business Development at SPX Flow Power and Energy, said.
Nuclear power is proving its value and reliability in difficult weather conditions. US nuclear power plants ran at record high efficiency rates in 2014, at 91.7% of capacity, according to data compiled by the Nuclear Energy Institute (NEI).
While each decommissioning site’s costs and requirements are bespoke, the costing models should be more flexible and universal so that tenders can be more competitive and stakeholders can budget appropriately.