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France is Increasing Prices For Nuclear Power by More Than 60 Percent And is Relying on Offshore Wind Energy

Paris, France – In France, the government-capped prices for nuclear power will be drastically increased in the future. The French state and the state energy supplier Electricité de France (EDF) have apparently agreed on this. At the same time, the contours of France's future energy policy are becoming clearer.

The French government completely nationalized the ailing energy supplier EDF in 2023 and will determine the fate of the company itself in the future. Despite high debts, EDF will have to finance the billion-dollar extension of the nuclear power plant's lifespan and the construction of new nuclear power plants. The French government is also planning to expand offshore wind energy on a large scale; offshore wind farms with a capacity of 10,000 MW are to be put out to tender in France in 2025 alone.

Price of nuclear power will rise by 67 percent to 7 cents/kWh from 2026

On November 14, 2023, after difficult negotiations, the management of the state energy supplier EDF and the French government agreed to adjust the electricity prices for electricity from nuclear power plants. The French daily newspaper Le Monde already reported this. According to this, the price for electricity from French nuclear power plants is expected to rise by 67 percent from 42 euros per MWh (4.2 ct/kWh) to 70 euros per MWh (7.0 ct/kWh) from 2026. The background is that the Arenh system will expire at the end of 2025. According to this approach, EDF had to sell up to 100 billion kWh of electricity to competitors at government-capped prices of 4.2 cents/kWh. It is unclear what consequences this will have for French electricity consumers.

In the future, the higher price for nuclear power of 7 cents/kWh will apply to the entire French nuclear power production and not just to the 100 billion kWh. In addition, however, a mechanism for redistributing EDF revenues will be introduced. This means that EDF must return 50 percent of revenue above 7.8 - 8.0 ct/kWh and 90 percent above 11.0 ct/kWh to consumers. However, these costs per kWh do not include other costs such as transit, etc.

Massive failure of French nuclear power plants drives up EDF debts

As Le Monde further reports, the massive failure of French nuclear power plants in 2022 led to the “catastrophic” situation that expensive electricity had to be purchased on the European market to compensate for the lack of nuclear power. According to published data from EDF, nuclear power production fell by 82 billion kWh to 279 billion kWh in 2022 compared to the previous year in 2021 (361 billion kWh), reaching the lowest level in more than 30 years. All of France's neighboring countries had to help France with electricity deliveries, and the country became a net electricity importer in 2022.

In addition, the French government also increased the Arenh cap to 120 billion kWh in order to protect consumers from increases in electricity prices. This forced EDF to sell an even larger share of its already low nuclear power production last year to competitors at a price well below the market price. With the increased electricity prices on the market, which climbed to more than 20 ct/kWh and sometimes reached peaks of over 40 ct/kWh, EDF's debts skyrocketed. EDF's mountain of debt rose by 50 percent within one year, from 43 billion euros (2021) to 64.5 billion euros at the end of 2022.

Despite high debts, EDF is planning billions in financing for the extension of the nuclear power plant's service life and the construction of a new nuclear power plant

The nationalized energy supplier EDF now faces a huge challenge. In addition to the existing high debt burden, according to Le Monde, the "grand carénage", ie extending the operating life of existing nuclear power plants to at least 50 years, will cost around 66 billion euros alone. An estimated 51.7 billion euros have been budgeted for the construction of the new nuclear power plant.

At the end of June 2023, EDF announced that the company intends to build the first pair of ERP2 reactors at the existing Penly nuclear power plant site. In the same announcement, EDF also proposed that three ERP reactor pairs should be built - in sequence, i.e. one after the other and not in parallel - at the Penly, Gravelines (Hauts de France) and Bugey or Tricastin sites in the Auvergne Rhône-Alpes region. With construction times of 10 years or more for new nuclear power plants, the first new French nuclear power plant at the Penly site is unlikely to be connected to the grid before 2035.

France is expanding offshore wind energy and relying on green hydrogen

In addition to the use of nuclear energy, France is significantly expanding offshore wind energy as a further pillar. In 2025, the French government plans to tender offshore wind turbines with a capacity of 10,000 megawatts (10 GW), taking environmental criteria into account. This means that France can achieve its goal of expanding offshore wind energy to a capacity of 18,000 MW (18 GW) by 2035. By 2050, the installed offshore wind power capcacity is expected to increase to 45,000 MW (45 GW).

When expanding offshore wind energy, France is relying on conventional and floating offshore wind farms, and concepts for the production of green hydrogen are being implemented directly on offshore wind turbines. One of the global pioneers of green hydrogen production is the French company Lhyfe, which is pursuing an offshore pilot project for green hydrogen production with Sealhyfe. In June 2023, the Sealhyfe platform, equipped with an electrolyser, reached an important milestone for the future of the sector with the production of the first offshore hydrogen at the site in the Atlantic, the offshore test phase has now ended. Lhyfe now wants to benefit from the experience gained so far. According to Guesné, founder and CEO of Lhyfe, “the production of hydrogen at sea is now a reality and the countdown for expansion has begun.”

Source: IWR Online, 06 Dec 2023