In April, EDF sharply cut its nuclear output target for 2020 from the 2019 level of 380 TWh to 300 TWh, and then revised it up again in July to 315-325 TWh. In this blog post, we offer an updated overview of the nuclear outlook, power balance and market prices for the rest of the year.
In the chart below we illustrate how the REMIT data from RTE has been modified since the start of the Corona-crises in March, compared to the actual REMIT availability for 2019.
The 300 TWh target announced in April represented a huge reduction in expected Q3 and Q4 output. The output target was revised again at the start of July when the 315-325 target was announced. The current estimated availability is illustrated in the chart above, showing a further increase in availability, but this would need to be revised down to fulfil the official 315-325 TWh target.
French Q4 prices fell strongly following the July announcement of a higher output target, but by end of September, French power was still priced significantly above neighbouring countries.
Normally France is a net exporter to all its neighbours except Germany during the 4th quarter of the year, but current price-spreads indicate that France will be a net importer from all neighbours in Q4 this year.
EQ has compared the price-differences from the end of June (300 TWh target) versus latest traded prices by end of September (315-325 TWh target) and 4-year averages.
Since the 315-325 TWh target was announced early in July, the price-spreads have as an average been reduced by about 10 €/MWh.
The start of October is looking to be relatively mild and based on French spot prices over last week in September, it looks reasonable that the French price will be lower than for the neigbouring countries during October. This is what the French vs Italian forward prices for the next three months show:
The price-difference for October is negative as explained above, while for November and December we see higher prices in France, which indicates the fear of power shortage in France due to colder weather and low nuclear capacity. We have looked closer to the power balance in France during Q4 to get a better view of the situation.
The French power balance
The EDF-announcement of a 315-325 TWh nuclear target means we need to downscale the current REMIT-curve for Q4. The latest REMIT-curve indicates about 340 TWh available nuclear capacity for 2020, thus we have downscaled the Q4-curve by about 15% to fit the 315-325 TWh target.
See chart below where forecasted nuclear production for the 325 TWh target of Oct 1st is compared to the 300 TWh from June, 2019-level and the average 2017-19 curve.
The French power balance for Q4 is then estimated based on Corona-reduced consumption of about 4% during Q4, while output from other types of production (thermal, hydropower + renewables) is based on average profiles.
We will then see the following power balance for 2020 (year and Q4):
Based on these numbers, the 325 TWh target will result in 39 TWh net exports, up 9 TWh from the 300 TWh target published in June. Increased consumption estimates lower the exports relative to the June-estimate.
From the Q4-balances we see that the increased nuclear target (325 TWh) results in a net export level of 5 TWh, up 10 TWh (4,500 MW) from the 300 TWh-target from June.
The normal exchange level for France during Q4 is about 4,000 – 6,000 MW exports. For Q4-2020 we estimate about 2000 MW exports given normal weather conditions. This means about 2,000 – 4,000 MW of changed power flows compared to a normal situation.
We see from the chart that the net exchange will be close to zero during parts of November and December. In such a case we don't expect French prices be to higher than in the surrounding markets.
On the other hand, in a cold-weather scenario with 5000 - 10000 MW increased consumption and low wind, there is a possibility for power shortage, and this is what the market players are fearing.
The French TSO has already focused on the possibility of power shortages, which the market is well aware of.
EQ haven't done any detailed simulations of the probability of such incidents, but we believe that such expectations are exaggerated in the market right now.
This means furthermore that the French Q4-price is strongly overpriced and might be reduced by 5-10 €/MWh given normal weather conditions.
EQ will follow the situation closely over the next few months.