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Q&A: French nuclear crisis

28 Oct 2016 17:24 (+01:00 GMT)
Q&A: French nuclear crisis

London, 28 October (Argus) — Q&A: French nuclear crisis

The French nuclear power crisis is affecting power, natural gas, and LNG markets across Europe. Here is an overview of the situation.

What is happening?

Several French nuclear power plants have either shut or extended planned maintenance periods while checks are performed at facilities affected by "irregularities" during the manufacturing process. The latest schedule from nuclear plant operator state-controlled utility Edf shows around 12.2GW, or 19pc, of France's 63.1GW nuclear capacity will be unavailable at the end of next month. Unavailable capacity should fall to 8GW at the start of December.

How has this affected power prices and the natural gas market?

The French base-load month-ahead power price is up by around 100pc on the year at nearly €90/MWh. The contract increased by around 300pc between July and the end of October.

How might it affect the gas and LNG markets?

Gas-fired power generation in France and neighbouring countries has increased to offset the loss in nuclear power output. France is already burning more gas — over 50pc more in October 2016 than in October 2015 — and importing more power from its neighbours. The country is producing as much power as possible from its gas-fired power plants.

It is also importing the maximum amount of power possible from Germany, which is helping to lift gas burn in that country too, in addition to favourable clean spark versus clean dark spreads in the German day-ahead market. This means that gas is more profitable to burn for power generation than coal.

Outages at French nuclear plants pushed French power prices above the Italian equivalents on some days, offering less incentive for imports and even a switch to Italian exports during peak periods.

France is also importing record amounts of power from Spain. Spanish gas-fired generation rose in the first half of October and the country exported electricity to France for the first time since May. Spanish gas-fired generation rose to 212 GWh/d on 1-15 October, from 163 GWh/d in September and compared with 170 GWh/d over the whole of October 2015.

Spanish gas-fired generation could remain strong later in the winter to supply France, particularly during any cold spells, with plenty of under-utilised gas-fired generation capacity available. Spanish gas-fired power plant utilisation was only 12pc in September.

Prices on the Spanish PVB gas hub, previously known as AOC, may also have risen enough to encourage Spanish LNG importers to divert fewer cargoes elsewhere, even with some support for global LNG prices in recent months. Month-ahead PVB prices were $6.55/mn Btu yesterday compared with $6.85/mn Btu for the Argus northeast Asian LNG spot price, or ANEA.

How did the crisis start?

Steam generator anomalies were found in 2015 during the construction of the Flamanville 3 nuclear reactor, and a decision was made to check operational reactors for similar anomalies. Irregularities in manufacturing checks and a paper trail from reactor manufacture Creusot Forge were uncovered during this process. The discovery of "marked files" highlighted 20 reactors out of 58 with varying degrees of severity concerning various parts of the reactors.

Then there were irregularities in an "unmarked file" uncovered as EdF was about to remount the steam generator at Gravelines 5 in the spring of 2016.

Anomalies with Japanese Casting and Forging (JCFC) steam generators were uncovered during checks for Creusot Forge irregularities. JCFC steam generators are used in 12 of the 58 operational reactors.

EdF last month delayed several nuclear outages without providing a reason for the extensions.

What next?

France is awaiting a decision from French nuclear safety authority ASN to restart 11 of the 12 reactors with JCFC steam generators. EdF will request the restart of Fessenheim 2, which had a Creusot Forge irregularity, by end of 2016, but decision is expected to take longer. Gravelines 5 is awaiting a new steam generator, which also had a Creusot Forge irregularity, and is scheduled to restart on 31 March.

EdF, French nuclear firm Areva and ASN have started reviewing unmarked files in September. This could take around a year, and they have all warned that other irregularities will be found. The impact will likely be felt over the next two years.

Other countries may also carry out checks on their reactors.