News
17/12/25
Viewpoint: French power in slump
London, 17 December (Argus) — France enters 2026 with power prices in a slump,
as stagnant demand meets strong nuclear availability and ever-increasing
renewables output. Forward prices are well below spot delivery in recent years,
with the Cal-26 contract assessed at €49.75/MWh on Tuesday, compared with spot
delivery of about €60/MWh in 2024 and 2025. Lower gas prices explain some of the
low forward prices, as does increased renewables capacity, but French hydro
reserves are well below previous years, and EdF expects to produce less nuclear
power year on year because of further planned long maintenance shutdowns. If low
spot delivery confirms that these forward prices were correct as to how
fundamentals would play out, it could limit any potential for upside risk. And
the course of any potential demand recovery over the next few years will
determine whether the contango shape of the French forward years is justified by
fundamentals. The French yearly contracts are unusual with Europe being in
contango, rising out to the end of the decade, compared with most other
countries which are in backwardation. Fundamentals arguments put forward to
explain this include expectations of increased interconnection to more expensive
markets, or an uptick in demand, especially from industry and data centres. But
demand has remained stubbornly flat over recent years. Industrial, data centre
and hydrogen projects with a total demand of 30GW have grid capacity reserved
for them. If all of these projects came to light and used their full capacity,
demand would leap by 180TWh by 2030, or about 40pc. Not all of these projects
will be built, and those that are will not use their full capacity all the time.
Grid operator RTE's high estimate is for 60pc of projects to be completed, which
will then use only 20-60pc of their grid capacity. But even if only some of them
are built, this could push demand growth to 1-3pc/yr. RTE's low estimate for the
incremental demand from these projects by 2030, as well as additional electric
vehicles, comes to 2.7GW, while its high estimate is for 6.3GW of incremental
demand. A rapid increase in demand could outpace supply gains from the several
GW/yr of solar capacity likely to come on line in the coming years, mechanically
tightening France's balance, if it is met and there is not a fall in demand from
other sectors. France may be reaching a crunch point on renewables. The ambition
of governments of recent years to advance on renewables and nuclear has hit the
buffers, as the lack of any demand growth removes justification for increasing
capacity. Low market prices are an indication that France does not particularly
need any extra renewables capacity in the short term. Capture rates for solar
have fallen year on year, while lower market prices mean the bill for public
subsidy for renewables grows ever higher. Some increases are locked in over the
next few years, but appetite may be lacking to continue growth beyond that. And
political obstacles could make a low-renewables strategy easier. Right-wing
parties are firmly opposed to renewables, and the government relies on their
tacit support to remain in office. The government intends to publish the PPE3
10-year energy strategy by the end of the year, which in this draft includes
cuts to renewables targets, it has said. The other big dossier of French energy
is the new nuclear programme. EdF has already started preparatory works to build
two 1.6GW reactors at Penly, and plans to build a further four, with eight more
on the drawing board. But the experience of the Flamanville 3 reactor — entering
service more than a decade late and many billions over budget — could make any
government hesitate before offering EdF funding for more reactors. This is all
the more true if prices remain low in the coming years, which would cut EdF's
ability to fund large investments and require more government support. The
mooted €100/MWh price point of the new nuclear, more than twice the current
market price, is a further impediment. And the programme is not expected to come
into service until the late 2030s at the earliest, meaning a government which
holds fire can spare itself large costs without incurring any power shortage
during its term in office. By Rhys Talbot Send comments and request more
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