France's national grid operator, RTE, announced on Wednesday that the outlook for France's electricity supply is “much more favourable” as the country prepares for the autumn and winter seasons compared to the previous year. Furthermore, spot prices in France are currently “significantly lower” than in neighboring countries such as Germany, Britain, and Italy, indicating a comfortable supply-demand balance in the coming months.
RTE assured that even in the event of a heatwave and drought, which could reduce the availability of nuclear power during the summer, France would be able to ensure sufficient supply through imports. The operator anticipates improvements in the nuclear sector's output during the winter, with an estimated daily production of approximately 40-45 gigawatts (GW) in December and 45-50 GW in January. These figures are expected to align with the supply levels recorded in 2021.
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The year 2022 witnessed a significant decline in French nuclear availability, reaching its lowest level in 34 years, due to stress corrosion issues. Consequently, the operator had to shut down an unprecedented number of reactors. However, with the projected increase in nuclear output, France is expected to return to its status as a net exporter in 2023, having been a net importer for the first time since 1980.
While the grid operator acknowledges the positive developments, RTE emphasizes the importance of controlling demand to preserve hydroelectric stocks that will be necessary for the winter season.
Looking ahead, future contract prices for the winter in France are lower than last year's levels. However, they currently include a risk premium, which places them above the cost of thermal production and the prices observed in neighboring countries. Analysts suggest that this risk premium, particularly in the first quarter of 2024, is driven mainly by concerns over a repeat of the previous year, rather than underlying fundamentals.
An analyst commented, stating, “In general, we expect this risk premium to diminish as we adopt a bearish view on delivery prices.”
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In conclusion, the latest statement from France's national grid operator indicates a promising electricity supply outlook for the autumn and winter seasons. Improved nuclear output and lower spot prices compared to neighboring countries contribute to a favorable supply-demand balance. With the country expected to regain its status as a net exporter, efforts to manage demand and preserve hydroelectric stocks remain crucial for ensuring a reliable energy supply during the upcoming winter months.
