The French nuclear availability is one of the most relevant drivers of European power prices both in the spot and forward markets. The future prices for the rest of Q4 still show that the market players price in a strong risk of lower than expected availability of the french nuclear fleet. We look at what this means for power prices in Europe this coming winter.
Oct 24, 2022
The French OTC and future markets have been trading winter 2022 at sky-high levels for months, pricing in a strong risk premium. The French nuclear availability is surely the main driver of the tension in the market after months of underperformance of the whole fleet.
What does this mean in terms of power prices in Europe?
We conducted an analysis using the Volue Insight pan-European model SPOTEX taking into consideration 30 weather years. The model factors in temperature, wind speed, and solar radiation as they would have materialised with European weather between 1985 and 2015 (weather years scenario derived from ERA5 data).
We used two different simulations (closings of fuels and carbon from 18 October 2022 and UMMs from 19 October 2022):
A standard run: we used our inputs to the model and the French nuclear availability as we normally calculate it, subtracting from the total installation all published UMMs.
A “tight scenario”: we used all input as in (1) but reduced the available capacity of the nuclear fleet by 20% for the whole horizon of the forecast.
Please be aware, when looking at results, that due to the very high prices in delivery and on screen, we reduced on the 11th of August our normal demand forecast for the next 12 months for most of Europe by 3-6% depending on the market areas. This, in our opinion, for now well reflects the measures introduced by the EC at the end of September to reduce electricity consumption.
Our SPOTEX model performs the simultaneous optimisation of prices and XB exchanges for all the European markets shown in the table below:
Thanks to the pan-European approach of SPOTEX, we can analyse the impact of a specific drivers on all bidding zones.
All tables we show represent the DIFFERENCES in weekly granularity between the “tight scenario” (scenario 2) minus the results of the model taken from the standard inputs (scenario 1).
We observe a weekly average increase of 20-50 Euro/MWh baseload in France for the observed period. The weeks that are affected the most are those between December and January. The total weekly net position of France increases by 3-9 GW indicating a larger need for imports.
Even under severe circumstances such as low nuclear availability and low temperature we see the model pointing to levels much lower than the French OTC market.
Below, we summarise the impact on power prices for all the neighbouring countries that contribute – when possible – to increase the total French net import position.
If you would like to know more or get a demo of SPOTEX, get in touch.