For many years, the price of electricity has been influenced by several markets (natural gas, coal, oil, carbon, etc.). It is also affected by several factors inherent to the market (level of demand, availability of supply, etc.).

Once combined, these elements generate a “long-term” trend, which is important to consider when optimizing your energy budget.

The availability of supply, combined with an increase in demand, pushes producers to their limits. France's nuclear reactors currently provide nearly 70% of electricity consumption. During periods of low nuclear availability, electricity prices can experience dramatic increases in the short term. The end of 2021, and the beginning of 2022, are the perfect illustration of this. This is a sign of a tense underlying trend for the electricity market.

Depending on your company's energy offering, it is important to follow short and long term trends to detect future opportunities in the price of electricity. In this article, we will analyze the underlying trend currently emerging in this market. We will also study the possible repercussions on the prices offered by suppliers.

In this article, we will focus on evolution:

• the balance between electricity supply and demand;
• the nuclear sector, the main source of electricity in France;
• means of producing renewable energy.

A complex electricity supply-demand balance to maintain

The current energy transition is pushing up demand for electricity in the long term. Indeed, current policies are seeking solutions to achieve carbon neutrality in Europe by 2050. To further accelerate the achievement of this objective, the European Union is raising its carbon emissions reduction target. By 2030 it should be 55%, compared to 40% previously.

Achieving these very ambitious objectives requires concrete and rapid actions. These make it possible to reduce carbon emissions into the atmosphere. One of the key solutions retained is the end of the use of natural gas for heating in new buildings. This choice to limit the use of natural gas, or even fuel oil, will significantly increase general demand for electricity in France. This example joins the transport sector in the list of new consumer behaviors turning towards electricity.

To illustrate this long-term increase in overall electricity demand in France, several organizations have made projections. The Academy of Technologies published in March 2021 a document on the levels of energy demand for electricity in France, by 2050[1]. It highlights a doubling of demand in the space of 30 years, the latter increasing from 470 TWh (Terawatt hour) to nearly 840 TWh.

“… the demand for electricity (470 TWh currently) could go from 730 TWh to more than 840 TWh in 2050 if we include a doubling of the demand for hydrogen compared to its current level…”

Electricity Transport Network (RTE) also proposed its electricity projection in 2050 based on the National Low-Carbon Strategy (SNBC)[2].

According to their estimates, electricity demand should increase from 25% to 55% of the total energy consumed. This significant increase in electricity demand endangers the production sector, already strained by several cyclical and structural factors.

The nuclear sector: what are the long-term forecasts?

An aging sector

Nuclear energy will be, in 2022, the most important source of electricity production in France. In addition to being carbon neutral, it generates a constant and very significant volume of electricity. This means of production represented, in 2020, 67% of electricity production in France, far ahead of hydraulics, or even Renewable Energies (ENR). However, French nuclear power plants are aging and are reaching their operating limit, set at 40 years.

This situation creates uncertainty over France's ability to respond sustainably to the expected increase in energy demand.

To limit the pressure on EDF on electricity production, the solution chosen was to implement a program called “grand carénage”. This program aims to extend the operating life of French nuclear power plants, while maintaining operational safety. It was established in 2014, and must end in 2025, for a total cost estimated by EDF at 49.2 billion euros.

Thanks to this major overhaul plan, the oldest nuclear reactors, built in the 1980s, have seen their operating life extended in 2021.

The Nuclear Safety Authority (ASN) announced that the reactors concerned can continue their activity for an additional 10 years. At the same time, checks on the most recent reactors in the nuclear fleet revealed, at the end of 2021, corrosion problems and concerns about the cooling system. The detection of these problems led to the shutdown of 10 nuclear reactors, out of the 58 existing. These shutdowns led to a sharp increase in electricity prices over the years 2022 and 2023.

A gradual return of these reactors is planned for the end of 2022, beginning of 2023, which should relieve market prices. However, in the longer term, these difficulties add to the uncertainties surrounding the new French nuclear reactors.

A long-awaited nuclear succession

Emmanuel Macron announced in November 2021 the desire to build six new EPR (European Pressurized Water Reactor) type nuclear reactors, from 2025, in France. This announcement is a response to the forecast of energy demand by 2050 established by RTE. This announcement effect had the effect of reassuring the market in the long term, but also raises several questions. Indeed, the construction of a nuclear power plant generally takes 5 years. Thus, these 6 new reactors would only be in service from 2030, at the earliest.

In addition, these six announced reactors will be based on the model of the Flamanville nuclear power plant. However, the construction of this third generation reactor is accumulating problems and delays. Launched in 2007 and expected to be commissioned in 2012, work on the reactor is still underway.

The cause was various welding problems and poor workmanship which led to this delay of almost 10 years. At the end of 2021, EDF announced that the Flamanville EPR should be commissioned at the end of 2022, beginning of 2023.

Another question raised by this announcement by Emmanuel Macron, France's capacity to respect the law on energy transition. Indeed, this law provides for a reduction in the share of nuclear energy in the French energy mix, to increase it from 75% to 50% by 2025. The objective of this law is to give a more important place to renewable energies . However, the latter encounter difficulties in their implementation.

What developments for the renewable energy sector?

Renewable energies are favored by the European Union and part of the French government. However, they create numerous controversies, particularly as soon as the question of the land selected is raised. Offshore wind turbines alone crystallize France's difficulties in developing renewable energies. The condemnation of the State for its inaction in favor of the environment and the objectives of the European Union are putting pressure on energy policies in the medium term.

The development of renewable energies in the French energy mix raises another question: the seasonality of energy production. Unlike nuclear production, which is constant throughout the year, ENR production is dependent on the weather. This variability in production poses a problem with a view to increasing demand. The more the share of renewable energies grows, the more volatile electricity prices will become. For example, during winter periods, electricity prices could increase very significantly from one day to the next.

To limit these production seasonalities, France has historically used fossil fuels to cover all demand. Thermal and gas power plants have the advantage of being easily used and constant in production. On the other hand, they release a large quantity of CO2 into the atmosphere. Emmanuel Macron, in his electoral program, announced the shutdown of coal-fired power plants in France.

However, at the start of 2022, the coal-fired power plants of Gardanne, Saint-Avold and Cordemais still remain in operation. This is proof that the situation on the electricity market is complex, and that the balance between supply and demand is difficult to maintain. Thus, to limit this long-term tension on the electricity network, and by extension, on market prices, the government is focusing on optimizing energy needs.

Optimizing your company's energy needs: the key to preserving your budget and the environment

“The best energy saving is the energy that we do not consume”. This motto illustrates the current state of mind of the current government on the future of the French energy market. He wants to accelerate the energy transition of electricity consumers, to limit the quantity of energy consumed in the medium term. Among the tools enabling the acceleration of the energy transition, we find:

• Dynamic offers in France, from the Nordic countries;
• The establishment of financial aid to encourage companies and individuals to carry out energy saving work (Energy Savings Certificates or CEE).

These solutions allow consumers to act on the contractual conditions subscribed to with suppliers, and to optimize their electricity and natural gas needs.

Infinity Energies, an electricity and natural gas consultant, offers comprehensive support to professional energy consumers (companies, associations, communities, condominium managers, methane digesters, etc.) to help them control their energy budget:

• Energy brokerage, with around twenty energy suppliers;
• Tax optimization of taxes present on the energy bill (Contribution to the Public Electricity Service or CSPE);
• Energy market monitoring;
• Invoice analysis;
• Obtaining CEE;
• Bringing your business into compliance to comply with the tertiary decree…

Our team of energy consultants will support you now to answer your questions about your energy project.

Evolution of the price of electricity in July 2019, 2020, 2021 and 2022: From €43.02/MWh to €513.59/MWh

[1] https://www.academie-technologies.fr/publications/perspective-de-la-demande-francaise-delectricite-dici-2050-avis/

[2] https://www.rte-france.com/analyses-tendances-et-prospectives/bilan-previsionnel-2050-futurs-energetiques

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