Macron’s nuclear push

This week French president Emmanuel Macron announced a new prime minister – with other key energy portfolios still to be put in place. The latest pod discusses corrosion at several of the country’s nuclear plants, expected output over the crucial winter period and the expansion of solar power. We also examine whether Macron’s plan to build up to 14 new reactors is realistic without a restructuring of EDF.

Host: Richard Sverrisson, Editor-in-Chief, Montel
Guest: Emeric de Vigan, CEO and Founder Core-E

Transcript

Richard Sverrisson, Editor-in-Chief, Montel: 0:05

Hello listeners and welcome to The Montel Weekly Podcast, bring You Energy Matters in an informal setting. This week has seen a flurry of regulatory developments, both at the EU and national level. Today's episode focuses on France and changes to President Macron's new government, as well as a belated look at his election victory. What does a new cabinet mean for France's energy transition and the expansion of renewables? As is fairly well known, France has been plagued by issues as its nuclear fleet changing from being an exporter of power to a net importer. So are the plans for up to 14 new reactors realistic or feasible? So joining me, Richard Sverrisson to discuss France's energy strategy is Emeric de Vigan of Core-E. Let's start by looking at the new governments especially the new Prime Minister. What does this mean for energy strategy in France? Emeric?

Emeric de Vigan, CEO and Founder Core-E: 0:59

Let's be clear. We only have a new Prime Minister. As of today. We don't really have a new government, so it's, it is pretty difficult to to estimate what this really means. Generally speaking, I think this Prime Minister it is born is quite likely to continue. The renewable expansion in France are unlikely to stop it, put it that way. Regarding the new Nuclears nuclear, it's a little bit less clear. I think it will depend on who is act, who is the actual ministry in charge of it. And also the big question is who will be the next CEO of EDF?

Richard Sverrisson, Editor-in-Chief, Montel: 1:33

Okay. So we need to have those details really before we can have a closer dig deep into the issues there. But but I've heard that Elizabeth Bourne, that she's in charge of green planning. What does this really mean?

Emeric de Vigan, CEO and Founder Core-E: 1:44

Green planning means the political strategy to push for more renewables or to de carbonate the economy. I'm not expecting any major change compared to what we've seen in the last few years, five to 10 years. I think we're gonna see a strong push for more solar generation potential acceleration, actually. They wanna make sure that it gets easier than before to actually get the permits to to build the new solar farms. I'm not expecting any, any strong shock from a renewable point of view.

Richard Sverrisson, Editor-in-Chief, Montel: 2:17

There are elections coming up in June Emeric. What can we expect here? I know it's mainly, there's talking that, we could see an increased polarization of the country, but would there be any sort of energy impacts here?

Emeric de Vigan, CEO and Founder Core-E: 2:29

This is very politically political question. We as you said we've seen that some political leaders are strongly against nuclear generation. Whereas most of the others are in favor of continuation of of the development of of nuclear fleets or at least the renewal of the renewal fleet so differently. They think most of people think we do need some nuclear generation if we wanted de carbonate the economy. So there's really two 2, 2, 2 different positions. There one, it's it's led by Jean who is strongly against nuclear generation in, in, in his public positions. All the others seems to be in fair about,

Richard Sverrisson, Editor-in-Chief, Montel: 3:07

and he, he has quite strong support in France. He came third in the presidential election. What could a potential. If he were to, provide a, or get a strong share of the vote, could that add pressure on the nuclear plans?

Emeric de Vigan, CEO and Founder Core-E: 3:21

I don't think so because the way the elections in June do work, is quite unlikely to get a majority and is actually quite unlikely to get a very large amount of deputies in the Parliament. So he will have his voice will be less than that. But I don't think it would really be in a position to actually decide the energy polity of the country.

Richard Sverrisson, Editor-in-Chief, Montel: 3:41

It's it's clear that there could be more a more divided country, but what, I'm just thinking potentially Macron's position could be weakened. Yeah.

Emeric de Vigan, CEO and Founder Core-E: 3:49

Yes, it could be weakened. But I don't see I don't see John having the majority in the Parliament. I don't see any other party having the majority in the parliament. So it's also quite unlikely to be, he is also quite unlikely to be in a very weak position, in fact. John Meron that is sorry. No Emmanuel, I think it should be in a position to take decision, at least from an energy point of view.

Richard Sverrisson, Editor-in-Chief, Montel: 4:12

What does this then mean? For example, for the very ambitious plant plans to build six new EPRs or European pressurized reactors and potentially with an option of up to eight more. Do you think what's your view on these, on the, on these, this target?

Emeric de Vigan, CEO and Founder Core-E: 4:27

I think so far I just see it as a public announcement that was actually done before the presidential election. And everything still has to be done. The financing is not clear the people who would be in charge of this project unknown yet. So to me there's nothing clearly ready to achieve this plan yet. So I think before we in a, the country is in a position to start building new nuclear reactors again, it's needs it, it needs a to decide what will happen to EDF. There's some pretty ambitious reforms that macro wants to do. Wants it to do, put it standby, quite likely to do in the coming months. Once that is done, I guess we can start discussing on what's what's the plans to to build new reactors and how we finance them, who is in charge? But as you mentioned before, the issue is more on the short term. What do we do with the current fleet? How do we fix the issues?

Richard Sverrisson, Editor-in-Chief, Montel: 5:27

Exactly. I'd like to return to that a bit later, Emerick, but if we can focus, on, on the, maybe on the reforms of EDF what's on the table to those listeners who haven't been fo closely following developments in France. What are the options or what are, what has Macron said that he'd like to do with the utility?

Emeric de Vigan, CEO and Founder Core-E: 5:45

There's a lot of different options in the, when you look at details, but generally speaking, the what seems to be the only realistic option is to split nuclear generation. And whether we will be a hundred percent nationalized or not, that remains the question, but it is quite likely that we see a split between the different activities of EDF renewable. On the one hand, the nuclear on the other hand. With the nuclear quite likely to be in my opinion, fully nationalized and, quite regulated in the way it's sold to the market. On the weather. The nuclear generation is sold to the market. This is linked to the RN that comes to an end in 2025 and something has to be done to find a new mechanism.

Richard Sverrisson, Editor-in-Chief, Montel: 6:30

Absolutely. So what I mean, so there, there's a kind of bad bank option. Is this what we're talking about here, Rik? Or is that, would that be unfair?

Emeric de Vigan, CEO and Founder Core-E: 6:37

I think it's quite unfair because nuclear is not bad in itself, but it needs looking at what is now with a huge amount of money that needs to be invested to A, fix the issue. B, expand the lifespan of the different units. Can be seen as a bad bank for the next few years, but generally speaking, nuclear generation should be a profitable business.

Richard Sverrisson, Editor-in-Chief, Montel: 7:01

I'm just wondering as well, Emeric, whenever there are changes to EDF structure or, plants are plant to close, there's often a very strong union reaction. So how do you see this? Panning out in their years to come that will the unions react to any changes in the structure of EDF or how it operates as a company?

Emeric de Vigan, CEO and Founder Core-E: 7:20

Yes, they will definitely react and we're quite less likely to see some some strikes here and there quite regularly actually. Now I don't think all the unions have exactly the same view. From what I've heard recently, I'm not sure we'll see all the unions striking together and, sharing the same the same view on what should be done. In my opinion, I think a structural change at TDF is doable because, part of it really is common sense. Most of the unions now, it's needed. They know how much money is needed to finance the nuclear generation. I'm, I would say I'm rather optimistic. I'm not saying that Malcolm will be able to run the pension reform and the EDF reform at the same time, the same week. But I think it's it's feasible within the course of few months.

Richard Sverrisson, Editor-in-Chief, Montel: 8:06

So we've got some tough battles ahead. Anyway yes. Now we talked a little bit or I mentioned the intro that France EDF has become, or France and Annette importer power from it, from its neighbors. And the EDF output targets are the lowest in 30 years Now. Do you expect the company to reach this target of 295 to 315 T hours?

Emeric de Vigan, CEO and Founder Core-E: 8:31

Yes, I think so. There's part of me that think they might be able to produce a bit more, in fact. But we're still quite blind actually about about what, what will happen in the next few months. We know there's this trust corrosion issue. On top of various other issues. And regarding this stress coercion issue, we had the, as SN the regulator giving a speech yesterday would stay. We literally said they're still running studies and checks to see if the units can run safely with this coercion. And if that's the case, I wouldn't be surprised that we have a. I wouldn't say high availability this winter, but maybe decent availability this winter. However, that's that, that doesn't mean the issue doesn't have to be fixed. But it could be that they can still run the issues and spread the works over the next several years. So I don't think, we'll we'll see a terrific increase in the nuclear generation in the next three to four years, but we might be in a position to avoid the worst this winter.

Richard Sverrisson, Editor-in-Chief, Montel: 9:33

Fingers crossed.'cause I think parts of Europe are very, not just France, but its neighbors are also very dependent on, on, on French nuclear power. Okay. Okay. Yeah. But I you think that we'll keep at this kind of around 300 OTT hours for the coming, coming years, then?

Emeric de Vigan, CEO and Founder Core-E: 9:52

Probably a bit more maybe, some, somewhere between 3 13, 3 40, 3 50 in the next few years which is quite low when you look at it. We used to be above 400 tower in what we can call the old days now.

Richard Sverrisson, Editor-in-Chief, Montel: 10:04

The good old days, exactly. Yeah. But when Emeric, recently, I think it was earlier this month, or certainly at the end of last month EDF was fined for breaches of insider information. Are you happy with the way the company puts out information on its remit website, which is the remit the information on outages, et cetera, because. As you were saying is we're, we're a bit blind sometimes. We don't really know exactly what the issues are, especially with the corrosion or other issues.

Emeric de Vigan, CEO and Founder Core-E: 10:31

Yeah. It is a tricky question and I'm not the regulator, but I would say the, they're doing a good job in publishing outages in real time when the when they happen why it's a bit more difficult. For market participants is to get information about the different talks that happen between them, the a SN I guess the government too. Where it's not actual firm information that they have to publish, but it's more assumptions that they're discussing. And, you really feel that it's a lot going on in the back, that doesn't get doesn't get communicated to the market. And also, let's be honest you guys have very good sources sometimes from unions especially. And yes, it's always surprising to see a listed company to get some information from a listed company by unions rather than by the corporate communication department.

Richard Sverrisson, Editor-in-Chief, Montel: 11:18

Absolutely. I think that's our report has done a done, so done a great job there. Putting out that, that kind of information on what is the issue, but what do you make of these corona issues? Is it serious or do we just not know the implications of the corrosion at the at the plants.

Emeric de Vigan, CEO and Founder Core-E: 11:32

It, it definitely is serious. And and it wasn unexpected at that stage because let's let's remind let me remind you that the all oldest units are not affected. From what we had, it's only the most recent units that are affected. So yes, it's air use. Whether the units can run safely with this issue is still under investigation. I guess EDF will say that say, yes, the regulator will look into it and will give his decision will give his view on that. But in any case fixing the issues is quite a heavy job. Because it's in the nuclear part of the units you can get workers to spend 12 hours fixing the pipes there. So it's not something you can fix in a few days or weeks, or even months. So I think it. It requires a very large scale plan from EDF

Richard Sverrisson, Editor-in-Chief, Montel: 12:20

And fixing it and dealing with it also then will require the plants to be offline while that's done as well. Yes. So hopefully they'll schedule it at a time, not maybe in the coldest days in the winter, but I'm sure. I'm sure they know that. Don't even.

Emeric de Vigan, CEO and Founder Core-E: 12:32

Yeah they're very good at doing that. So I have no concerns there. But what we're seeing these days is that the power prices are very high even in the summer. There's really two things there. The security of supply aspect we, they will deal with. But in any case, not having the units running in the summer is also very costly for the country and

Richard Sverrisson, Editor-in-Chief, Montel: 12:50

For the continent, for sure. That's we're very dependent on that as we mentioned earlier. You mentioned, you expected to see a big expansion in solar. What about wind in France? What are the plans here? You must have very good offshore conditions on the North Coast and on the Atlantic Coast.

Emeric de Vigan, CEO and Founder Core-E: 13:08

Yes the, there are plans from what I'm seeing there, they're a little bit less ambitious than for the solar. I guess the reason that it's more difficult to get the permit and to get the public acceptance for offshore wind farms in, in, than it is for, than it is for solar.

Richard Sverrisson, Editor-in-Chief, Montel: 13:24

And is Macron hoping to deal with this? It's the same old not in my backyard protest. The nimbyism is there a way, I know that they've had similar problems in Italy, for example, and they're looking to speed that up. Is that on the agenda of the new Macron presidency?

Emeric de Vigan, CEO and Founder Core-E: 13:39

I've more heard that for solar than for wind, to be perfectly honest with you. But I'm I might not, I've heard everything. I'm not, might not be aware of everything, but I think there's a strong willingness to push for that, for solar. For wind, I think a little bit less.

Richard Sverrisson, Editor-in-Chief, Montel: 13:53

If we can talk, move on to. The energy crisis in Europe and what it's how France has dealt with it. What, what has been the, the major impact of the crisis in France? We can see obviously the, massive increase in prices and the moves to cap some of the retail prices. But what are the other moves? How is France dealing with it?

Emeric de Vigan, CEO and Founder Core-E: 14:15

It's a good question. So first let's be clear, there's two crises that are actually somehow linked. There's a gas crisis, with prices going absolutely mental there linked to a nuclear crisis before last spring. I'd say it was only a gas crisis, where we saw gas prices going up. Then we started having the nuclear issues, which is adding to the gas crisis because the less nuclear generation you have available, the more gas units to replace it. I'm talking not only from a French point of view, but from a European point of view. So far the way France has been dealing with it from the retail point of view you mentioned it, there's been some ca cap implemented on the prices from a wholesale point of view. We just replace the nuclear that was missing by some gas coming either from French gas units or from surrounding countries. Importing significant amount of power from Spain, from Germany, from the uk. And we but again, it's not specific to France. From a European point of view, we just imported a lot of LNG from the US to try and and refill the storages. And so far the plan has been going okay. I'd say also because the import from Russia, Russia have not really been cut. So far we're in a position to refill the storages and and think we might be okay by the end of the, by the end of the summer. Long story short we, from a pure power point of view, there isn't a lot that has been done. By that I mean we haven't seen any major demand response or sobriety initiatives, which is quite surprising. There's been a little bit of demand destruction, very marginal in my point of view from the analysis. We are running with my company. We're seeing, I'd say almost zero. I know some companies are seeing a few percent. It's very difficult to get to to calculate exactly how much it is because there's a strong weather impact. But so far from a consumer point of view, because there's been some cap on the prices. Most well for residential customers, but also for professional customers. It's not directly a cap, with the rn, the extra volume of RN have been quite protected from my prices, so been more or less business as usual. I think it can be very different next winter.

Richard Sverrisson, Editor-in-Chief, Montel: 16:29

Yep. That's the scary part. But, so you haven't, that's interesting. You haven't seen industry or industrial demand fall at all in France as a result of the energy crisis?

Emeric de Vigan, CEO and Founder Core-E: 16:39

I haven't seen anything very significant. I haven't seen anything very significant. I think the, at the European point of view, the gas demand is done by around 6%, which is quite a lot. Or significant the power demand is down maybe 1%, one to 2% from what we're seeing at the moment. It'll be we in a few weeks when there's no eating demand left at all in Europe. We'll have a much clear view.

Richard Sverrisson, Editor-in-Chief, Montel: 17:04

Perfect. I'd just like to finish really Emeric by talking about the, our end mechanism, for those listeners who are unaware what this is a, a number of years back, the European Commission forced EDF to sell a proportion of its power to industrials at a fixed price. What, how do you see this, you said this is gonna end in 2025. The debates becoming quite fierce and what should replace it, or should we continue with it? What's the current state of play here, Emeric?

Emeric de Vigan, CEO and Founder Core-E: 17:30

The first unknown is the volume for 2023 because you know the volume, the island volume was a hundred tower. Tower. It went up to 120 tower. Tower for 2022. We don't know what is going to happen for 2023. Now for the future of the mechanism, there's a very strong consensus, I'd say for improving the mechanism improving it in two ways a rising the price and it's important. And b, making it less optional for the buyers because the issue with this mechanism at the moment is that the retailers, they have the choice to buy iron or not. So when the market is under the R end price, retailers just don't buy which is plus there's a lot of other bits of optionality in the mechanism. I think it would be fair to to have a new mechanism that is a kind of guarantee for EDF of revenue over five to 10 years. And and that is linked to the market price.

Richard Sverrisson, Editor-in-Chief, Montel: 18:27

So a long term contract, if you like.

Emeric de Vigan, CEO and Founder Core-E: 18:28

Yeah. Bit yeah, bit long term contract, con contract for different, yeah, I think there's a lot of options there, but clearly most of the consumers or the retailers of the industrials I think would be happy with such.

Richard Sverrisson, Editor-in-Chief, Montel: 18:43

What, but what's edfs view here? What do they think? I know you're not a representative of EDF, but what does that Clearly not, but what do they view, how do they view this mechanism and changes to it?

Emeric de Vigan, CEO and Founder Core-E: 18:54

First, EDF is not one person, so there's a lot of different views there. Sure, for sure. But I'd say the CE is not completely against it in fact. I think he realizes it's a mechanism that makes sense for the consumer and that ultimately the money saved compared to market price goes into the consumer's pocket. Unlike what some, what a lot of people say, which is completely wrong, the money doesn't go to the retailers there, they don't make money by buying iron at 42 and selling it on the market at the 200 euros per megawatt. It doesn't work like that. So it's, I think it's a it's a mechanism that isn't quite right at the moment in the way it's designed. There's too much optionality for the buyers. The price can always be discussed. But it's quite it's quite likely to continue past 2025 with some adjustments,

Richard Sverrisson, Editor-in-Chief, Montel: 19:44

Emeric. Perfect. We look forward to discussing, more, more deeply when we have a better idea of the new government in terms of energy minister and the new CEO of EDF, et cetera. Maybe sometime later in the year, but for now, thank you. Thank you very much for a fantastic overview of what's happening in France. Thank you, Emerick. Literally minutes after we recorded this episode. EDF load its production targets for this year by 5% to 280 to 300 OTT hours. Citing corrosion checks on a dozen reactors, which could impact production until 2024. A 20 a 280 TW hour output would be the lowest for 34 years and well below last year's level of 360.7. The firm maintained its 300 to three 30 OT estimate for next year, but it warned that considering the overall control and repair program, nuclear generation for 2044 may be impacted. That's just to give you some background, the things that happened very quickly in this sector.