Déjà vu: French nuclear concerns return

This week’s news of potential issues with steam generators at some of France’s nuclear reactors caused energy prices to skyrocket as market participants feared a return of problems seen in the autumn of 2016. 

Listen to the guests discuss the implications for France and its neighbours. 

Host: 

• Richard Sverrisson, Editor-in-Chief Europe, Montel. 

Guests:

• Kris Voorspools, Portfolio Manager, Anode Energie. 
• Chris Eales, Editor France, Montel. 

Transcript

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

Hello listeners and welcome to the Montel Weekly podcast. I'm Richard Sverrisson, and today I am joined by my colleague Chris Eales, who's editor France and Kris Voorspools, who's portfolio manager at Anode Energie. Uh, welcome to you both. Hi. Hi, Richard. Chris, today, you're not wearing double denim, but you've got, uh, red shoes on. That's, uh, that's a new departure. Uh, anyway,

Chris Eales, Editor France, Montel: 0:24

question of style, Richard. Yeah,

Richard Sverrisson, Editor-in-Chief Europe, Montel: 0:26

it, we have, uh, we, you know, we have to sort of, um, have to comment on Chris's, um, dress sense now and again during the podcast. But anyway, Kris, I'd like to, uh, to start by asking you a little bit about, uh, the situation in the Benelux and and France region. Uh, we've seen. This week some news about reactors in France that potentially have some problems with their steam generators. They're welding on there. Now, I know you are no expert and the news, we don't have any details on what this means, but, um, what's your initial feeling here? Is it, oh, no. Deja vu? Or is it, um, we need to find out some more details.

Kris Voorspools, Portfolio Manager, Anode Energie: 1:04

Well, for starters, it's getting a bit confusing with two Chrises here, but, uh, that's true. You, Chris as well? Yeah. Yeah. Say Chris with a K, maybe. Chris with a K. Okay. That's, um, it, it clearly demonstrates that the situation is very fragile, uh, as in France, as in Belgium. Uh, there's obviously problems with the nukes. Uh, I don't know the, the technical details for the moment. Uh, whether or not the situation in France is, is. Is critical that, that they will actually go offline. But it, it clearly demonstrates that, that, uh, the system is fragile and, and once you're talking about nuclear, uh, they're massive installations. So if, if, if you're potentially losing, uh, thousands of megawatts at the same time. It's immediately gonna have a massive impact and okay. The market reacts without any, any clear knowledge. Is there a risk of, of losing, losing a thousand megawatts or 10,000 megawatts? We, we basically don't know. So the markets is, is, is reacting, but it, it has no, no fundamental basis to react. But it demonstrates that, that the system is fragile and you're, you're using technology that's, that's, that's been operational for over 40 years. If there's a problem in one nuke, well there's potentially a problem in all of them. So yeah, that's, that's, that's a critical issue. And that's going to emerge

Richard Sverrisson, Editor-in-Chief Europe, Montel: 2:25

constantly. You can't see this. I mean, it, it has happened, it happened 2016, 2017. Um, so this is maybe something that, something we can expect to, to continue.

Kris Voorspools, Portfolio Manager, Anode Energie: 2:35

Um. Well, these kind of scares normally, uh, or, or people usually say, well, this is a one time event and it won't happen again. But, but we've seen that in, in Belgium also, uh, 2015, there were the cracks in, in, in, in, in the reactors. They, they were investigated for, for, for over a year. And, and, and then apparently they, they received the green lights to continue operating. But, uh, okay, 2018, they all went offline again, so, so the. It's, it's not the reliability that you, that you would be expecting from a nuclear power plant anymore. And that's something to, to, either it continues or it doesn't, but it brings uncertainty to the market. And then any news that comes, uh, will have, will have, uh, a large impact.

Richard Sverrisson, Editor-in-Chief Europe, Montel: 3:18

Hmm. Absolutely. I mean, I mean, we've seen. I mean, markets have gone, I've seen words like insane and completely crazy into the way that the, the markets have just taken the, the, it's gone ballistic on the upside here. Maybe it's calmed down a bit now. What is is is the worst case scenario here. What's, what, what are markets participants fearing here? What are the concern? Worst case scenario is

Kris Voorspools, Portfolio Manager, Anode Energie: 3:37

that all, all, all nuclear power plants in France go offline. Yeah.

Richard Sverrisson, Editor-in-Chief Europe, Montel: 3:42

As clear as that. Yeah, exactly. Yeah, yeah, yeah. That's,

Kris Voorspools, Portfolio Manager, Anode Energie: 3:44

that's the worst case scenario. Uh, whether or not that that's realistic, I, I don't know. And, and I don't really think so because, okay. The steam generators have been operating for 40 years. So, so, so I don't think the, uh, French will go into a scenario where there, where they shut down all of their nuclear power plants at once.

Chris Eales, Editor France, Montel: 4:06

Although we, we had a situation in 2016, October, 2016 in France, uh, and it was also related to steam generators, carbon segregation. They were worried about cracks in the steel of the steam generators. Yeah. In that, in that case, um, if my memory serves me. Uh, I, I think they stopped. They certainly stopped for it. They brought. Planned outages forward. Concerning four reactors. Yep. That was the first thing they did. And then I think later on they messed around with planned outage schedules for, for, for other reactors. And in the end you had a third of the fleet Yeah. That was affected by this steam generat, another steam generator issue. I, I, it's possible that that is also. Has helped to drive, uh, concerns, fears as well. People are, have, have learned to expect the worst in a way in France. Mm. And it always happens in autumn. That's bizarre, isn't it? It is strange. I think you're verging on the

Richard Sverrisson, Editor-in-Chief Europe, Montel: 5:03

conspiracy theory

Chris Eales, Editor France, Montel: 5:04

there, Chris, but but no, there

Richard Sverrisson, Editor-in-Chief Europe, Montel: 5:05

aren't any sort of little men around here as far as I'm aware running around. Not yet anyway. But what, I mean, what happens Chris, with a k if we get back to, um, a scenario which is also combined, I mean nuclear potentially outages combined with a very harsh winter. Um, what what could that do to, to, to, to prices

Kris Voorspools, Portfolio Manager, Anode Energie: 5:23

a, a very harsh winter. Harsh winter is always a. Problem in France, even if, if the entire nuclear fleet is available, France is highly dependent on, on, uh, electricity for heating. So if it goes below minus 10 degrees, then then you always have a problem in France, even with the, the entire nuclear fleet available and with some of

Richard Sverrisson, Editor-in-Chief Europe, Montel: 5:42

them off. Yeah, I suppose the sky's the limit. Absolutely. But then. To some isn't. The situation eased to some extent by low gas prices and, and high levels of storage for, for, for the gas market. I mean, neighboring markets could come to some assistance here.

Kris Voorspools, Portfolio Manager, Anode Energie: 5:59

Uh, neighboring markets always come to assistance if it's very cold, but, but, uh, you can't import more than, than the maximum, uh, than the maximum capacity. So even with the low gas prices, uh, you still have. Okay. Fairly cheap generation available in, in other countries, but that's not gonna help that much if it gets, gets really cold. But is

Richard Sverrisson, Editor-in-Chief Europe, Montel: 6:22

the problem, essentially the fact that the reactors are just too old? I mean, they're, they're, they're getting old problems are creeping up. The, you know, the same issues are creeping up every day. Every, every, every year. Sorry, not every day.

Kris Voorspools, Portfolio Manager, Anode Energie: 6:34

Well, the, the, that is, that is indeed a problem. And you also see that in the maintenance schedules, 10 or 20 years ago, they, they went into maintenance for about a month every, every two years now. If a power plant goes into maintenance, they do all kinds of stuff. Uh, I, I, I dunno what exactly, but, but, uh, maintenance of one month. I, I, we haven't seen that in a long time.

Richard Sverrisson, Editor-in-Chief Europe, Montel: 6:54

The men in white coats, uh, we'll know about that when they Yeah. But, but, um, you are, you are from Belgium, uh, Chris with the care and that's, they, they, we've had some issues there also with, with these nuclear reactors, um, last, last year particularly, uh. Only one of them was online. Yes. Um, uh, going into the winter, but I think maybe, maybe we're lucky that the winter wasn't, was, was fairly mild otherwise it could have been. But even then we saw price up 300 euros, didn't we?

Kris Voorspools, Portfolio Manager, Anode Energie: 7:23

Um, forward to the November contract went, went above 200, uh, on the spot market. I think the highest we saw was about 400. But, but. Again, that's not really dramatic. It, it didn't go to 3000. So, so there, there was never a blackout, eminent or, or any, any severe, uh, security or supply problem throughout, throughout that period

Chris Eales, Editor France, Montel: 7:44

are the, uh, are the, given that, I think at the end of the winter we had a, we had over capacity in Belgium. It was a, it was a vast turnaround, wasn't it? It was a very. Curious situation, do you think the fears of blackouts are overdone? In, in, in Belgium every, not every year, but often we hear, uh, you know, alarm bells are, are rung somewhere, uh, either by Elliot or by someone in the government. Uh, uh, and, and it never turns out to, uh. The reality to is, is is always different, but we don't see the lights stay on. Well,

Kris Voorspools, Portfolio Manager, Anode Energie: 8:17

the, the, the strange thing is, I, I hear the alarm Bess bells from, from Ilia as well, but they also have a scarcity indicator on their website, which could be green, orange, red, or black. And okay, black is a big issue. Then they start to, to, uh, uh, to, to, to shut down certain parts of the grid to avoid, to, to avoid the blackout. But, uh, since the existence of that indicator, it has always, it has mostly been on green and sometimes on orange. Never red or black. So, so security of supply. Yeah. Ili, I screaming. But their indicator is, is, is telling something else also in, in, in the month of November, indeed. When only one nuclear power plant was, was online. The indicator was never red or black. So, so that is basically saying that there was no issue with security of supply. Mm-hmm. And indeed, if the entire fleet is available. Then Belgium prices even go, uh, lower than, than in Germany. Mm-hmm. So that indicates that for the moment, the capacity is, is, uh, well, fairly redundant in Belgium if everything is available, but okay. Maybe they're simply cautious and taking into account that that's, uh, you can only count on about half of

Richard Sverrisson, Editor-in-Chief Europe, Montel: 9:32

it's to, to, to be online. It's that unreliable. But, uh, but, uh, but Chris, again, I, you know, you're saying, um, that uh, Belgium has plans to. Decommission is nuclear fleet by 2025. Yes. Uh, and earlier today you highlighted a very, very tight time schedule for it to do that. Mm-hmm. Um, now is this, this, this realistic and, and I think also earlier again, has been screaming that there could be sort of serious blackouts after this date if nothing is done, uh, if nothing's put in place to, to, to, to replace that capacity. Yeah. Is that something you, you would agree with or? Well,

Kris Voorspools, Portfolio Manager, Anode Energie: 10:05

starters, there is something in place because, uh, Belgium is working on a, on a, on a capacity mechanism that should go, go online in, in a couple of years time. So, so there is a plan B for, for when all the, all the nukes go offline. The big question is, will they effectively go offline? Because some politicians are, are asking for, for, uh, 10 years additional lifetime for, for three of the, of the seven nuclear power plants. So that, again, adds uncertainty to the nuclear game in Belgium. And we, and

Chris Eales, Editor France, Montel: 10:35

we had, sorry to legal issue with the dual reactors. Um. It's currently still in the courts. I think, um, there was a finding, um, that it was unlawful to energy acted unlawfully to extend the lifetimes of those reactors by 10 years.

Kris Voorspools, Portfolio Manager, Anode Energie: 10:53

Yes. So again, uncertainty and, and, uh.

Richard Sverrisson, Editor-in-Chief Europe, Montel: 10:57

Yeah, and again, Belgium doesn't have a government yet in place to sort it out. That doesn't maybe help the situation. There's no government yet.

Kris Voorspools, Portfolio Manager, Anode Energie: 11:04

Nobody even knows what that government will look like. There's currently talks on, on a potential coalition, but, but, uh, nobody knows if that will actually work or if they'll need to find another majority to, to, to do something. And probably the nuclear, uh, life extension will again be on the, on the negotiation table of the new government.

Richard Sverrisson, Editor-in-Chief Europe, Montel: 11:24

This maybe is often the easiest. To the cheapest option. Is it not just to extend, uh, the lifetime of a, of a reactor?

Kris Voorspools, Portfolio Manager, Anode Energie: 11:29

The problem with the lifetime extensions of nuclear is that that's not the issue, that's not the challenge for the future. If, if you, if you look into the future, whether or not it's nuclear or renewable or, or something else. The lifetime extensions of, of, of the nukes is, is a, is a ripple in time. It, it, it's, it's not, it's not something, something fundamental on, on a longer term time horizon. You need something else in the energy transition, which is flexibility, uh, storage. You need those kinds of things and you need them in a hundred percent renewable context, but you also need, need them in a hundred percent nuclear context. So whatever you choose, uh, the lifetime extension of the nuclear. It's not really important. You have to start working on something else and, and that is flexibility, that is demand response and topics like that. But the problem is as long as you keep debating on nuclear lifetime extension, you don't start to debate on the real issues of flexibility in the long term.

Richard Sverrisson, Editor-in-Chief Europe, Montel: 12:27

And you certainly don't start building the necessary infrastructure capacity to do that. It's just delayed and delayed. And delayed. Yeah. If, for example, in that period where, where you don't have the new capacity coming online, you have potentially nuclear decommissioning if there's a harsh winter, you highlighted earlier today as we're speaking at the, the UX Energy day, um, that, uh, Belgium could be sacrificed for the, for the greater good, you know? Yeah. For, uh, could you explain a bit more about what you, what you

Kris Voorspools, Portfolio Manager, Anode Energie: 12:55

meant here? Well, that's the flow-based markets. So all, all the European markets are coupled and, and, uh, the, the prices are, are settled in, in the flow-based algorithm and the flow-based algorithm, it simply calculates the maximum welfare for, for the entire system and the entire system is split up in, in the different countries. But of course, Belgium is a very small com co, uh, country. So the welfare benefits in Belgium don't really, uh, weigh up to the welfare benefits in Germany. So if there is it so. In, in the welfare optimization. Belgium is often sacrificed, and that's also what you see when you have price spikes in, in, in problems in France or Germany or the Netherlands. Then Belgium is usually, usually used as a transit country to solve the problems, the local issues in, in the biggest countries. Mm, which means that. Uh, in that case, Belgium has no access to import capacity, but they simply have to transit the power from, from the Netherlands to, to France or vice

Richard Sverrisson, Editor-in-Chief Europe, Montel: 13:51

versa. And does that mean then that, you know, brownouts, blackouts or very high prices? I mean, what, what are the, the, the actual consequences are, uh, the actual consequences. Consequences

Kris Voorspools, Portfolio Manager, Anode Energie: 14:00

will, will probably be that if you have price spikes wherever in Europe, that, that it'll probably affect, uh, Belgium. Or the smallest, uh, economic regions in, in, in Europe, uh, first.

Richard Sverrisson, Editor-in-Chief Europe, Montel: 14:11

So it'll have, yeah. Okay. So there will be, there'll be sacrificed first. Uh, yeah. And in such a, such an occasion. Chris, uh, with a c had to, had to leave us. Uh, I think maybe he had to fill up his, his parking meter, but, um, but I think another aspect, oh, here he, here he is coming back. Um, we heard today that also that the French, uh, energy bill was passed in parliament, which then, uh, um, actually confirms the 2035 date for phasing out nuclear. Do, do you think that's realistic? Again,

Kris Voorspools, Portfolio Manager, Anode Energie: 14:41

I don't know. That's, that's a politic. Political decision and, and 2035. That's, that's interesting because that's beyond any, uh, political time scope. So, so that's, that's simply passing on the problem to, to the next government. That's, that's a, a commonly used political trick. But, but in, in this case, I don't really know what it means. It means you shift the problem to the next, or probably even to governments from now on.

Chris Eales, Editor France, Montel: 15:07

Does it mean as some have analyzed that you have to extend reactors? Um, essentially that's what you have to do.

Kris Voorspools, Portfolio Manager, Anode Energie: 15:14

You, you could potentially extend reactors. Uh, of course you're facing all the problems with old reactors for the moment, they're not getting any younger, so if you talk, uh, 2035, then, then they're, again, 20 years older than, than they are today or 15 years older than they are today. Probably with larger problems, but you could extend lifetime. I, I, I don't know if you can do it indefinitely, but, but you can extend the lifetime and that's, that's a bit of a problem for the moment because they're working on a capacity mechanism. But, uh, the gut feeling more or less says that if the capacity mechanism won't make it, then they'll simply have the plan B of prolonging the lifetime of, of the nuclear power plants. But having a plan B well. It, it's, it's more or less invalidates the plan A or, or, or makes the plan a less, less credible. So,

Richard Sverrisson, Editor-in-Chief Europe, Montel: 16:05

and uh, as we said earlier, it also, um, delays the, the transition within the energy system in that country as well indeed. Moving. Yeah. So that's, it's, it's, uh, there's certainly no plan C there. So,

Kris Voorspools, Portfolio Manager, Anode Energie: 16:17

so if, if you always have the. Possibility to extend the lifetime of nuclear power plants. Everything else is on hold, I think,

Richard Sverrisson, Editor-in-Chief Europe, Montel: 16:25

and that's, that's the danger here. Yeah. Chris with a K. And Chris with a C. Thank you very much for joining the Web Weekly, the Monte Weekly podcast this week. Thank you. And I thank you. It's been a pleasure. And thank you for joining the Benelux uh, energy Day. Um. Uh, I think there all this left to say no. Please, please enjoy, uh, the rest of the evening. It's a little bit rainy here in Amsterdam, but, uh, you know, it's been a pleasure having you here. And, um, please, listeners, uh, keep up to date with, uh, the latest news on monte news.com. Uh, and follow us on LinkedIn, Twitter, and uh, you can subscribe on Spotify and Apple Podcasts. Thank you very much. Goodbye.