Curbs to French power exports

Cuts to French electricity exports began earlier this year and will continue into the autumn. Listen to a discussion on why grid operator RTE impose the export limits and the reaction from inside France and the wider market? The TSO said the cuts are likely to continue into the autumn amid ample supply from renewables and nuclear and dwindling demand, but is the issue more structural?

Host: Richard Sverrisson, Editor-in-Chief, Montel
Guests: Frank Boerman, Tennet; Clement Boilloux, Montel Analytics; Muriel Boselli, Montel News.

Transcript

Richard Sverrisson, Editor-in-Chief, Montel: 0:20

Hello listeners and welcome to the Montel Weekly podcast. Bring you energy matters in an informal setting. After a short summer break, we are back, and this week we'll turn our attention back to France and announcements by the country's grid operator, RTE, to restrict or curb electricity exports to its neighbors. What are the reasons for the limitations? How much power has RTE cut and what has been the impact on France's neighbors and the market more generally? Are the curbs an indication of the future? Of increased rollouts of renewable energy and the pressure that poses onto the Power Network, not only in France, but beyond helping me. Richard Sverrisson, to shed light on this contentious issue. Are Frank Boerman of Tennet? A warm welcome.

Frank Boerman, Tennet: 1:11

Thank you

Richard Sverrisson, Editor-in-Chief, Montel: 1:11

Clement Boilloux of Montel Analytics. Bonjour! Ca va Clement.

Clement Boilloux, Montel Analytics: 1:16

Hello Richard.

Richard Sverrisson, Editor-in-Chief, Montel: 1:17

And welcome back Muriel Boselli France Correspondent for Montel News.

Muriel Boselli, Montel News: 1:22

Hello Richard..

Richard Sverrisson, Editor-in-Chief, Montel: 1:24

I'd like to start with some context. This week Montana Analytics issued a report and about the power flows within Europe, Clement. Could you give us some of your findings there and where does it place France in terms of electricity, imports and exports?

Clement Boilloux, Montel Analytics: 1:39

Well, France remained the first exporter all over Europe, a bit more than 40 tet, hour per year. For the first semester, we witnessed that it's mainly due to the nuclear level and also high hydro power and production. That is quite likely be the case for the next semester. Also, just because the nuclear production is continuing to rise, the target of EDF should be achieved in the highest part of the objective above the 350 dawat hour. So yeah, France will remain also exporter for the next for the next semester.

Richard Sverrisson, Editor-in-Chief, Montel: 2:16

Absolutely. Even though we've seen some of these restrictions in place in terms of France's electricity exports, France is still the powerhouse here in Europe, isn't it? It's really generating a lot of electricity that it needs to export abroad.

Clement Boilloux, Montel Analytics: 2:28

Yes, absolutely. France is absolutely over supply and due to the New York, due to the high hydro, also the low demand that is, that doesn't recover from the COVID, abso, that's absolutely a need for France to export all the power towards. Of course, Italy, Switzerland, the uk and also Spain. And bit also to Belgium and Germany. So at the moment, France is cheapest country all over Europe, so it needs to absolutely spread this cheap power all across Europe, and that's gonna continue as much as possible despite those curves.

Richard Sverrisson, Editor-in-Chief, Montel: 2:59

And I'm sure that's much welcomed by France's neighbors across Europe. But, we are here to talk about these export curbs announced by the French grid operator, RTE. But Frank, can I turn to you and ask, why were these put in place? What are the main reasons for the export restrictions?

Frank Boerman, Tennet: 3:21

From what I saw from the announcements there is a large larger than normal historically speaking export flow also from Spain through France towards these Eastern neighbors, which puts quite a strain on the grid more than normally. They have several plant and implant outages. That all together puts quite a strain on the grid. And apparently, according to RTE calculations, it is then needed to curb its export capacities. I think it's good to stress that RTE is not unique in that as in that every TSO does data calculations on on, on the important export capacities. This also coordinated within within the region. And curves small and large are, can be a daily occurrence, are a daily occurrence. The only special thing here is that the curves are quite large for quite longer periods of time. And. When were these cubs put in place? They started kinda spring this year, if I remember correctly. Quite up March. Yeah, March indeed. So really early spring. And then they stopped for the high summer months and now that we are slowly rolling into the end of summer, they are they are coming back, which they already announced last time when they announced the curbs. They expect it to be necessary for a while, and that it's highly likely to be tied to their schedule of planned outages, of course. And then the forecast that they have.

Richard Sverrisson, Editor-in-Chief, Montel: 4:53

Yeah, absolutely. Thanks. Very. I think it's interesting note that there's a, as Clement said, there's a, the several factors within France, as in oversupply, high renewables, high hydro, nuclear, low demand, but it's also the Spanish. Imports, with with their massive amounts of solar production that needs to, that are being imported into France that needs to go beyond France border. So that's also a factor here, right?

Frank Boerman, Tennet: 5:15

Yes. They very specifically point to what we call a transit flows. So that is a flow form zone A through B2C. And in this case they pointed out that there, there's quite some transit also from Spain, but also for example, from Belgium through France to Italy is also a thing. Which makes sense.'cause historically speaking, Italy north has always been a sink. Eh? So the Italy north cannot produce enough on its own. So imports a lot has done so for years. And that attracts these transit flows through its neighbors. Including France, but also, for example Austria.

Richard Sverrisson, Editor-in-Chief, Montel: 5:51

So this has been done, this is quite common practice and is done by other TSOs across Europe. It's yeah, a common occurrence when you have these levels of pressure on the grids coming from, especially from renewables production, or, as Clement said, oversupply in a way.

Frank Boerman, Tennet: 6:04

Yeah. Yeah. And you have to imagine that TSOs are the guardians of the grid. And of course they want to facilitate the market as much as possible, but the safety of the grid comes first, obviously. So it's not like that, that the TSOs, I sometimes feel that people think that we're here in the office oh, today I don't I don't have a good mood and I will curb the borders. That's not how it works, eh? So we have very extensive processes, which are coordinated in the core region. We publish about that a lot. And the only special thing is that they now do it for quite some time, for longer period. But this has always been published, has always been quite transparent. The only criticism that was there at the beginning, which I agree with. That they were a bit late explaining that this that they expected this to take a while instead from a daily occurrence.

Richard Sverrisson, Editor-in-Chief, Montel: 6:50

Yeah. We'll come back to the issues of transparency here when I I'll bring in Muriel and Clement there Frank, but yeah, you are right. See, if the lights go out, you, the TSOs are the first ones up against the ball, I think obviously you, you have the guardian, the guardians of the security of the network. But Clement, if I can bring you in here and ask you, according to some calculations, how much has been cut so far? Do we have any indication of numbers?

Clement Boilloux, Montel Analytics: 7:13

We do. For the moment, it's more or less one gig cut with Italy and 400 me, with with Switzerland, which is in fact not so bad that, important and especially if we, I extended a bit the time comparison and if we check and we compare the numbers, the current available export, our Italian Switzerland, for instance, compared with last year, we just noticed that we are more or less at the same level. At the moment we speak a lot about it, but when you on Zoom a bit and you look at longer, horizon in the past, that the situation is absolutely not abnormal for the season for the beginning of August. So I would say for the moment, nothing really major. We will see that after the holidays, but for the moment, yeah, for me, nothing major.

Richard Sverrisson, Editor-in-Chief, Montel: 7:57

So that hasn't had a major impact on the market so far in terms of flows.

Clement Boilloux, Montel Analytics: 8:00

Terms of flows overall, not so much for Italy. I would assume that yes, one gig missing of import for the north of Italy. That's, that can be a bit a major issue. But overall at the French level, let's say from a French perspective, not that much. Especially when you see the. The increase also available to export towards Spain because at the moment France export to towards Spain. So once we will have the situation that Frank described, the flow transit flow from Spain to, for instance Germany and so on, that the per might be much more important. But at the moment it's not not a major issue and to. Also come back on your price impact. It's funny to, to see that when the announcement was done on the 24th of of July, just after that the price of the French contract of September just crashed from 49 to 39 euros per megawatt hour. Since then, it's rising again. But that at least in France, there was a clear price reaction just after that. Announcements that is now gone because the contracts trade now at 61 Euro.

Richard Sverrisson, Editor-in-Chief, Montel: 9:03

Okay. And how about with what about Italy? This is, you say one gigawatt missing into imports into Italy, that's obviously gonna have a price effect there, right?

Clement Boilloux, Montel Analytics: 9:11

Yeah, there was a kind of, price reaction, but a bit later, we see a price rise but only starting on the 29th of of July. So a bit later than than the announcement of 30. And since then, it's a constant rise indeed for in the Italian price for September, especially 1 0 1 0 8 to one 20 Euros more or less yesterday at the closing.

Frank Boerman, Tennet: 9:31

I think it's good to to stress that that it's indeed logical for the price to crash, because sometimes people find that counterintuitive. But if you can't export and you have a lot of cheap power like France, then indeed it makes sense that your price goes down, and if you can export, your price goes up. So that makes sense. But in the end your welfare will definitely be impacted. So the welfare that you get from the day had markets. In the end will be lower because you have less exports than you could have done.

Richard Sverrisson, Editor-in-Chief, Montel: 9:58

French consumers will be fairly happy there. Maybe not the producers, but Muriel, if I can bring you in here. You as a France correspondent, you talk to a lot of people in the market. What has been the reaction to these limitations on the power exports?

Muriel Boselli, Montel News: 10:13

Yes. So the market was informed on 17th of April through a note published on the gl platform. But some traders expressed surprise and anger because they were called by surprise. And also, they hadn't seen it coming at all. One of the points that was raised by some traders, I'm being careful here because it's only some traders, but some felt. The information had been known the day before and they had seen some movement on the markets, but in any case, there was. What happened was that traders basically expressed a general lack of confidence towards rt because there was a meeting on May 22nd. I think Kleer took part in that meeting. There was a meeting from RT to the market participants to try and explain the causes of the problems and also to try and explain what would happen in the future. So the participants felt that RT was unable to properly explain what had happened. Therefore, this is creating some uncertainty in the marketplace because they feel they can't project well in the future, whether this is going to repeat or not. So at the moment traders are saying that. Because they're not able to rule out a similar scenario during the same period next year, they're taking these potential cabs into the power price for Q2 and Q3 of 2025. So yeah, so basically surprise and anger and lack of confidence in general towards RTE, which hasn't been able to be very clear about the situation.

Richard Sverrisson, Editor-in-Chief, Montel: 11:59

I'd just like to make clear, I think, we have asked RTE to explain, I know you guys on the Montel News team do that regularly, but they haven't got back to us on the, on this issue anyway. And for an imitation to be on the pod. But Muriel, some traders, I dunno whether this is anecdotal, whether this is true or not, but say, there's millions of euros that have been lost here.

Muriel Boselli, Montel News: 12:18

There's one trade in particular who who said that? Yes. That he wasn't, he said he wasn't referring to himself, but he was referring to other traders that had told him that there'd been a lot of money lost. We know that, in these kind of situations, some people win, some people lose. If you don't wanna lose money, then you shouldn't be a trader. But it's true to say that there was, the RT did what? Did publish these cuts, but they didn't give a global information for a couple of weeks. So if you had been looking properly at the J website, then you would've seen what was going on, but. There wasn't a clear explanation with proper, proper statement that came later. But the reality is they didn't form the market. There was no transparency problem. There's possibly a lack of explanation but they didn't form the mark on the cats as they were happening.

Frank Boerman, Tennet: 13:15

And that's a very common problem, eh? So we have a highly complicated system, especially with the coordinated flow-based capacity calculation. And a lot of times I have the feeling that when people get really mad they usually don't understand. Or they don't understand how it works. And also in that session, because I was also in there, you could hear sometimes questions like you you didn't publish. Yeah, they did. There's a daily publication tool, but people don't always know that or don't always look at it. And yeah. That makes it a bit difficult.'cause I think it is, I think you can have fair criticism of RTE, but that sometimes gets drowned out by a lot of informed parties.

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

I know. We have to be a bit careful here because none of these numbers have been verified in terms of gains or losses. And it's anecdotal and obviously, people, it's hearsay, people talking in their own hearsay, people talking in their own book. But Frank, in terms of transparency, do you think the information could have been put out there? Differently or in a more efficient, clear way. Muro, you mentioned the JAO platform, which is the Joint Allocation Office, which is a place, a sort of centralized place where, basically ca capacity is announced or or calculated, the calculations are published.

Frank Boerman, Tennet: 14:24

Yeah. Like I said, so the daily publications were fine. That was always clear both for the core region and for specifically Italy, north and Swiss. But the fact that it was special and that they expected it to be for a longer period. That message came out a little bit late, that could have been slightly early. And I know that they have acknowledged that as well, and that's why they now published these more expense extensive explanations. So yeah, to, to me, except for maybe that two week period that they could have said something a little bit earlier, but they were very busy with solving the problem. To me I don't see a problem. I, what I do see is what I just mentioned, is that there is a more general issue, that we have very highly complex systems, and that as the whole group of DSOs we need to keep working on informing stakeholders for that. And this is also a thing in other regions. So the Nordics will switch to a different capacity calculation. And in a lot of the meetings about that, that people don't understand. And that we have to keep explaining to them how it works and where it's published. But in terms of what they did, yeah, I, I don't really see how you could do it much different, to be honest.

Richard Sverrisson, Editor-in-Chief, Montel: 15:32

Fair enough. I know you are not a spokesman for RT, but you're a representative of TSOs there, so that, that's important information there, Frank. Thank you. Clement. What's your view here? You're also present at this meeting.

Clement Boilloux, Montel Analytics: 15:42

Yeah, indeed. I feel that also even if they anticipated LT was caught by the size of the issue they had to face they, they knew that they had some, many, a lot of maintenance. And basically the heart of the issue is around the Leon, on the Leon area when there are a lot of maintenance on the transmission line and so on, maintenance that are needed. For the future of the grid. So it has to, those maintenance has to hap have to happen. They knew that the situation, that it would've been tight, but not maybe as tight as it was, and they were. Indeed in looking for some solutions for it. So on that they were publishing in due time by the law. If I can use those words, they respected all the codes, all the deadlines. They had to warn the market. I would be a bit more harsh toward also the market because honestly those maintenance. If you read, then you follow carefully what RT says for years, then you know that they will have to do those kind of maintenance and that's placing the grid be at risk so you can think that something is happening. As Frank said, if you follow everything, which is your job, you know that you can have a risk around there. And for. That was for the past event in the spring and for what's happening right now, the situation on the flows. Okay. They won a bit in advance. The market reacted also the prices reacted, but when you really look at the figures for the moment, the situation is extremely comparable to what happened last year in August and the year or so before, in terms of availability of export and so on. What we could say yeah, it could bring more transparency also by, they could say something like, okay, to make sure that the grid will not be at risk. We cut by default all the exports at a certain threshold. That can be the eight gig max, eight gig exports maximum all day for the next 2, 2 months. That would be a very nice, way to anticipate everything, but that would be completely against the whole market because that would reduce at the maximum, the export, which is not some, nobody wants that, basically. So they need to reevaluate on a daily basis to be as, to propose as much capacity as possible. You need to accept this uncertainty to make sure that the amount of exports are maximized. Otherwise, they just reduce at the lowest possible and to say, okay, we are safe. And you have the transparency you can anticipate, but do you really want that? I'm not sure.

Richard Sverrisson, Editor-in-Chief, Montel: 18:03

These as has been mentioned here, we are in a world where you have a lot of renewable generation, you have this kind of the French nuclear output at very high levels. So there's always gonna be an element of flexibility and of volatility, of course, in terms of both production and power exports. But Muriel, what has been the regulatory response, especially in France as neighbors? Could you say anything about that?

Muriel Boselli, Montel News: 18:24

Yeah. So Belgium's Energy Regulator Craig that was back in April called for joint French Belgium probe. So with Francis Crow into those cubs they said at the time that too little information was known by Craig and by market players on the underlying reasons behind those capacity productions. So we haven't heard back from, the result of that pro. We were waiting. But in any case, as Frank and Clel were pointing out, they changed the way they communicated after the 17th of April, the we had much more regular updates, and I think it was, the updates were quite clear as well, so that they have taken heat of the criticism in any case.

Frank Boerman, Tennet: 19:11

Yeah, that was the main criticism, I think from ke their main criticism was clearly. Please talk more. I don't think they, I don't think they ever talk more exactly. I don't think they ever questioned the legality that RTE do that does those cuts. It's purely talk a bit about it more.

Muriel Boselli, Montel News: 19:26

Yes, it really was about the, too little information was the, were the words used by the keg. But the underlying question that we are hearing now a lot is, is this structural? Are we in a new era where, we are gonna see that every year. We, there's been a major shift in, in France with. More solar. We added four gigawatts. In the past 12 months we have. Dwindling domestic demand as Clement was pointing out minus 8% since the energy crisis. And on the other hand, we also have, big diff big changes with, Germany shutting down Ling Night and Coal over the last two, three years and nukes closing. We, we know there's a hundred. Billion euros planned for upgrading rts the, to update the grid to incorporate new productions so we know there's gonna be works. So are we, does this mean. During this, these spring summer months we are gonna see every year these kind of cuts. I guess that's the that's an important question.

Richard Sverrisson, Editor-in-Chief, Montel: 20:35

Absolutely. And yeah, very much and that needs to be brought up, brought to the fore, I think Mir, but before I, I go to the, there's a outlook going forward and whether there are more structural issues at play here. Frank, can I put to you what's been the reaction in the Netherlands? And perhaps, I know Tennet is also active obvious as German TSO as well. What has been the reaction there?

Frank Boerman, Tennet: 20:54

Ah I think at first it was it was rather similar to the k, eh we understand that you do it especially as a TSO ourself, but would be nice if if you explain a bit more. And of course internal communication is always faster in that way. So we got quite fast. A a dedicated, extensive response from RTE on questions. And as far as are concerned that, that was it, eh we would like to understand and they explained and yeah. Then for us, it's yeah we don't push that further because again, we all do it, eh, in it. So we all need to take measures to safeguard the grid, to do capacity cuts. We all try to do it. In the least amount possible. But sometimes it's unavoidable.

Richard Sverrisson, Editor-in-Chief, Montel: 21:36

And do you think in terms of structure issues at play? In the Netherlands, of course the massive boom of solar has created very many issues. And on the French, on, on the Dutch grid both distribution and transmission level. So do you think there is a structure issue at play here? We should be thinking more about strengthening grids or using them in a more flexible way. Finding different ways to, to optimize the production that we have.

Frank Boerman, Tennet: 21:59

Yeah, especially those first parts, but that's something that we are really pushing forward on, eh great investments are on an all time high, but there, there is a physical limit to how fast you can roll out things. And those limits we are really pushing against now in terms of smarter market dispatch. I think that the s stock region that they had market is already highly efficient with. With how emia the market algorithm works, I always bore my friends to death by calling it the modern world wonder in terms of what it all does and calculates what can be looked at. And what is being looked at is certain subsidies for renewables. So we are now transitioning to a maturity phase in which you can question whether all subsidies are still needed. And that's also a discussion in Netherlands where we have a subsidy for solar. That you can basically, you can equalize the amount of solar energy that you put in against your load, even if it's not at the same time, which is a form of subsidy because in reality it's not at the same time. So somebody needs to pay for the generation for that. And we, that was so successful that there are now questions of trying to abolish the subsidy because we have so much solar that it's almost pushing the system to its limits so that those are discussions that need to be had and are also being done now, but giant. Of course we need more grid investments, but that's really that has been in the forefront for years now and it's pushed being, being pushed really hard. The figures are enormous.

Richard Sverrisson, Editor-in-Chief, Montel: 23:17

Yeah. It's quite tricky, isn't it, with the subsidies because you don't want to put the brakes on fully, you wanna keep encouraging the rollout of renewables, but you can't basically just have, willy-nilly with no market signals.

Frank Boerman, Tennet: 23:28

Yeah. Personally, I think it would be okay if the break was put on solar in the Netherlands, because we have such a ridiculous amount of it. And that's great, but I don't think we need more at least not until the. The load becomes more flexible that we have more storage we have incoming more offshore wind, which will also more cause more feed in. Yeah.

Richard Sverrisson, Editor-in-Chief, Montel: 23:48

That's fair enough. And Clement, just to, to round off with you really about the outlook for the autumn and the months that Muriel mentioned for next year. What are your expectations here? Is this gonna be a recurring issue?

Clement Boilloux, Montel Analytics: 24:00

I would not be surprised if that's continuing if that's continuing to happen. Indeed, it was stated during by several ts reports, and as from Frank said the grid investments are at reckon High, and especially in France because the grid is historically. Organized toward the New York power plants, and now it has to be a bit more organized toward a bit more wind, especially the offshore wind that is developing finally. And so that's causing complete change of the routing of the power to toward France. Historically speaking, that was more pushing the power toward toward Paris in, in some ways and now gonna be more. Also from west to east, which is the issue from having the, this pass through from Spain to Italy or from Spain to Germany which is historically speaking was more the opposite way around because in the west of of France, there is not so much power that are produced. It's more around the road or on the lower, but not so much. While now with the, in the Brittany the offshore wind is coming. So you need to reverse completely the way the grid was built, and that's gonna, you don't make it in a day.

Richard Sverrisson, Editor-in-Chief, Montel: 25:09

And market participants need to be keeping an eye on these information platforms very closely in order to get hold of the latest information.

Clement Boilloux, Montel Analytics: 25:17

And speaking of that, what we can eventually regret on the on the transparency points that all the grids need to publish the maintenance of the cross border lines, but they are not necessarily obliged to publish the maintenance of the internal line. And and that's something that we could ask in the for a bit more. Yeah. Transparency publication, a bit more organized, let's say, because I'm not saying it's not published, I'm saying it's not as organized as the, as it is for them. It's not on the remit publication, basically. So that might be a question to, to open, but yeah, is, it really is needed.

Richard Sverrisson, Editor-in-Chief, Montel: 25:57

Perfect. Clement, I we'll finish on that in the interest of time. We'll finish on that plea for more internal grid transparency. But thank you Clement, Frank and Muriel for an excellent discussion on this somewhat contentious issue. And thank you for making it very clear and providing your insights. Thank you.