Winter power prices spike due to nuclear safety tests in France

Winter power prices have spiked upwards after EDF cut its projection for nuclear output due to safety tests at a number of its reactors in France.

The price of baseload contracts for the first quarter of 2017 rose by 7.5 per cent between Tuesday and Wednesday. On the French market there was a 17 per cent increase.

“This is the strongest shift in European power market pricing since 2011, and shows how much concern there is over supply in key European markets ahead of this winter,” said Zoe Double, the head of power at price reporting firm ICIS.

“Price spikes and large day-on-day movements in contract values are usually seen on contracts delivered over shorter timescales, in the expectation that these supply shortages will be resolved. For the market to revalue power prices delivered over three months or longer is very unusual.”

On 23 June the French nuclear regulator ASN ordered EDF to undertake safety tests on a number of its reactors in France to make sure they don’t suffer from a similar manufacturing anomaly to one uncovered at the Flamanville 3 reactor being built in Normandy. ASN said as many as 18 of EDF’s reactors could be affected.

Last week, EDF announced that planned outages for refuelling had been extended because of the tests, in particular at its Tricastin 1 and 3 reactors. It said its target for nuclear output in 2016 had been cut from 395–400 TWh to 380–390 TWh and that it expected nuclear output in 2017 to be in the in the range of 390–400 TWh.

Power prices shot up on Wedesday, seemingly after details of the safety checks and the resulting added maintenance were published in a French magazine. In France the price of baseload contracts for the first quarter of 2017 averaged €55.90, up from €47.90 on Tuesday. ICIS said it was the biggest day-on-day change for a three-month contract it has witnessed in 15 years monitoring the French power market.

UK prices are often affected by developments on the French market due the 2GW interconnector connecting the two countries. The baseload price for the first quarter of 2017 rose from £47.65 to £51.23 between Tuesday and Wednesday, and the price of six-month contracts for the 2016/17 winter season jumped by 7.7 per cent. The last time there was such a big change in the price of three or six-month contracts was in 2008.

There was a knock-on effect on the gas market as Britain’s National Balancing Point gas price rose by 5 per cent in anticipation of increased demand for fuel. On Thursday the baseload power price for the first quarter of 2017 fell to €53.85 in France but rose even further to £52.75 in Britain.

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