Blog July 31, 2019

The French national temperature record broke on 28 June 2019, reaching 46.0⁰C in Vérargues near the southern French coast. France’s heat waves are not only felt by beach enthusiasts, but they also affect the country’s electricity production. With rising river temperatures and reduced flows, several nuclear plants must reduce their output to abide by environmental restrictions. Limited hydro availability is also an impediment, resulting in a rise in net imports. However, these imports are restricted by neighbouring countries’ ability to meet their own increases in domestic demand (e.g. during a peak in cooling load), which can result in an increase in conventional domestic thermal generation and generate a bullish market sentiment.

In the summer months, France’s power demand most often peaks around noontime. This was the case each day during the heat wave that occurred during the week of 22 July. On 22 July at noon, French nuclear availability was high and the day-ahead spot price was €44.31. As the week progressed however, several reactors had to either reduce their output or completely cease operation. Seven sites were affected in total and at the peak of the heat wave on Thursday 25 July, total nuclear output reduction exceeded 5 gigawatts (GW). This nuclear availability decrease was shown in our PowerRT platform (Figure 1).

Reported Plant Availability
Figure 1: Reported plant availability on 22 July at noon. Note, 500 megawatts (MW) is the capacity of hydro units co-installed on certain sites. (Source: Genscape PowerRT)

Even though nuclear outages due to hot weather are infrequent, heat waves can cause major disruptions to the French power market. For instance, on 22 July nuclear availability neared 40GW, whereas by 25 July, it fell 5GW. While nuclear availability can fall even further, such as in August 2018 when it reached lows of 30GW due to weather and maintenance, it is not common.

Merit Order France
Figure 2: Merit Order France on Monday, 22 July, 12:00-13:00, with 40 GW of nuclear generation. (Source: Genscape EPSI)

We use our fundamental modelling platform EPSI to look at Central and Western Europe (CWE) and to understand how nuclear outages influence supply. Focusing on France’s merit order (Figure 2), it is clear how nuclear availability pushes conventional thermal plants out of merit, reducing France’s imports and further limiting opportunities for hydro production.

Merit Order France
Figure 3: Merit Order France on Monday, 22 July, 12:00-13:00, with nuclear generation reduced to 35 GW. (Source: Genscape EPSI)

All things being equal, 22 July’s modelled spot price at noon only moved by a couple of euros with 35GW of nuclear availability, reaching €46 (Figure 3). The modelled nuclear output shortfall is offset by additional imports and an increase in domestic reservoir hydro generation.

Merit Order France
Figure 4: Merit Order France on Monday, 22 July, 12:00-13:00 with nuclear generation reduced to 30 GW. (Source: Genscape EPSI)

This time with just 30GW of nuclear availability (Figure 4), further imports would have been necessary with additional French coal and gas peaker generation, pushing prices above €55. Under these conditions, France cannot meet its own demand and becomes a net importer of power.

Capable of running quick sensitivities, the EPSI platform provides valuable insight into the power market. Running sensitivities as shown above, market players can gauge how sensitive the system marginal price is to nuclear outages. On 22 July at noon, we see from modelled results that up to 5GW of outages would have a small impact on price, but quickly escalate thereafter.

It is worth noting that at such times, though demand is high, solar production in CWE is also at its peak resulting in price spike reductions. However, had further outages occurred on 25 July, we can assume the price was much more sensitive, which can be quantified by running other modelled scenarios.

Whether rerunning day-ahead auctions with different levels of nuclear availability or basing sensitivities on renewable production, flexible demand levels or commodity prices to name a few, the EPSI platform allows users to combine speed and complexity. With its API functionality, EPSI easily allows you to remain connected to the latest data updates such as weather and plant availability, propelling you ahead of the curve.