As Europe's energy priorities are challenged by Russia's invasion of Ukraine, France is set to lead Europe's ambitions on building new nuclear plants, but the ongoing presidential elections present some risk to this, and other ambitions linked to France's aim to meet its decarbonization and energy independence goals.
S&P Global Commodity Insights in its European Electricity Long-Term Forecast published on March 29, forecasts France to see the highest level of new nuclear build in Europe, albeit still not enough to prevent gradually falling total installed capacity to 2050 as existing reactors come to the end of their technical lifespan.
In the same report we forecast strong French capacity additions for solar PV and offshore wind but comparatively limited growth in the onshore wind sector.
These assumptions reflect, among other things, our view of political support for various technologies that are likely to arise from the presidential elections. Incumbent President Emmanuel Macron, from the centrist En Marche movement and Marine Le Pen, from the far-right Rassemblement National party, will face each other in the runoff on April24.
The 2022 French elections come during volatile times, which see the world still reeling from the COVID-19 pandemic while Russia's invasion of Ukraine has moved the goalposts of European energy policy as the continent seeks to end its reliance on Russian energy imports at an unprecedented pace.
The war in Ukraine began at a time when election programs had already been drawn up but, in some cases at least, has further cemented the political agendas of the twelve candidates who have qualified for the presidential race.
With Macron trying to fend off the political right and facing the possibility of having to appease the Left and the Green Party, the president's stance on energy policy has, to a large extent, sought to take a middle ground between the two camps.
Macron seeks to strengthen the nuclear sector. Support for renewable power is more varied across France's political spectrum.
In any case, the next president is likely to reform some of the targets stated in the Multiannual Energy Plan (PPE) from 2018, which is the main instrument setting out the country's medium-term energy strategy.
Given France's central role in the European Single Electricity Market, any significant changes to its energy policy will have strong implications for other western European power markets.
Macron has said that he hoped that "no nuclear reactor in a state of production will be closed in the future, unless for essential safety reasons".
Nuclear safety regulator ASN – rather than the government – will make the decision on whether reactors continue to meet safety standards. But Macron's statement hinted that he would, if re-elected, abandon a PPE target to lower the share of nuclear in the French generation mix to 50% by 2035 compared with an average of 74% in 2010-2021 and a forecast share of 66% in 2022-2023 with corrosion issues at several reactors significantly lowering nuclear dispatch this year and next.
Such technical issues could become more frequent as the nuclear fleet ages. Still, a policy of maintaining as much of the existing fleet as possible has also found strong political support among Macron's main opponents.
Le Pen wants to extend the lifespan of the existing fleet and had even lobbied for the return to service of the two 0.9 GW Fessenheim reactors, which closed in 2020. This would have required Macron to grant a moratorium on decommissioning work at the Fessenheim site, which the president has denied.
Macron in February asked EDF to build six new third generation pressurized water reactors (EPRs) by 2050 after the under-construction 1.6 GW Flamanville 3 unit is commissioned, which S&P Global Commodity Insights expects in 2024.
Construction at the first new EPR is to start in 2028 with the aim to have the first reactor online in 2035 at the earliest, under Macron's plans.
The president has also called for a study into whether an additional eight EPRs by 2050 would be feasible.
The total of 14 new reactors in 2035-2050 would be in line with one scenario of transmission system operator RTE's 2050 scenarios on French electricity demand and supply. The so-called NO3 scenario envisages 14 new EPRs , which would help France retain a 50% share of nuclear in its generation mix in 2050.
Le Pen has echoed Macron's plans of having at least six new EPRs built by 2050. The candidates would also support the construction of Small Modular Reactors (SMRs).
Macron in late 2021 announced plans to invest €1bn into the development of SMRs, with a capacity of 10-300 MW each, and for the development of low-carbon hydrogen technology at home and abroad. SMRs built in France could also be linked to electrolyzers.
While political support for the construction of at least six EPRs is fairly widespread, hurdles to realizing these ambitions remain, with financing perhaps the greatest challenge.
The inclusion of nuclear in the EU's taxonomy legislation could help France tap into the green financial sector and make it easier to attract private investors. But ultimately, the rising penetration of renewable energy will weigh on nuclear capture prices and new reactors with high capital costs, which are not yet depreciated will find this hard to absorb.
This means that Flamanville 3, a project which EDF initially hoped would be the flagship for the EPR design before it fell more than a decade behind schedule, is likely to be France's last merchant nuclear plant.
The new government would have to provide some form of state aid such as Contracts for Difference (CfDs) to attract investments into new reactors while a restructuring of EDF also remains on the cards, but it is, as has been evidentin recent years, hard to achieve.
The French state currently holds nearly 84% of EDF's total shares. A 100% state-owned company would likely be best suited to shoulder the Eur50 billion in investment which EDF has estimated would be required to build six EPRs, especially when taking into consideration that EDF has ended the 2021 financial year with a net debt of Eur43 billion.
To receive EU state aid approval for a fully state-owned company, France would have to, however, split EDF into several groups.
Macron's government had in 2020-2021 submitted several proposals to restructure EDF with the latest proposal foreseeing a split into a 100% state-owned arm, which would handle the nuclear fleet and hydro power concessions, and a second publicly listed company, which would manage renewable assets and grid activities.
Macron has also proposed reforms to the Arenhmechanism under which EDF has to sell a certain amount of its nuclear dispatch at a fixed price to competitors. But Macron failed to secure approval from the EU for his plans, partly as France has so far rejected calls from the EU Commission to open its 433 hydropower concessions to competition while there has also been no agreement, to date, above the level of Arenh prices or volumes. Macron's plans have also been met with strong opposition from trade unions, which fear that the split up of the group would be detrimental for job security.
S&P Global expects that the PPE target of reducing the share of nuclear in the generation mix to 50% by 2035 will be abandoned. We forecast that only six out of the currently earmarked twelve 0.9 GW reactors retire by 2035 with nuclear generation making up 58% of the French generation mix in that year.
Frequent technical issues in recent years have highlighted that keeping the entire existing fleet in line with safety standards is costly and can lead to extensive outages. EDF might struggle to maintain 61 GW of existing capacity while also pursuing an ambitious new build program, even with the backing from the French state.
S&P Global forecasts six EPRs being built by 2050 to be commissioned from 2038 while we assume that four SMRs with a combined capacity of 1 GW come online by 2050.
We believe that 14 new reactors by 2050 will be too challenging from a funding standpoint and given the relatively short lead time to 2050. While Macron's support for existing and new nuclear plants is met with opposing views from other candidates in the presidential race, the incumbent might still be able to gain the support of their parties in the National Assembly, if needed, via his commitment for renewable capacity additions should he secure a second term in office.