French power for 2023 hits record Eur260/MWh amid fuel gains, Macron victory

French Cal 2023 power rose to an all-time high April 25 after President Emmanuel Macron secured a second term in office amid high fuel costs and reduced nuclear availability.

Year-ahead baseload traded as high as Eur260/MWh ($279/MWh), up 34% over the past month, EEX data showed.

"Today's upside in French year-ahead prices is mirrored in other markets, mostly driven by commodity gains and coupled with some relief as a win for [Marine] Le Pen would have spelled uncertainty for the economy," said Sabrina Kernbichler, European power lead analyst at S&P Global Commodity Insights.

France, traditionally Europe's biggest exporter of electricity, has become a premium market recently amid an unprecedented number of reactor outages.

While rising coal, gas, and carbon prices have lifted European year-ahead power prices, French premiums are driven by record-low nuclear production set to continue into 2023 and potentially 2024.

On average, less than half of France's reactor fleet will be available this summer with output on April 25 below 30 GW out of 61 GW installed capacity.

S&P Global forecasts monthly output to average around 30 GW between April and September.

Post-election focus

Macron won the April 24 presidential run-off vote against far-right candidate Marine Le Pen, who increased her share of the vote to around 42%, significantly above 2017.

"Macron's energy policy plans that pre-date Russia's invasion of Ukraine are not behind [today's price] upside as new nuclear plants will only start materializing in the second half of the 2030s," Kernbichler said.

Political focus is now shifting to June's parliamentary elections, with a parliamentary majority essential for reforms, such as restructuring of state-owned utility EDF and reform of the ARENH price mechanism.

Under ARENH, EDF has to sell 100 TWh/year to domestic suppliers at Eur42/MWh, well below market levels even in 2021, when talks between Paris and the European Commission about the nuclear release mechanism stalled.

The Far Right's pro-nuclear and anti-wind stance shifted Macron's campaign pledges, calling early February for six new reactors, with construction of the first starting in 2028, while maintaining ambitious offshore wind growth targets.

S&P Global forecasts France to remain a net exporter in 2023 with a net average 3.5 GW flowing across its borders, down from a 6.1 GW forecast for 2023 last August, due to reduced nuclear production, according to its latest five year forecast published April 8.

"Under this scenario, a Germany without nuclear reactors would struggle to deliver net exports to France without a very high mark up in prices," Kernbichler said, adding that this could prompt demand destruction either in the gas or power sector.

For first quarter 2023, French baseload settled at Eur423/MWh April 22, compared with German Q1 2023 trading at Eur247/MWh April 25 after closure of its final reactors.