Energy crisis in Europe: Paris may be the first city to suffer a blackout this winter

By Javier Blas

On the subject of the European energy crisis, all attention is on Germany and gas from Russia. However, France and its fleet of nuclear reactors are at least as important. Indeed, the first European city to be at risk of blackout due to falling temperatures at the end of the year may well be Paris and not Berlin.

As winter approaches, the outlook in France grows increasingly bleak. Electricite de France (EDF), the state-owned utility, has only 26 of its 57 reactors operating, with more than half of its chain undergoing emergency maintenance procedures after cracked pipes were discovered. With nuclear reactors producing the lowest share of the country’s energy in 30 years, France is facing an electric “Waterloo”.

Falling nuclear availability is pushing France to rely more than ever on gas-fired plants, alternating wind and hydropower, and imports. This raises the cost of electricity in the wholesale market for the whole of Europe, with French futures rising almost 1,000% more than the decade average by 2020.

In mid-summer, when French electricity demand hovers around 45 gigawatts per hour, this is not an insurmountable problem. But on a cold winter night, when French households can push consumption to over 80 or 90 gigawatts, it could be disastrously expensive. Although the French economy is smaller than Germany’s, electricity demand in France is much higher than its neighbor’s during the winter, as households there rely more on electricity for heating and hot water.

Although EDF has promised that at least some of its reactors will be and have been connected in time for the colder months, the company has a nasty habit of promising more than it delivers. The severity of the winter could be the key: for every degree Celsius that the temperature drops below normal, French energy demand increases by about 2.5 gigawatts per hour – a figure equivalent to the power of two nuclear plants.

During the late snow that hit last April, the French grid was forced to issue a rare orange alert – the second highest – asking households and companies to “moderate their consumption”. These alerts will become standard practice next winter and will most likely escalate to “red alerts” that indicate a risk of power outages unless families and businesses reduce demand.

Electricity traders take risk seriously. In the wholesale market, the key one-year French baseload contract has soared to a record high of 507 euros per megawatt hour, well above German prices of 350 to 370 euros for the parallel contract. French retail consumers are currently protected by a price cap, but businesses are fully exposed.

With the advent of winter, this will become much worse. For December, French baseload electricity is trading at more than €1,000, almost double prices in Germany, while peak-load power – usually in the evenings when families gather for dinner and the heating is on – changes hands at a cost of more than €2,000 euro. In practice, this means traders expect that French electricity demand may be so high relative to supply that so-called hourly prices will rise against the €4,000 threshold set in December. The market, aware of what is coming, tries to significantly reduce consumption in advance in an effort to prevent blackouts. It’s a costly way of trying to force heavy-drinking companies like smelters to plan to shut down in December.

The French problem is spreading to the rest of Europe, including the UK. EDF, long a source of national pride as well as low-cost electricity exports, must buy energy to meet daily needs. Earlier this month, the French grid made an emergency request to the UK grid for extra power — and this was done in the summer, when demand is low.

In the past, EDF imported electricity on a net basis for only a few days a year, if not at all. For example, between 2014 and 2016, France did not import electricity for a single day. But as nuclear problems mounted, it became increasingly reliant on imports. Last year, it bought power from abroad for 78 days. So far this year, he’s had to do it a record 102 days.

France’s markets are putting further pressure on an already strained European electricity and gas market. If French President Emmanuel Macron wants to help ease Europe’s energy crisis, he needs to focus at home. Fixing EDF’s situation should be his top priority – far above his phone conversations with Russian President Vladimir Putin.

Paris took a first step, announcing the nationalization of the company at a cost of 10 billion euros, although not earlier than September. Strangely, Macron has yet to create a new executive team. The company’s chief executive is expected to leave, but perhaps not until March 2023. The rest of the senior management team, including the nuclear executive who has overseen the disastrous performance of the past two years, appears to be safe in their jobs currently. Macron also has not curbed the influence of labor unions within EDF – another perennial issue holding back reform at the company.

Time is up. Paris is wonderful in autumn and winter. It will become much less attractive if the “City of Light” is forced to go dark.