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Europe’s Power Prices Could Rise as France Curbs Electricity Exports

France, the biggest net electricity exporter in Europe, plans to limit power exports to neighboring countries, which could lead to higher prices in other European power markets such as Italy, Switzerland, Belgium, and Germany.

France, which derives about 70% of its electricity from nuclear energy, returned last year to the top spot of Europe’s net power exporters, as its nuclear fleet returned from maintenance and domestic demand was lower, analysts at Montel EnAppSys said early this year.

The Montel EnAppSys analysis published in February showed that France exported nearly 50 TWh more than it imported in 2023, after turning into a net importer in 2022 for the first time in more than 40 years.

However, French grid operator RTE has faced “unprecedented operational constraints on its network” this year, due to historically high exports towards France’s eastern neighboring bidding zones, accentuated by planned and unplanned outages.

As a result, RTE limited electricity exports in the spring of 2024, which led to widening and record-high spreads between French day-ahead power prices and those in its neighboring countries.

Now RTE said this week it expects “a new tense situation, from 29th of July 2024 until mid-October 2024,” in which it would limit exports to 8 gigawatts (GW). The reasons behind are comparable to the spring curbs in exports, namely the combination of low consumption, abundant and competitive generation coupled to the grid, and high transit flows over the French network. These have led “to significantly high export situations towards France’s eastern bordering bidding zones, in a situation where some planned outages are still required to ensure a well-functioning grid.”

As a result of the new planned export curbs, in August and September “Price spreads between France and its eastern neighbors will likely widen again over the curtailment periods,” Florence Schmit, an energy strategist at Rabobank, told Bloomberg.

The nearby markets most affected by France’s power export curtailments will be – in descending order – Italy, Switzerland, Germany, and Belgium, according to RTE’s estimates.

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By Charles Kennedy for Oilprice.com

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