You are listening to Redefining Energy. Your co hosts from Berlin Gerard Reed and
from London Laurent segalin today on really defending energy job, We're going to talk
about French nuclear Oh la la. But first award from our partner. This
podcast is powered by Expo, an international leader in providing sustainable energy solutions for
the future. Yeah, ja aulla Llah. But first question is why should
the ninety seven percent non FRENCHI listener be interested in the fate of French nuclear
And I can tell you it's because, whether we like it or not,
the health of the French nuclear fleet is a key component of europe security of
supply and energy price levels and by the way, de carbonization, Yeah,
Europe and beyond Europe. A well functioning French nuclear fleet reduces the amount of
imported ler G absolutely absolutely. So. We have this fleet of fifty six
reactors, sixty gigawatts, managed by a single company, and it represents between
ten and fifteen percent of detricy consuming the continent. And if you just account
for zero carbon sources, it's even a much larger part. And that's been
really clear. It was also an incredible feat of engineering. The building of
them and how fast they were built really incredible. Yeah, but look,
twenty years ago EDF was the most powerful utility in the world. They were
producing four loat and twenty hour and they were privatized. They reached two hundred
billion eurovaluation and twenty years later they are plagued by debt losses. Fully time
government intervention, IDIF had to be renationalized. So it's a bit of a
fallen angel. It's one way about that, Lauran, It's a French disaster.
We don't want to re litigate the past. We don't want to engage
in sterile discussion about whether nuclear is the solution, a solution not a solution.
We have to live with. The simple facts is that for the past
thirty years, the French new fleet has been the backbone of the open energy
system and it's going to continue to be so in the coming decades. So
around do you think Europe can rely on a French nuclear fleet come forward?
I have my opinion, but at the end of the day, it's better
to have a real expert discussed with us that matter, and our guess this
week is Emeric de Vigan and is the former EDF Energy trader and he was
in charge of trading the power from the all nuclear fleet. So Emeric know
what is talking about. Is now head of Kepler Energy with a leading subscription
based data analytics platform. They'll bring a lot of real time market data and
really Emeric knows what's going on in the nuclear fleet, probably even better than
edf itself. Well, let's bring him on the show. Emeric, welcome
to the show. Thank you for having me. Emic. We've been new
to talk about French nuclear So what's your current assessment of the situation right now?
The current situation of the French nuclear is a big concern. Was the
French nuclear fleet used to produce round form? What our was? It did
produce less than he and our last year. You can use whatever what you
want, catastrophe, industrial accidents, but in any case, twenty twenty two
was incredibly low, lower than anyone would have ever expected from the French nuclear
fleet. So ahead of us, there's more question than answers how much can
we produce this year in twenty twenty three? We know what should be above
three hundred tower, which is better but far from being great. What is
more of a concern is the target that we are reading in the news for
the coming years where some French government officials are saying we should aim for three
hundred and sixty t tower, which is in its ap still extremely low and
in my opinion, probably not ambitious enough to have abundant and cheap electricity in
France. But also across your can I ask you that when you just talk
about it's not ambitious enough. When I look at that number, I sort
of think I don't even know how you're going to hit us. So for
me, that's incredibly ambitious. What am I missing? Well, I think
that's the big issue we all having Looking at the French earlier performance, we
got used to poor performance, and this is why it's very important to look
beyond Front and look at the performance of nuclear generation in other countries where the
availability factor is close to seventy five eighty eighty five percent, potentially ninety percent,
while in Front we hamming for sixty or seventy percent. We should have
much more ambitious targets. Again, we used to produce four hundred ter what
hours, okay, and the two reactors that person times are not running anymore,
But we were actually not producing four hundred We were producing four hundred and
twenty, So clearly producing four hundred ter tower should be feasible. And the
reason I'm saying that also is that we know we could do upgrades that some
other countries did increasing the power of the reactor, which doesn't require such a
huge amount of work. You have been in charge of trading short term that
nuclear fleet when you're at TEDF trading, And what a lot of market participants
always complaining is that there is this system called REMIT where every producer is supposed
to put forward or announce the plan too are not going to work, And
the EDF had the bad reputation of not really abiding to its own short term
prediction. So was it a bit of insider trading or how do you analyze
that? Well? First, and I'm being very honest here, there's no
insider trading at TEDF. Clearly detect the REMIT regulation very seriously, but it's
true and reality. There is an issue with the quality of the REMIT messages
that are published by IDF. There's a various explanations for that. The one
DF always said that these REMIT messages are not meant to be a forecast of
the availability or unavailability of the future. It's a view of when we're going
to do our maintenances. See it's causing in my opinion, two issues.
One is the impact on the price. Because of the quality of the REMIT
messages, is not easy for traders to get a feel for what the forward
availability will be, saying that some companies like Kepler have their own forecast which
are a lot more reliable than what IDEF is publishing. The second question it
raises is more in terms of reputation. People, as you think very quickly
link the poor quality of these messages to a willingness to manipulate the market,
which I think is sad. And also you always wonder how IDIF is not
actually able to correctly forecast the lens of their maintenances. You know, when
you look in other industries like the oil business, chemical business, which are
not less complex than the nuclear business, any maintenance that is meant to last
months last month was on the nuclear reit any maintenance last at least ten or
twenty percent longer than initially planned, which is a bit of an issue from
a reputation point of view. Can I ask you just so I perfectly understand
this IDIOF comes out with a protection and says we're going to produce x amount
of power. Tell me what happens if they don't produce that amount of power?
A mott of the financial implications for media. There's two things here.
IDEOF rounds two kinds of forecasts. One is a direct forecast that they used
to issue as a listed company saying we would produce three hundred and fifty hour
of electricity with our nuclear fleet this year. In my opinion, they used
to take this this target pretty seriously. They used to revisit it through the
year, but it used to be quite accurate. That's one thing. The
other thing is everything that falls under this REMIT regulation where they simply forecast the
unavailability of the units unplanned or planted, so they have to publish everything.
If they don't publish an outage and an availability, then they could get fined
by the regulator. But that's not really the issue. The real question is
this REMIT regulation inside the trading market, manipulation, etc. The real question
is why IDIF is not able to produce more because this is what costs money,
because it's some power they can't sell or the market, or worse that
they have to buy back on the market because most of the nuclear generation is
sold forward, so whenever something unplanned happens and IDIOF has to replace this power
with some volumes coming from the wholesale markets exactly. And that's where I'm coming
from. The whole thing is that. So if what you've got is unplanned
outages, then what ends up happening is IDIF has a loss because you've sold
the power forward at a certain price and then you have to buy a back
delivery. Right, That's what happened. So then what I don't understand is
why it's so difficult to go and sort out maintenance within IDF. And again,
if I look across the rest of the world, I don't see this
number one and number two. We're living in a let's call it a renewables
world where every day got the wind changing, the sun changing, and we're
doing predictions on a real time basis, and m I sort of getting it
right. But we can't do this in nuclear in French nuclears. I explain
this to me, I just I can't get my head around it. Yeah,
we'd agree with what you're saying. We've got to realize that it's an
industry with a lot of Nurcia, and until twenty nineteen hotel prices were on
what fifty years permega what tower, So maybe at that time it was not
that costly to have low availability or you know, do not produce as much
as possible. So maybe at that time they haven't done the investments into you
know, improving the weathery're running the maintenances. Now there's those explanations which I
have to give here. Whenever you speak to people at DF they tell you
that the regulator is extremely firm or tough, not sure about the right word
there. So whenever they're running maintenances, it's not only tendard maintenances that they're
running, but they're also upgrading a lot of the systems at the unit,
which explains why the maintenances lasts longer than expected. You know, they love
to say that it's basically bringing generation three nuclear to generation four nuclear what they're
doing during the maintenances. So I guess that explains a little bit why all
this takes a lot longer than in any other country. But in any case,
I think it's only now with this energic csis that we have seen in
the last two years that we start realizing how costly this can be, which
is a bit frustrating. Now, it's not really a secret that EDF has
been always lookwarm about a pure liberalization of the energy market. And although they
like it very much, you know in country like the UK where they could
gain market share through liberalization, in France the new that liberalization was only a
way to lose market share in a certain way because they started at one dred
percent. And so my interpretation is that they've tried a lot of tricks in
the book and you'll tell me if they are a perpetrator or victim, but
they end up with that weird market mechanism called the arene. So can you
explain a bit what it is? And at the end, why is this
price not fixed by the market but by some bureaucrats or the assembly. Yeah,
and it is this mechanism where has to sell one hundred tower of nuclear
generation to its competitors, competitors on the retail business, not on the generation
business of course. So every year there's an auction where the retailers can order
this nuclear generation at forty two year euros. There are rules on how much
they can buy depends on how much their portfolio NEEDSTA. I won't go into
all the details there. The issue with this mechanism, in my opinion,
is not really the price. I know that now that prices are one hundred
and fifty euros permegaba tower we seek forty two looks incredibly low. But honestly,
two or three years ago, it seems to me that if you was
happy with this forty two euros, or would have been incredibly happy with forty
six or fourteen auros per mega whatever. So I don't think it miles away
from what it costs ID have to produce this nuclear electricity. The biggo trube
with the AREND is the optionality. The retailers can buy this electricity when the
market price is above this forty two euros permegaba tower, and can also decide
to not buy when prices are below this level, which is what happened in
twenty fifteen and twenty sixteen, if I'm not mistaken. So it's mechanism that
is far from being perfect. Again, mainly with its optionality. I don't
think IDEF is really a victim of the price, because also let's not forget
that this electriested that is purchased at forty two euros Permegaba tower is sold back
to back to the end user, so the money doesn't go into retailers pocket.
This forty two euros benefits the French end user who determines the forty one
or the forty six. Or there must be a guy or three guys in
a room and say it's forty one or it's forty six. So who are
those guys? Honestly, I can't tell you. I think it's exactly what
you're saying. It's a few guys in a room. There's this very funny
video that you can find on the internet. While the head of the French
regulator said, well, you know, this discussion is not very scientific.
At the end it's forty two because it's not forty three. And that's really
what he declared in the parliament. That way of fixing a price. It
is very reminiscent of what happened on the Uzbek cotton price fixing between the Uzbek
cotton producer back in the early fifties and the Soviet textile consumer and they could
not find the correct price of cotton and there was no market mechanism. And
at the end, it's Joseph studying in person what to determine the price of
the usbek cotton. I mean, why, why can't they have a normal
functioning market or is it really the nature of nuclear? How do you see
that? I don't think it's the nature of nuclear because I think in a
lot of other countries like the US or Finland, the operators are able to
give their costs, their cash costs. The issue in front, in my
opinion, is that we love to see different costs on nuclear. You have
the cash cost, you have the accounting costs, you know, taking into
account the future investment that are needed to expend the lifespan of the station.
So you know, we'd love to make things complicated so that they're not transparent.
And that's clearly the issue because you see what it's leading us today where
you have on the one end the regulator that leaked the documents saying one of
the costs of producing a new charactistic sixty one years Permegawa tower. If says
no, it's seventy eight euros, and would even love from what I have
to get more, you know, ninety yuros Permegawa tower. So we are
really struggling with this lack of transparency because there's no proper formula to calculate discussed.
Which is I agree with you, which is watching edible when you think
about it? Because the nuclear nation infants is a monopoly. Can I switch
the team and just I have a question relation to last year, because you'll
know the answer to this. So if I understand what happened last year,
what you had was we obviously had power shortages in Europe at the beginning of
sort of this year and at the end of last year. And I've said
a large part of the reasons because the French fleet was out, but we
also saw was the Germans switching on the coal plants. I suppose My question
is did the Germans switch on those call plants because they were supplying power into
France? Was that the reason they did this? Or was it because they
because they were switching off their own nuclear plants? Right? And just curiosity,
but it just love to hear your thoughts. It's a very good question.
First, if you allow me to correct you. Last year, we
had fears of power shortage on the market which didn't materialize for various reasons.
One is the weather, but I'm not really buying into this. I think
weather was average it was not super warm. It was not super cold.
The main reason for not having power shortage is the fact that the demand was
completely destructed, you know, we're not using the term demand destruction, and
that saved the power supply demand balance. But also on coming back to your
question, font was able to import a lot of power from its neighbors to
upset for the seeing one hundred. Our nuclear generation was important, power from
Spain, from Italy, but also from Germany and also, if you said,
from the cold stations running in Germany. Generally speaking, Germany is able
to cope with the shut down up its nuclear fleet. I'm not saying there
won't be press on the grade around there, but it shouldn't last very long.
So yes, last year France was imparting massively from Germany, even in
the summer, which is super unusual. It's quite usual to see if fronts
imparting from Germany in the winter, but not in the summer. How do
you look at the upcoming winter, Well depends from which angle you see it.
From a pure supply demand point of view, it's looking a lot better
because the nucleard generation has improved. And you know it was solo last year
that we're talking about twenty five percent better than last year, probably ten gig
what's more, which is huge, but also because the demand is still very
low, which is not such a good news. Saying that, I mean
the demand is low because some companies counterfold the high price of electricity, which
is bad. But the positive is that it's also low because the residential clients
have changed their behavior, and also with seeing some industries investing in energy saving
and energy efficiency, which is quite positive, but rays is questioned. But
the future, you know, will demand eventually pick up? And if demand
doesn't pick up, how much nuclear do win it in the future. I
recently, in the light of having more intermedtency on the system and now the
French nuclear said that they can manage intermedtency by modulating the production. Is it
for real or is it arming the plants as I see somewhere. So what's
your take on the flexibility of the nuclear fleet. Yes, it's a very
good question, and you've already partially answered it. The nuclear stations are flexible.
They can up and down pretty much as you want. Obviously, they
can go from zero to full capacity from one hour to the next. But
I would say that generally flexible, and yes, they can cope with the
intermittency or renewable as well as they were dealing with the intermittency or the shape
of the French demand, because you know, let's not forget the French demand
is probably the most volatile in the world because there's a lot of electrical leading
in the country. So yes, they can do it technically. But what's
interesting in the latest development is that it seemed that eventually IDF or experts started
admitting that it was arming potentially arming the units, which is interesting. When
you speak to people working with large devices in other industries, they all say,
yeah, of course, there's no way rumping a nuclear units up and
down several times a week or sometimes several times a dad doesn't have any impact
on the aging of the units. So yes, the French nuclear can deal
with it like any other nuclear station could actually, but this comes at the
cost. That's a bit of a more tricky question. But I'm always wondering,
because IDF is vertically integrated, how much do they report on the generation
division versus the retail division, and how much cost is transferred from one to
another, because if you look at, for instance, another integrated company we
have in Europe, which is NL. This is clear financial distinction between the
retail operation, the transmission operation, that generation operation. Do we have some
cliity on that or is it all a bit fuzzy? I think that interesting
that what we've seen in idfarly financial results last year is that a lot of
what has been lost on the generation side was made back by the trading harm
of IF trading. Wow, So how do you explain that? It's a
natural edge and it's the reason why most of the utilities have a trading ham
because just very simple. When you're a tailor, you have to edge at
any price to have enough power to supply your part folio. So you can't
take any risk, while the treading harm can take some risk. And you've
seen what happened last year when the power for delivery twenty twenty three twenty treaded
up to what five hundred yuos Permegawa tower even ire for a few days and
then we're delivering way under So not buying everything at that price was the right
decision. Very good. Vertical integration is back in the game, Americ.
Maybe just to end this, we talked a little bit about the future and
how you see the role of nuclear in this clean electricity world going forward,
in particular the role of French nuclear in European context. You'rered percent correct.
You have to look at Europe when you think it's the role of French nuclear.
We've seen it in the last two years where friends turn from export of
electisty to an import, which has an impact, not can effect on power
prices across Europe. So the question for the future is in fact more on
the demand that on the supply site, will there be enough demands to justify
as much nuclear than we have today in the fure mix potentially more. That's
a very important question because one could say that at the moment, with demand
levels as they are, we probably don't need as much nuclear doneration than we
have now. Again, because nuclear is great when it runs baseload, because
then it's economically super interesting and obviously it's low carbon technology. But if all
of a sudden you have to rump your units down several times a day,
several times a week, then it starts being a lot more expensive. And
the question hearing the discussion that happens these days between idf CEO and the government,
is nuclear electricity competitive at ninety or PERMGABA tower. I think it's a
big question mark and it probably is a no because I'm not sure it's competitive
against all the waste produce electricity in Europe, but also or maybe it's not
competitive against priso inexist on other continents. Wow. But on the other hand,
what's the price of energy security, what's the price of national pride,
what's the price of keeping those jobs? Yeah, sometimes there are other factors
than the pure market forces in an energy policy and national security. What national
security when you need to import your uranium from what Nizier, Kazakhstan, I'm
not really sure about that. Well, now I'm coming from it. At
the end of the day, France has nuclear weapons. They also have nuclear
submarines and guess what they need to be. You know that knowledge needs to
be kept in France. So there's a crossobs, aalization that takes place as
well, So it's not just commercially buying and selling power, right. Yeah,
But it's an interesting one because I was actually super surprised and I heard
about TDF complaining about the loss of skill with people retiring, because I thought,
you know, it's such a big company, they could probably have anticipated
that a little bit. But also, as you said, we have nuclear
weapons, we have nuclear submarines, we have nuclear flight carriers. So I
was and I'm still surprised by the loss of workforce, educated workforce in the
nuclear field. I find it very surprising that it's happening now. Okay,
Emeric, thanks for this anyway, So those assets are here, They're not
going to disappear overnight, and let's just hope they continue to be used in
a more thoughtful way in relation to the power production and the zero carbon production
in Europe. Yeah, yeah, I don't know what to conclude, your
heart, what do you want to conclude? I think we could say that
it's good because at least we can have these discussions now, which wasn't the
case a few years ago. And we all think Claire is a great tool
to reach the Nezier target. We also strongly believe that it can be very
competitively speaking, let's make sure that happens in the coming years. Absolutely,
Amic, thank you so much for coming on the show. Yes, thank
you very much. It was a pleasure, great discussion. Thank you very
much for coming on the show. Jeah, before you say anything, I
want to point out that Emeric is a sailor and it's from Brittany, which
is the region I come from, and I've been sailing a lot, so
I have a lot of respect for him. Number two, we just add
a fascinating conversation and so different from anything we read from the nuclear lovers or
the nuclear aitors. I agree totally with Youie, I have a question for
la Ron. I was quite I was quite tech. I still can't come
to terms us, which was his explanation of the fact that you know,
EDI Effort come out almost on a quarterly basis with predictions of how much power
they're going to produce every year, and they constantly missed them, which costs
them a lot of money, and that they then on a monthly basis are
coming out with maintenance and planned and unplanned of the nuclear plants. And the
thing that I just scratched my head was how can they get this so wrong?
I suppose what I concluded that from listening to his explanation was there's just
serious cultural issues within that ADF business. I mean, that's the that's the
only thing I can conclude after but it really really did strike me that they're
and but let's be clear. That's why they went bankrupt, that's why they
were nationalized because again they got their maintenance wrong. I mean, so explain
it to me please, I just okay, you pointed the right problem.
It's in one word, flippancy. Flippancy Okay, that's okay, that's a
good word. That's a good word. Okay. In a in a transition
world that's moving decentralized, that's moving digitized, epitomized the old world centralized,
analog, a bloatd bureaucracy. And the thing is they're all bureaucats, so
there's no downside. Nobody's gonna be fired, there's no upside. They never
get a bonus, especially now that they are not under stock exchange anymore.
So they have literally zero motivation to do good or to do bad. They
have zero motivation to innovate. And for thirty years, because they had built
this absolute engineering marvel, there was swimming in cash, cash by the way,
that the government you know, immediately took so they don't care, that's
what I think. Okay, So can I follow one from that? In
assent? Well, then, how do you see the future of that French
nuclear flat? How do you see it now? It's going to tag along.
But let's be clear, even the politics have tried to reform in DF,
they've tried to split it, they tried to put some more market common
sense in their thinking, and IDF has resisted any type of change. There
are a lot of good quality people, so ultimately they're going to fix their
current fleet. But let's face it, they don't have the money to build
new nuclear plans, especially if the price tag of each new unit is twenty
billion. They don't have the money and the government won't let them increase the
prices. So I don't know. Nobody has managed to reform DF. It
is what it is. I'm so taken back by what you're saying. I
really am, And I'm not disagreeing with you anyway, right because again I
just go back to it the brilliance of what IDIF did fifty years ago,
which is to begin that whole process of building this nuclear fleet out. And
as I said, they were the kings of the world, kings and nuclear
kings of the power generation. And then and as you said, the bureaucracts
struck over and the rest is history. It is tough to change, tough
to change, tough to change, we end up this bit or sweet episode.
Even decision makers can find a solution, so we're not going to find
it anywhere. Just to say that it is, in my opinion, has
stupid to be one hundred percent pro nuclear as it is to be one hundred
percent anti nuclear. But what is for sure is that there is no place
for private capital in nuclear. It is a government game and it really depends
how governments are motivated over the long term to invest in nuclear. But I
would say ninety nine percent of our listeners will agree with exactly that statement.
There's no role for private capital than in nuclear. Yeah, that's a jard
In two weeks time, we'll have a bit more joyfull episode with an entrepreneur
and batteries, so we're going to talk about the future, not that,
but we think Jim is very talented. Man. It was crazy. It
was great, absolutely great to have more, really brilliant and we thank our
partner Expo and Joab I took to you. In two weeks time, look
forward to it. Thank you for listening to Redefining Energy. Don't forget to
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