February 17, 2019 / 6:01 PM / 5 months ago

UPDATE 1-French nuclear output unlikely to surpass 405 TWh due to shutdowns - EDF CEO

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PARIS, Feb 17 (Reuters) - French nuclear electricity generation is unlikely to surpass 405 terawatt hour (TWh) annually in the years ahead due to planned shutdowns of some nuclear reactors, Jean-Bernard Levy, chief executive of utility EDF said on Sunday.

France plans to halt power generation at some of its aging nuclear reactors to reduce dependence on atomic energy and develop power from renewables sources.

The 1,800 megawatt Fessenheim nuclear power plant, France’s oldest, is expected to be decommissioned by 2022.

EDF operates France’s 58 nuclear reactors, which account for over 75 percent of the country’s electricity needs.

It has set a target to produce 420 TWh a year, but said on Thursday that production this year would be 395 TWh, compared with 393 TWh last year.

Levy said in an interview with French newspaper Les Echos that EDF’s revenue growth would remain limited if the Arenh mechanism - under which it sells nuclear electricity to rivals in the French market - remains unchanged.

Under the Arenh mechanism, EDF sells 100 TWh of its annual output to rivals at a fixed price of 42 euros ($47) a megawatt hour (MWh).

In the November auction window, alternative power providers in the French electricity market requested 132.93 TWh of EDF’s nuclear power generation for 2019.

Levy said the current level of Arenh mechanism should be raised, and a floor price introduced to ensure EDF’s profitability, while a ceiling price should also be put in place to protect consumers from volatility.

EDF has said the current price is too low and the mechanism is one-sided as its competitors only use it when it is advantageous to them.

“The price at which we are required to sell our electricity to our competitors has not changed in eight years,” Levy said. “It helps to cover current costs but not to make our investments.”

“Our competitors buy from the market when prices are lower than the Arenh, and from the Arenh when prices rise, depriving us of the rise in prices. This injustice must end,” he added.

European wholesale power prices have traded above the Arenh level since May 2018, buoyed by the related increase in carbon emission permits, coal and gas prices, increasing demand from the Arenh window.

The French year-ahead electricity contract for 2020 delivery settled at 49.10 euros/MWh on Friday. The contract hit a high of 57 euros/MWh in January.

The French government is preparing a review of the mechanism, which is expected to be more favourable to EDF.

$1 = 0.8855 euros Reporting by Geert de Clercq and Bate Felix Editing by Susan Fenton

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