MARKET DEVELOPMENTS | EUROPE ON THE UP nuclear in Europe? An uplift for
Investment analysis suggests the mood music is positive for Europe’s nuclear sector as the push for a low-carbon energy system gathers pace
MORE EUROPEAN COUNTRIES ARE THINKING about turning to nuclear power, said Benjamin Leyre, a vice president in the Infrastructure Finance Group at Moody’s Investors Service, but projects are unlikely to be brought forward without state support. Leyre was speaking at a Moody’s recent discussion on
European power markets that looked at likely market changes in the next few years and by 2030, a target date for many European countries to complete significant decarbonisation. Across Europe, Moody’s analysts expected to see
increasing electricity demand in the second half of the decade, driven by increased electrification of transport and heating. In the next couple of winters “the electricity supply-demand imbalance has eased and Europe is much better prepared for the forthcoming winter than a year ago”. Analysts thought low carbon generation’s share will
increase: “A rebound in nuclear output in France, strong hydrological conditions and increased solar and wind generation have reduced thermal generation in 2023. Looking ahead, we expect low-carbon generation (including nuclear) to account for around 80% of total output by 2028 in the markets covered by our analysis, driven by ongoing growth in renewables capacity.”
In general Moody’s expected that power prices “will likely
remain above their long-term historical average in the next few years, primarily reflecting high, although declining, gas prices, as gas will stay the marginal fuel for power generation in most European markets”. But Moody’s analysts concluded that “A rising share of
renewables will also lead to more price volatility and, over time, a likely decline in power prices from current levels,” with significant periods of negative wholesale prices. Leyre said those two effects would mean investors were “quite lukewarm to nuclear plants on a merchant basis, ie fully exposed to power price evolution”. However, he said that the issue had been identified and it was an important factor in the European Commission’s work this year in developing a new market framework. He said, “The EC is very aware of that and market reform would allow for Contracts for Difference to be proposed that would securitise [the investment], and provide some visibility on prices in a way that would be disconnected from the wholesale price evolution”. Germany and France have been on opposite sides of a fierce debate about whether to allow the Contract for Difference option but they have come to an agreement and the measure has been included in a proposed new market framework.
Above: EDF could benefit from higher cash flows if domestic price reforms are taken forward Photo credit: olrat/
Shutterstock.com
32 | January 2024 |
www.neimagazine.com
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