French fuel mix: zero carbon and below zero prices

France has been a significant net exporter of electricity in Europe for decades, thanks in large part to its robust nuclear energy infrastructure.  

However, a series of challenges emerged between summer 2022 and winter 2023. These began with the discovery of cracking corrosion issues in nuclear power plants. These issues led to a period of uncertainty and lowered production capacity, ultimately resulting in France becoming a net importer of electricity.

Current situation 

France's nuclear energy sector is gradually recovering towards what we would consider normal levels of production. As of 2024, France's nuclear production remains below its peak levels of the past decade but is showing signs of improvement.  

It's noteworthy to mention that the challenges faced by the nuclear sector have overshadowed other transformations within the energy industry. Nevertheless, France remains committed to its nuclear energy program whilst exploring opportunities to integrate renewable sources and enhance energy efficiency measures. This approach underscores France's determination to maintain a stable and low CO2 emissions electricity supply amidst evolving energy dynamics. 

Analysis of Power Generation Sources 

The chart above provides a comparison between the load (represented by the black line) and the aggregated production of nuclear, wind, solar, and hydro power.  

This visualisation efficiently illustrates periods when France experiences oversupply solely from decarbonised sources - especially after April 2023. The power generated by these technologies can be classified as "must-run" sources or non-flexible assets, indicating their availability regardless of demand fluctuations. 

In addition to the low demand observed in Q4 2024 compared to previous years, the chart highlights a significant increase in wind and solar power generation over time. 

Installed Capacity Growth: 

Solar experienced notable growth, with the installed capacity rising from 10.2GW in 2021 to 17.4GW in 2023, resulting in a production increase from 14.2TWh in 2021 to 21.6TWh in 2023 and 3.8TWh in 2024. 

Wind power also saw substantial expansion, with the installed capacity increasing from 17.2GW in 2021 to 23.6GW in 2023, leading to a production rise from 36.9TWh in 2021 to 50.8TWh in 2023, with an additional 15.6TWh generated in Q1 2024.  

The first offshore wind farms came online during this period, signaling the beginning of a rapid growth trajectory for this sector. Onshore wind capacity expanded from 17.2GW to 22.1GW, whilst offshore wind capacity grew from 0 to 1.5GW. 

The chart below illustrates the increased production of Wind & Solar from 2021 to Q1 2024, highlighting the notable growth in solar energy generation.

The last week of February (the coldest one) provides a clear illustration of the export dynamics amidst low CO2 emissions. It shows that France becomes oversupplied as soon as the wind or solar production reaches a sufficient level (26th and 29th) and when they combine efforts, France is significantly oversupplied as we see on the 30th. 

Future Outlook: 

The installed capacity of wind and solar energy is expected to continue growing in the coming years. Estimates suggest France could reach up to 44GW of wind and 47GW of solar by 2030.  

Simultaneously, nuclear production is anticipated to return to historical levels, reaching 47-48GW, which represents a 5GW increase compared to this example week of February. With this combination of renewable and nuclear energy sources, France is poised to meet rising demand in the future while remaining a strong exporter when weather conditions favour renewable energy sources.

Export Benefits for Europe 

France being a strong exporter is beneficial for Europe on multiple fronts. Not only does it help in keeping electricity prices low, but it also contributes to the decarbonisation of the European electricity mix.  

Interconnection already plays a pivotal role in European policy, meaning some countries must be able to supply power to others when needed. The importance of this can be seen in the France-Italy interconnections, as well as the Eleclink to the UK. 

Record-breaking exports: 

These long-term investments in infrastructure have enabled France to break several export records. Most notably, with exports reaching up to 20.2GW on the 6th of January. As shown in the graph below, the level of power export consistently remained above 16GW - even as wind production reached 16GW as illustrated below. 

Challenges with high oversupply 

In many situations, exports alone are not sufficient to address the challenges posed by high oversupply in the French electricity market. This can occur due to various factors, including reductions in interconnector capacity, or when neighbouring European countries, such as Germany, Belgium, and the Netherlands, face similar oversupply situations. Consequently, Day-Ahead (DA) prices plummet to 0 or even lower, reflecting the excess supply in the market. 

Negative Day-Ahead prices & consequences 

In France, wind or solar power plants operate under Contracts for Difference (CFDs) schemes. When the Day-Ahead (DA) price is negative, subsidies are not paid 

As such, asset optimisers are highly incentivized not to sell power (or buy it back) at negative prices. Below is an overview of the 16th of April as an example. Wind production demonstrates high reactivity to strict negative DA prices, as evidenced from 3 to 4 am and from 10 to 11 am.  

The sensitivity analysis curves, also show that even an additional 2 GW of capacity would not have been sufficient to lower the price below the observed level. The bid/offer curves of the Day-Ahead auctions further illustrate this point.

Hourly analysis and wind production 

For the hour from 15 to 16, 2.3 GW were not sold at 0, while 800 MW were bought back. These numbers suggest that approximately 3.1 GW of wind and solar generation should be missing from the market. However, it's worth noting that we observe a drop of 6 GW in wind production, from 11.7 GW to 5.6 GW. This significant decrease in wind generation further underscores the challenges faced during periods of oversupply, negative pricing and the difficulty in anticipating them. 

Future outlook on power prices 

The increased development of wind and solar energy, good levels of nuclear availability, high hydro production and low load levels have driven electricity prices to extreme lows. But will this situation persist? 

High hydro production is typically seasonal and subject to change as we move into summer. Nuclear availability is expected to increase in the coming years, whilst offshore wind farms are finally being connected, contributing to the overall energy supply. Installed solar capacity in France is projected to reach 48 GW by 2030, further enhancing renewable energy generation. 

While power production continues to rise, uncertainty remains regarding future demand. Neither French nor European re-industrialisation is imminent, with the earliest projections suggesting potential re-industrialization by 2027, according to RTE's scenario.  

With this outlook, France is likely to experience low prices for the next two years. This means the occurrence of negative prices may continue too. While this presents a favourable situation for energy users, it also poses challenges for wind and solar developers. 

Factors Influencing Day-Ahead French Prices 

With the current subsidy schemes in place and nuclear modulation, it's unlikely that Day-Ahead French prices will significantly drop below 0 when France is alone in the market.  

However, prices such as -5 or -20€/MWh can occur when other European countries are also oversupplied. In Belgium for example, subsidies are above 50€/MW, meaning there's no incentive to stop production before prices reach -50€. 

In Germany, wind and solar do not receive subsidies when Day-Ahead prices are negative for more than 6 hours consecutively, leading to a lack of specific price signals. 

Conclusion 

In analysing the dynamics of Day-Ahead prices and energy balancing mechanisms, several key insights emerge: 

When Day-Ahead prices break the price floor of 0 EUR/MWh, it requires French nuclear plants to show flexibility. Wind and solar generation also needs to be curtailed too, whilst excess electricity can also be exported to neighbouring countries. 

Despite Day-Ahead prices occasionally dipping below 0, it's also crucial to discern "real" negative prices. These range from -2 to -50 EUR/MWh, as they are primarily influenced by neighbouring countries. This underscores the high level of sensitivity within the region, particularly as significant flexibility resources are already utilised. 

However, there are also scenarios where cheap flexibility resources are optimised and used at their maximum for managing both the Morning and Evening peaks, as well as solar hours. Therefore, when pumped hydro storage facilities operate at full capacity outside of solar hours and absorb excess energy they are not available for balancing actions. 

This means that more expensive flexibility options, such as oil and demand-side response (DSR), come into play during peak demand periods. This was shown to be the case between March and April this year. Cross-border activations with Germany are then also constrained by limited available capacity.  

What we can say for sure, is that while demand remains low, periods of oversupply (and further instances if negative pricing) remain likely.