EDF : New approach to nuclear electricity pricing in the making in France?

Last Thursday, EDF and Aluminium Dunkerque announced the conclusion of a 10-year electricity supply contract covering up to 70% of the site’s electrical needs . The terms of this contract have not been made public. It concerns an industrial site making up for 4 TWh of electricity consumed p.a. , i.e. almost 1% of consumption in France. The conclusion of this contract may well constitute a first step in the overhaul of the French electricity market in a twofold context : ( i ) the end, next 31 December, of the ARENH mechanism which had until then indirectly enabled electro-intensive industries to benefit from a competitive electricity supply set at 42 €/MWh; (2) the difficulties encountered by EDF thus far in implementing its new bilateral sales strategy with large electricity consumers, via the CAPN mechanism (nuclear generation allocation contract). 18 months after its introduction, this mechanism has resulted in only one firm contract for 1 TWh and 10 letters of intent for 15 TWh being signed . The announcement of the contract with Aluminium Dunkerque also comes a few days after Bernard Fontana, EDF new Chairman & CEO, took office . The latter would appear to be open to exploring new contractual schemes to facilitate long-term purchases of nuclear electricity by electro-intensive industries, in particular: ( i ) the smoothing over time of the payment of instalments to EDF, which can represent several hundred million euros, but also (ii) the potential fixing of a sale price for electricity below 60 €/MWh, which is the full cost of nuclear energy determined by the French energy regulator, in return for risk sharing with the industrial s concerned, particularly the level of future nuclear production. Amid mounting importance of electricity prices for the going concern of industrials in Europe (see Electricity and industrial competitiveness: how to bring about the EU’s reindustrialization? ), w hile not a game changer for the regulatory & market environment facing EDF in France , this contract announcement may pave new ways for nuclear electricity pricing and ultimately further de-risk the construction and operation of nuclear power plants in France .