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French industries prepare for tough winter

  • Market: Electricity
  • 23/09/22

Prospects of tensions on power supply this winter, combined with high prices, are forcing French industries to invent strategies aimed at cutting energy demand and adapting their production patterns.

Around 300 French energy-intensive firms could face financial difficulties owing to their high gas and electricity costs this winter, French industry minister Roland Lescure said earlier this week. And in case of a very cold winter, they could also be exposed to a risk of power cuts — one of the tools announced by French transmission system operator (TSO) RTE to balance the network in case of a supply crunch and higher demand.

Prime minister Elisabeth Borne earlier this month asked French industries to establish an "energy sobriety" plan aimed at cutting power and gas demand during the winter period, in line with the country's targets of a 10pc energy demand reduction in the next two years.

Winter contracts in the forward power market have also surged to unprecedented highs, fuelled by uncertainties on French nuclear availability. The fourth-quarter 2022 has been assessed by Argus at an average of €954/MWh so far in September, while the fourth-quarter 2021 was assessed at an average of €147.13/MWh in the equivalent period last year. Nuclear outages extensions announced by French utility EdF at the end of August propelled the product to new highs, as unavailability schedules were revised upwards. And the first-quarter 2023 has averaged €973/MWh so far this month.

"Facing those stratospherically high prices, we have many members that have their factories running at 80-90pc of capacity, and some of them have to suspend production," energy-intensive industries' association Uniden's representative Gildas Barreyre told Argus.

Belgian chemist firm Solvay has chosen to invest in energy efficiency to cope with high prices. "In our Dombasle site, we are using waste that cannot be recycled to produce steam for our soda ash production," the firm's representatives told Argus. So far, the company does not plan to halt or reduce production and remains "confident that it can keep serving customers even in the event of a 30pc gas curtailment in Europe", Solvay added.

Members of Uniden, of many sectors, are rescheduling maintenance works for the winter, thereby avoiding running their factories when prices are high or in case of a supply shortage. But others have chosen more radical options, such as glass producer Duralex, whose director Jose-Luis Llacuna on Thursday said that the firm will halt activities at its Chapelle-Saint-Mesmin factory during five months starting from November. "Energy costs represent 46pc of our revenue… this makes it impossible to produce [in those conditions]", Llacuna said.

And Zinc producer Nyrstar's factory in Auby, in the north of the country, is "continuing at the curtailed production levels announced last year" the company said in August, although declining to give further comments to Argus.

Need for state support

Most members of the Uniden association have part of their electricity needs covered by Arenh contracts — output sold by French utility EdF at a fixed price of €42/MWh, recently lifted to €46.20/MWh. "[Our members'] needs are covered at 60-80pc by the Arenh scheme, around 5-10pc are hedged with market futures or long-term contracts and the rest is exposed to the spot market," Uniden told Argus. The association is calling for a higher attribution of Arenh volumes, which would ideally cover 75-80pc of its members' needs.

While the government established a fund allowing firms with energy expenses amounting to 3pc or more of their revenue to benefit from state support until December, calls for emergency measures have been multiplying from industry unions. The association of industrial energy consumers CLEEE asked the government to implement a regulated tariff accessible to all companies for the duration of the crisis.

French president Emmanuel Macron this week urged energy-intensive companies that are currently renegotiating their contracts to refuse signing those at the current prices, adding that negotiations on the EU level will provide a solution to set "more reasonable" prices.


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21/11/24

Cop: Talks in Baku torn between mitigation and finance

Cop: Talks in Baku torn between mitigation and finance

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Cop: EU, four countries commit to 1.5°C climate plans


21/11/24
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21/11/24

Cop: EU, four countries commit to 1.5°C climate plans

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Cop: Australia backs no new coal power call: Correction


20/11/24
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20/11/24

Cop: Australia backs no new coal power call: Correction

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China to quit coal baseload power by 2050: Think tank


20/11/24
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20/11/24

China to quit coal baseload power by 2050: Think tank

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UK launches global clean power group at G20


19/11/24
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19/11/24

UK launches global clean power group at G20

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