EDF Energy CEO Warns Of ‘Dire’ Situation For Electricity Generators

Posted by NucNet on 18 April 2016 in NucNet

Tagged with: EDF, Hinkley Point, Sizewell, Vincent de Rivaz.

Key components of the UK’s electricity market reform package need to be improved because of the “challenging” context of very low and falling electricity prices for generators, EDF Energy chief executive officer Vincent de Rivaz told a conference in London.

Mr de Rivaz told the Nuclear Safety Symposium on 14 April 2016 that the UK’s electricity market reform put in place three main components: the contract for difference (CfD), the capacity market and the carbon price floor.

But he said the situation for generators of electricity is “dire”, with forward power prices falling by 20 percent in the last six months alone.

“We have been thrown into a world of electricity at £35 [€43, $49] per megawatt-hour.”

Mr de Rivaz said this is precisely why EDF Energy and its parent company, the state-owned French utility EDF, must work to improve the capacity mechanism. “We are currently in a very constructive and consultative process with [UK] government on this exact issue.”

Mr de Rivaz said the carbon price floor needs to be strengthened, which is essential for the immediate sustainability of EDF’s business. “And it is why we need the CfD, which will make EDF’s investment in Hinkley Point C possible. These instruments are critical to keeping the lights on,” he said.

Mr de Rivaz did not say if the improvements to the electricity market reform package are essential for a final investment decision on two planned 1,600-MW EPR units at Hinkley Point C. But he said he had categorically told a parliamentary committee three weeks ago that the project “will go ahead and will go ahead very soon”.

Last year the CfD was set at £92.50 per MW/h. This price will be guaranteed for 35 years after the proposed reactors at Hinkley Point C begin operation and will increase in line with inflation. However, it would be reduced to £89.50 if EDF committed to go ahead with construction of a second nuclear station at Sizewell C in Suffolk.

Mr de Rivaz said the UK has broad political support for its ambition to have a significant share of nuclear in its energy mix.

But he said that over the last five years 20 percent of the UK’s generation plant has closed. A further 35 percent is due to close between now and 2030. “That includes all of our AGR stations despite life extensions, leaving only Sizewell B”.

After the 2011 Fukushima accident EDF invested almost £200 million to improve its resilience and emergency response capability even further, Mr de Rivaz said.

And since British Energy joined EDF Energy in 2009 “we have turned the performance of the fleet around”.

Last year’s output was 50 percent higher than it was in 2008, an additional 20 TWh of power generation, representing six percent of the UK’s electricity needs.

“We could not have achieved this if we starved or sweated our assets. We have done it by investing,” Mr de Rivaz said.

“As a result we have also safely extended the lives of our AGRs by eight years on average, in less than seven years.

“This corresponds to more than 400 TWh of additional electricity generation and carbon savings of around 95 million tonnes.”