To shed light on this situation, CRE will soon question market players “about their strategies and their expectations for the coming winter”.
Faced with the recent surge in electricity prices for next winter, even the sector regulator no longer hides its astonishment. In a press release published on Tuesday, the Energy Regulatory Commission (CRE) notes “that the level reached by forward electricity prices (for winter 2022-2023, editor’s note) in France no longer corresponds to an average expectation of spot prices (short-term, editor’s note) as modeled historically“. In other words, after making its calculations, CRE does not understand the cause of such high electricity prices on the French market.
Because, as the regulator points out in its report, the forward prices of electricity for the winter of 2022-2023 in France are reaching levels “records“. If they knowa record increase in Europe, which has accelerated sharply since mid-June 2022 […]the French price is particularly affected and, in particular, the gap with Germany reaches considerable levels“, can we read in his document. In France, the prices of products delivered for winter 2022-2023 “almost doubled in a few weeks», to reach more than 800 euros per megawatt hour (MWh). Compared to its German equivalent, the French price for the fourth quarter of 2022, as of July 8, is “about twice as expensive“, notes the CRE. Either a “historical gap“.
“Reinforced monitoring»
These extremely high prices are explained, recalls the CRE, by “the availability of the historically low French nuclear fleet“, caused by the shutdown of many reactors, and “fears for gas supply security for winter 2022-2023related to the war in Ukraine. However, the regulator is surprised by the price of electricity – correlated to that of gas – which is much higher in France than in Germany, “even though France, thanks to its more diversified supplies, benefits, on the wholesale market, from one of the lowest gas prices in Europe, and even much lower than that of Germany“.
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Current prices result in a scenario where, next winter, the price cap – i.e. the time when electricity demand cannot be met by sales bids – would be reached 30 days during each of the two winter terms. A hypothesis which could oblige the manager of the electricity network, RTE, to cut off the electricity at certain large industrial sites, lower the electrical voltage on the network, or even order load shedding at companies and individuals. “Even pessimistic scenarios on the availability of the nuclear fleet and on a cold winter do not lead to such a high number of hours of reaching the price cap as anticipated by market prices“, notes the CRE.
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The sector regulator therefore believes that these prices are not based on tangible reality, but on “market fears about the risk of a supply/demand imbalance on the electricity markets in France this winter“. If he has not observed to date any “behavior likely to amount to market manipulation», he indicates forfollow “his heightened surveillance”. To precisely understand the mechanisms at work behind these abnormally high prices, CRE announces that it will soon question market players “on their strategies and their anticipations for the coming winter“.
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