French Power Export Curbs Could Boost Prices for Neighbors

This content was published on July 25, 2024 - 13:40

2 minutes

(Bloomberg) — French electricity grid limitations will constrain power exports from Monday for more than two months, threatening higher prices in neighboring countries.

The curbs that run until October will impact exports to Belgium, Germany, Switzerland and Italy. Similar limitations this spring led to record spreads between France’s day-ahead power price and its neighbors.

France’s fleet of nuclear plants is the backbone of Europe’s power system, often supplying cheap electricity to other nations when renewable assets aren’t generating. Without French exports, they have to fall back on more expensive gas-fired generators.

“Price spreads between France and its eastern neighbors will likely widen again over the curtailment periods,” Florence Schmit, an energy strategist at Rabobank told Bloomberg. By contrast, French prices could “drop back to the low 30s,” she said.

Italy, which is already struggling as summer heat boosts cooling demand, will be the most exposed to upward price moves, according to Schmit.

“This will also drive up gas-fired power generation and coal in some markets and give gas hubs a reason to eliminate further price drops,” she said.

French grid operator RTE said limitations will increase when exports toward its eastern borders exceed 8 gigawatts. There’s a chance that curbs will be needed even before that threshold — which will be updated on Sept. 8 — is reached.

Italy is the most vulnerable, then Switzerland, followed by Germany and Belgium, RTE said.

French power contracts for delivery in August fell 3.75% €44.60 per megawatt-hour, while in Germany the equivalent contract saw a smaller decline of 0.622% to €75.10.

–With assistance from Francois de Beaupuy.