France turns to gas for security amid nuclear outages [Gas In Transition]
France is joining other European countries in taking steps to build up its LNG regasification capacity as part of a push to phase out Russian imports, while it also contends with critical problems at its nuclear power plants that have served as the mainstay of its energy system for decades.
France is less exposed to the European energy crisis and the risk of disruptions in Russian gas supply than some of its neighbours, given its relatively low reliance on Gazprom, and gas at large. Whereas neighbouring Germany and Italy depend on Gazprom for 35% and 29% of their gas imports respectively, France depends on the Russian company for only 17% of its volumes. Instead its largest supplier is Norway, with a market share of 36%.
Furthermore, gas makes up only 16% of the French gas mix, compared to 27% for Germany and 41% for Italy. But France is nevertheless impacted by high global gas prices, and would suffer if Russia were to cut off deliveries to its neighbours.
Independence through atomic energy
France enjoys relatively strong energy independence thanks to policy decisions that were made several decades ago. In 1974, in the wake of the first oil crisis, then French president Valery Giscard d’Estaing called for a rapid expansion in the country’s nuclear power capabilities. The programme launched that year would result in the construction of 45 atomic reactors, allowing France to significantly reduce its oil and gas imports and achieve greater energy security.
Nuclear energy is today the bedrock of the French energy system, with 56 reactors with a combined capacity of 63.2 GW providing almost 70% of the country’s power generation, which is among the most cost-competitive in Western Europe. Nuclear power also continues to support French efforts to cut greenhouse gas emissions, as the country moves in the direction towards net zero by 2050.
France never embraced natural gas in the same way. Gas-fired power in the country has found it difficult to compete with atomic power, and the lack of any significant domestic reserves meant there was no incentive in terms of energy security to carve out a large place for gas in the national energy mix.
Amid climate concerns and in the wake of the Fukushima nuclear disaster four years earlier, however, France took a decision in 2015 to reduce the share of nuclear energy in its generation mix to 50% by 2025, as part of its Energy Transition for Green Growth Act, which also called for an acceleration in renewables deployment. In 2019, the Energy Climate Law delayed the nuclear target until 2035.
Situation turning critical
The drop in nuclear energy production at Electricite de France (EDF)’s plants recently to an historically low level is now a source of concern. It currently varies between 295 and 315 TWh, and the situation is becoming critical. Reseau de Transport d’Electricite (RTE) has called for France to reduce electricity consumption in response. According to a recent report by the Committee on Economic Affairs, an increasing number of reactors are suffering complete capacity outages, due either to staggered maintenance operations following containment measures, or to corrosion issues identified at certain reactors.
To maintain its energy security, France has therefore turned to gas. It will take time for France to overhaul its nuclear facilities, and in the meantime, increasing gas imports is one of the fastest and most affordable ways to effectively respond to the current energy crisis and, if the situation calls for it, to replace the 17% of gas that France buys from Russia.
France currently has four regasification terminals at its ports with a total capacity of 34 bn m3/year : one at Dunkerque, another one at Saint-Nazaire and two others at Fos-sur-Mer. Since the beginning of the year, France has imported a record volume of 136 TWh of LNG, which represents almost one third of its annual consumption.
The sharp increase in LNG supplies is due to growing energy needs and the extra attention to energy security against the backdrop of the military conflict in Ukraine. In addition, France is one of the largest re-exporters of LNG in Europe, with more than 40% of gas it imported in 2022 being re-exported to Benelux countries and Switzerland.
Having the role of a gas gateway in Europe brings France additional revenues. According to GRTgaz, one of two operators that run the country’s transmission network, customers using France’s LNG import terminals pay around one €1/MWh euro for the regasification of supply, and pay an additional cost to transport this gas via the national gas transmission system and cross-border interconnectors.
At the moment, French LNG terminals are working at their nameplate capacities, and at times even beyond. Elengy, a subsidiary of GRTgaz that operates three of the terminals, has recently upgraded the facilities to receive a wider range of different LNG carrier classes, to maximise utilisation.
In light of current circumstances, France is considering expanding its regasification capacity with the construction of a floating terminal in the port of Le Havre. The FSRU vessel that is set to be used belongs to TotalEnergies. Studies and discussions on installation and connection costs for the project are currently underway. If the ongoing administrative procedures do not hamper the project, the Neptune FSRU could become operational within 18 months. With a regasification capacity of 5bn m3/yr, the vessel is expected to receive LNG from the US, Qatar and Africa.
At the same time, French energy companies are expanding their LNG supply portfolios. Engie has recently entered into new agreements with US LNG suppliers. On May 3, it signed a 15-year contract with NextDecade, on the annual supply of 1.75mn mt of LNG from the first two trains of the Rio Grande LNG project, due online in 2026. Earlier in March, the company decided to extend its import contract with leading LNG exporter Cheniere Energy. The contract was extended over 20 years : the group says it wants to diversify its imports and reduce its dependence on Russian gas, which represents nearly 20% of the company’s supply. According to the contract, Engie will purchase between 900,000 and 1.2mn mt of LNG depending on the year.
While increasing its regasification capacity is a prudent move for France, and will strengthen Europe’s energy security, it is unlikely to be enough in the immediate term to help Eastern Europe deal with the risk of gas shortages. For historical reasons, the European gas pipeline network is largely designed to transport gas from east to west. The European Commission has made efforts over the last decade to substantially expand Europe’s gas transmission system through the construction of interconnections and the development of reverse-flow capacities, but still, the situation is not geared up for a complete suspension of Russian gas trade.
As already noted, the German market is significantly dependent on Russian energy, but gas from France cannot directly flow to the country because the former has a different gas odorisation system. Instead, supply must first flow into Belgium and Switzerland before arriving in Germany. France is working on steps to expand direct gas flow to Germany, but French experts suggest that solving the issue with odorisation and building a new gas pipeline would cost more than €200mn. Meanwhile, constructing a second link between France and Spain would cost €2bn.
Taking into account these high costs, France will need to be selective with which projects it goes ahead with, choosing only with those that are truly necessary in the short and medium term, and that can pay off quickly. Otherwise, such large infrastructure investments would risk becoming stranded in the future, and falling into disuse.