EDF and Areva target nuclear reactor sales in Saudi Arabia

French utilities EDF and Areva are poised to enter the nascent Saudi Arabian nuclear market, but face competition from South Korean, Japanese, and Russian bidders.

Saudi Arabia is one of the world's biggest oil producers, with only Russia and the US coming close. However, domestic oil demand is rising at a rate of 8% per annum and unless oil production growth can keep pace - which is unlikely - volumes of oil available for export will diminish.

Saudi Arabia intends therefore to diversify its energy mix towards renewables and nuclear. In May 2012, plans were announced to construct 16 nuclear power reactors with 17GW of capacity by 2032, at a cost of $80bn. In addition, 16GW of solar PV capacity, 25GW of solar CSP capacity, and 4GW of bioenergy and geothermal capacity are planned by 2030.

Although Saudia Arabia has not issued a tender for nuclear power projects, the French government has already expressed interest. In early 2011, EDF and Areva opened a joint office in Riyadh, offering technological knowhow and training to local staff.

However, France faces stiff competition from other potential bidders, including a South Korean consortium led by Korea Electric Power Corporation, a Japanese consortium led by the International Nuclear Energy Development of Japan Co, and Russia's Rosatom.

In France's favor is Areva's expertise in the entire nuclear value-chain, and EDF's experience in building and operating nuclear plants. Against it are Areva's cost overruns and project delays in the Flamanville (France) and Olkiluto 3 (Finland) plants. Areva's previous attempt to enter the Middle Eastern market failed when it lost a $40bn contract to build and operate four nuclear reactors in the UAE in 2009.

The move into Saudi Arabia fits EDF's and Areva's strategy to pursue contracts outside Europe following the French government's intention to reduce nuclear power's share of the generation mix by 25% by 2025.

Areva and EDF's relationship has been a troubled one; however, the two have managed to work together since February 2011 to lead France's nuclear export drive. The fruits of this agreement can be seen in EDF's partnership with China Guangdong Nuclear Power Holding Co to build two EPR reactors in Taishan, southern Guangdong, for which Areva is providing the reactors. Datamonitor expects that their long-term partnership will optimize France's chances of building on its success in China and in winning further major contracts such as that targeted in Saudi Arabia.

Written by Yasmin Valji

Analyst, Datamonitor Energy

email: yvalji@datamonitor.com

Follow Yasmin on Twitter: @YasminV_DMEN

For more information:

Datamonitor Energy group has now launched a dedicated website, replacing this blog account.

The new site contains more commentary, insight, and analysis from all of the Datamonitor Energy team, as well as overviews of all published and soon to publish data and research.

For more information, you can find the site here: www.datamonitorenergy.com 

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Calls for action as networks struggle with German energy revolution

Support is growing for the German federal government to take a greater role in pending grid development projects that will increase the connectivity of scattered renewable sources, with calls even for part-privatization.

The growing pace of the German Energiewende is highlighted by the fact that the share of renewable electricity generation in Germany rose to 26% in the first half of 2012, primarily from solar and wind capacity.

Yet Germany is already facing network stability issues resulting from sudden increases in electricity generation from renewable sources. The fluctuations in generation on the grid can affect the production of major industries such as coal mines and aluminum process units, forcing them to install backup power supplies in the interests of uninterrupted production.

The German Energy Agency estimates that up to EUR42.5bn is required in infrastructure investment by 2030 to support the country's transition from nuclear to renewable generation, including major projects to connect its renewable sources of electricity generation to demand centers in the south.

This marks Germany as a potential market for grid investments by both domestic and foreign players: for example in January 2013, Japan's industrial conglomerate Mitsubishi partnered with German-Dutch grid operator TenneT to announce the construction of four underwater connections for German offshore wind farms in the North Sea.

Yet other grid investment is lacking. The fragmentation of the transmission industry along with the recent network divestments made by the large German utilities has placed management of the nation's transmission assets in the hands of investors with little interest in co-ordinated network development projects. Proponents of federal involvement hope that this will guarantee that these projects proceed in the national interest.

Datamonitor sees calls for part-privatization as a step too far, and recommends instead the shared ownership of the transmission planning function, with federal and state governments, transmission companies, and renewable project developers holding shares in a network development agency. A successful example of an organization with this ownership model is the Australian Energy Market Operator, which among other roles has responsibility for co-ordinating transmission network development across five states.

The scope of such a transmission planning entity could grow organically, commencing with the development of the three key lines required to connect offshore wind projects. The question of asset ownership could be left open, avoiding an upfront commitment by German taxpayers, but allowing for the possibility of future government investment as an absolute last resort.

The challenge, as always, will be balancing competing development interests and delivering renewable power to high-demand centers, while avoiding excessive costs for German consumers.

Written by:

Rhys Kealley

Lead Analyst, Datamonitor Energy

email: rkealley@datamonitor.com

Follow Rhys on Twitter: @RhysKealley

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Datamonitor launches fully interactive energy retail price dashboards

Datamonitor's Retail Energy Pricing Dashboard contains retail gas and power prices in the B2C and B2B sectors across the EU. The interactive nature of the data visualization allows the user to drill down into each country's individual pricing trends.

Updated monthly, the dashboard presents data for 27 countries to provide a comprehensive European retail energy price analysis tool. Time series data going back to February 2012 is available which allows the user to identify historical trends in pricing. Data can be customized using several filters including:

• Month
• Fuel (electricity, natural gas)
• Customer type (domestic, industrial)
• Consumption level (small/large domestic, small/large industrial)

The customization can be performed with ease using single click menus for instant and insightful data analysis. The dashboards present comparisons between countries but also drill down to analyze percentage change for individual countries each month to show the real underlying price trends. 

Once you have selected the data you want to view, it can be easily exported as raw data into a Microsoft Excel spreadsheet or graphs can be captured as an image, for insertion into presentations. 

The images below show the introduction and time series data dashboards which are just two of the five published by Datamonitor.     

Written by:
Tom Haddon
Analyst, Datamonitor Energy
email: thaddon@Datamonitor.com 
Twitter: @TomH_DMEN 

For more information:

Datamonitor Energy group has now launched a dedicated website, replacing this blog account.

The new site contains more commentary, insight, and analysis from all of the Datamonitor Energy team, as well as overviews of all published and soon to publish data and research.

For more information, you can find the site here: www.datamonitorenergy.com 

This blog account will close at the end of February; all future blog posts will be available from the link above. 

Email: asken@datamonitor.com

Twitter: @DatamonitorEN

France's offshore wind brings investment opportunities

The French government has launched its second public tender for the construction of two circa-500MW capacity offshore wind farms, with an expected total investment of EUR3.35bn. The tender comes in the context of small but growing anti-nuclear sentiment, as well as the need to replace aging nuclear capacity and meet its 25GW wind power target by 2020.

France currently has 6GW of wind capacity. In 2011, wind generated 11.8TWh of power and contributed to 2.1% of the country's total electricity generation. Nuclear generation currently dominates France's electricity generation mix, making up 75% in 2012. However, under the leadership of the current socialist government, France aims to reduce the share of nuclear generation to 50% by 2025 and instead turn towards solar and wind energy.

France: first and second round public tender zones for offshore wind. 

Source: Ministry of Ecology, Sustainable Development and Energy. The second round tenders are in green, the first round in red.

In this context, the government has launched a fresh public tender for two 500MW-capacity offshore wind farms in northern France, near the islands of Noirmoutier and Yeu on the Atlantic coast. France awarded the first tender for offshore wind farms in April 2012, which had a capacity of 2,000MW at an investment of EUR7bn.

22 out of the current 58 reactors in France will complete their lifespan by 2022, leaving the government with the option to either decommission or extend their lifespans. The significant reduction in nuclear generation desired by the government, growing anti-nuclear public sentiment in the wake of the Fukushima disaster in Japan, and finally the high-capital costs of refurbishment are all factors driving the decision to shut down the aging reactors. Indeed, the Fessenheim 1 and 2 reactors located in northeastern France with a total capacity of 1,760MW, will be shut down by 2017.

France is a predominantly nuclear-led country; however, favorable policy and geographical conditions mean that it is becoming an increasingly attractive destination for renewable investment. Firstly, France has one of the strongest feed-in mechanisms in Europe promoting wind energy, especially for offshore projects: the feed-in tariff in France for offshore wind was EUR0.13/kWh in 2012, which has been constant since 2008. Secondly, France benefits from long coastlines including the English Channel, the Mediterranean, and the Atlantic, thereby allowing an average wind speed for offshore turbines of 13.5 knots.

These strategic advantages have motivated significant investments in wind, comprising of both domestic and foreign direct investment. For example Boralex, based in Canada, acquired the 32MW La Vallee wind power project located in the department of Indre, France, while German Enercon has also expanded its presence in the Picardy region in France. In 2013 France's EDF acquired 321MW of wind capacity in partnership with GE Energy and MEAG, which is the asset management arm of Munich Re and ERGO. Foreign investment has also extended to the domestic supply chain, with Japanese and Danish technology giants such as NTN and Vestas having set up extensive turbine assembly sites in France.

Datamonitor expects wind energy to be instrumental in helping France to achieve its aim of 23% electricity generation from renewable sources by 2020, which will be an unavoidable part of the generation landscape if France is determined to reduce its nuclear capacity. With a debt-constrained EDF and some 25GW of wind capacity to be met by 2020, France would appear to be an obvious candidate for foreign utilities and component manufacturers looking to expand.

Written by Yasmin Valji

Analyst in Datamonitor's Energy Team

Follow Yasmin on Twitter: @YasminV_DMEN

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