Nuclear Energy in Europe

1. Nuclear Energy in Europe Integration of Nuclear Energy in Liberalized Electricity Markets Point of view of electrointensive industries in France and Belgium November 23th, 2009 Olivier Monfort

2. Agenda • Electrointensive baseload Industries • A changing context • Exeltium in France • The Blue Sky initiative in Belgium • Conclusion

3. Electrointensive Baseload Industries (1) • Generally metallurgical and chemical industries for whom electricity is economically a raw material :electric furnace in steel, aluminum smelter, electrolysis in chemicals … • These industries work round the clock • Their intermediate products are commodities, and have to meet strong international competition • They are upstream to many other industries

4. Electrointensive Baseload Industries (2) • In terms of electricity consumption : • They consume more than 50 % of their electricity during off-peak hours : “baseload” • Electricity is economically a raw material :In France, an electrointensive production is defined as having more than 2,5 Kwh of electricity consumption per € of added value • Some can provide modulation and interruptibility : • reduce consumption in peak or shortage times • absorb excess electricity in off-peak times

5. A changing context (1) From national monopolies to 3 types of suppliers : • Historical operators are still in dominant position in their home market : EDF in France, Electrabel in Belgium. • Out of their home market, they are still outsiders : relatively little size, no or limited baseload production : GDF-Suez in France, EDF in Belgium • The new entrants have focused on general market, rather than industry, and are progressively purchased by historical operators : SPE-EDF, Essent-RWE, Nuon-Vattenfall, Poweo-Verbund, …

6. A changing context (2) From Regulated to Liberalized Electricity Markets : • In the regulated price systems, electrointensive, baseload industrial consumers : • Enjoyed prices linked to baseload costs • Mostly under long term contracts • After liberalization : • Prices are formed according to the marginal production unit, regardless of size of requirement. The huge price increase to electrointensive customers is part of the windfall profit enjoyed by nuclear and hydroelectric producers • The Commission forbids commercial contracts over 5 years

7. A changing context (3) Supply Demand situation : • For many years, Europe has underinvested both in generation and transport capacity while electricity consumption kept growing. Belgium has become a net importer. • The growth of Renewable Energy translates into higher overall costs borne by the collectivity. Intermittence requires higher grid capacity and flexibility, and adaptations from both producers and consumers.

8. A changing context (4) Conclusion for baseload electrointensive industry : • To be internationally competitive, they need to source as much as possible nuclear or hydraulic electricity at a cost based price. • To have the long term visibility for heavy investment, short of having long term contracts and the visibility of the State industrial policy, they are led to try and coinvest in baseload electricity generation.

9. Exeltium in France (1) • Facing a doubling of their electricity bills, industries draw the attention of the State. Ministry of Economy organizes “table ronde de l’énergie” (2004 – 2005). • The EDF monopoly on nuclear does not allow a Finland-type of project of direct coinvestment by industrial consumers. • A 2005 law defines eligibility and the Exeltium concept : • A group of industrial consumers contributes an upfront payment to secure a drawing right on the nuclear park, for up to 24 years. Price is based on cost, but they have to carry financing cost.

10. Exeltium in France (2) • After long negotiations and modifications, the EU green lights the project … just before the financial crisis. • Start-up early 2010 of a “half size” Exeltium, at a higher than originally expected cost. • 6 major + around 30 smaller electrointensive participants. • Possibility to expand when more financing is available.

11. The Blue Sky initiative in Belgium (1) • Initiated in 2006 by 7 electrointensive baseload industrial consumers to try and replicate / adapt the Exeltium project. • Today : • Steel : Arcelor Mittal*, Duferco • Metals : Aurubis (copper), Nyrstar (zinc), Umicore • Chemicals : Air Liquide*, BASF, Solvay*, Tessenderlo Represent 15 % of Belgian electricity consumption * also members of Exeltium • Differences between Belgium and France : • Federal / Regions vs Centralized State • Electrabel (GDF-Suez) private vs EDF State controlled • Nuclear 55 % vs 85 % of electricity production

12. The Blue Sky initiative in Belgium (2) Recent events in Belgium : • Pax Electrica 1 and 2 after Electrabel purchase by Suez and GDF-Suez merger • Purchase of SPE by EDF, capacity swap between EBL and E.On • Nuclear plants prolongation and “rente” sharing • Nuclear tax and funding of Fund of Renewables

13. What Blue Sky offers ? • Baseload consumption contribute to economical viability of baseload production and to grid stability. • Possibility to increase modulation and interruptibility provide opportunity to smooth demand. • Blue Sky members are willing to coinvest in power generation, contributing to needed capacity and to public goodwill in favor of such investments. More capacity will increase security of supply and moderate future price increases. • Blue Sky members support investments in nuclear energy, as an indispensable part of the energy mix.

14. Conclusion • Short of competitive electricity with a long term perspective, electrointensive baseload industries will find more and more difficult to invest in Europe. • With possible delocation, Europe would export both jobs and indirect Co2 emissions, and most probably worsen them. • These industries are upstream to many others. Failure to keep them would trigger progressive other losses. • A nuclear come back in Europe is a key opportunity, provided Authorities understand and accept the specific needs of baseload industries.