French nuclear woes to keep power prices high beyond 2030

Average wholesale power prices are likely to remain above £100/MWh until 2030 and beyond as the UK exports power to Europe to fill the gap left by French nuclear outages.

France’s massive 61GW nuclear fleet – second only to that of the US – has for decades been its main source of power and made it the world’s largest net exporter of electricity.

However, the aging fleet has suffered from a growing number of technical issues in recent years, leading to a flurry of outages for inspections and maintenance and prompting EDF to drastically reduce its generation forecasts.

Based on modelling of data from the first quarter of 2023, analysts at Cornwall Insight forecast power prices to average around £150/MWh in the 2023 fiscal year, but continue declining from the record-high levels seen in the second half of 2022 as concerns over gas supplies ease following a mild winter and new renewable generation comes online.

The consultancy said it expects average annual power prices to fall steadily to around £110/MWh in 2027 but then remain at this level for the winter season and above £100/MWh for the summer season until at least 2030 due to the increased scope for power exports from Great Britain as well as higher demand from the electrification of the economy.

The firm noted that gas prices will continue to be sensitive to the availability of globally traded liquified natural gas, which Europe is increasingly reliant upon because of reduced supplies from Russia. It said it expects the UK to miss its target of deploying 50GW of offshore wind by 2030, instead achieving the goal two years later in 2032.

Forecast average power prices by fiscal year

Cornwall Insight senior modeller Tom Edwards said the UK appears to have passed through the worst of the current energy crisis but the market is “finely balanced and consequently susceptible to price shocks arising from any unforeseen circumstances”.

“The recent decrease in short-term power price forecasts, largely attributed to the unexpectedly mild winter, can only be seen as a positive development,” said Edwards.

“In the mid-term, the transition towards renewable sources will enhance energy security further, and the affordability of wind turbines will be a driving factor in pushing down prices. The reduction in power prices indicates a potential return of cheaper tariffs for both households and businesses.”

He continued: “In the long run, electrification of the economy, amongst other factors, is predicted to raise the demand for renewable power, driving up price forecasts in the process.

“The latest predictions indicate a significant increase in exports to the continent, the growth, particularly attributed to the decrease in France’s nuclear capacity and the increase in wind capacity in GB, will likely result in power costs levelling out at a higher rate, surpassing pre-pandemic levels.”