backAs one of the main measures contributing to the creation of a new French energy model, the energy transition law of 17 August 2015, caps the proportion of electricity to be produced from nuclear plants.
The current French energy model is based on a very large share of nuclear, which represented 77.5% of the national electricity production in 2014. France is the largest producer of nuclear electricity in the European Union, and second in the world after the United States with 58 commercial nuclear reactors that total an installed capacity of 63.1 GW.
In the wake of the Fukushima accident in Japan, France embarked upon a policy of reducing nuclear dependency; one of President Hollandes campaign commitments was to decrease the share of nuclear energy to 50% by 2025.
Initially, this commitment was to be reflected in the closure by the end 2016 of the oldest plant in France Fessenheim. However, such closure raised several legal and practical issues.
An Unlimited Operating Life
First, the authorizations for operating nuclear plants are unlimited in time subject to facility safety inspections every ten years. In 2011 and 2013, on the basis of such safety inspections the Nuclear Safety Authority authorized both reactors in the Fessenheim plant to continue operating for an additional 10 years, subject to carrying out certain work. At the end of this 10 year period, new safety inspections could once again extend the lifespan of these two reactors.
Second, a nuclear plant can only be closed for safety, technical or industrial reasons. A law is required for closure for any other reason, and would entitle the operator, lectricit de France (EDF), to compensation. In the case of the Fessenheim plant, such compensation would have to take into account, at the very least, the investment of approximately 300 million euros made by EDF since the last ten-year safety inspection. Losses on the expected return and compensation for the German company EnBW and the Swiss electricity group CNP should also be taken into consideration. These companies participated alongside EDF in the financing of the construction costs of the plant and pay a share of the plants annual operating costs, receiving in exchange a percentage of the energy produced. A report presented to the National Assembly on 30 September 2014 estimated the States liability for compensation at 4 billion euros, without counting the indirect consequences of such a decision on employment, local authority finances or the electricity grid.
Finally, administrative procedures that must be followed before a closure can be authorized create another obstacle to rapid closure of the Fessenheim plant. These procedures in practice can take approximately five years.
A Legally Weak Mechanism
Because of these complications, Parliament has not referred to the closure of the Fessenheim plant in the energy transition law. The mechanism provided for in the bill aims to reduce the nuclear energy share to 50% by 2025 and cap nuclear production capacity to its current level 63.2 GW stating that authorizations for operating new nuclear plants shall not be issued if this level is exceeded. The mechanism provided for by the law is legally weak and it is uncertain how it will be implemented.
Several doubts also exist about the ways of reaching the objective of reducing the energy produced by nuclear by a third. According to various electricity consumption scenarios, this objective could imply closing around 20 reactors by 2025 (if consumption stagnates) or none at all (if there is a rise in consumption).
Moreover, the mechanism aims at making the operator responsible for the management of the nuclear generation capacity: decisions to open and close plants would be taken not by the State but by EDF. For example, in order to commission the new 1650 MW Evolutionary Power Reactor (EPR) in Flamanville, EDF would first have to decide to close equivalent nuclear capacity elsewhere. Although in theory it might seem easy for EDF to take a decision - the construction costs of the Flamanville EPR amount to 10.5 billion euros, while the older nuclear power plants are now amortized - such a decision would still have significant adverse financial consequences for EDF as investments in safety improvements made at the nuclear plant(s) to be closed would not be amortized. In addition, since EDFs investment in the Flamanville EPR was decided in 2007 and most of the investments to improve safety were determined before the last presidential election, it goes without saying that confronting EDF with such a dilemma also creates a major issue in terms of legal certainty.
Contrary to European Directives
The mechanism also raises issues vis--vis the European directives which provide for the liberalization of the energy sector. The intended nuclear cap may result in a partitioning of the French nuclear market, as the entire fleet is currently operated by EDF and new available generation capacity can only be created if EDF decides to close existing generation capacity. In practice, this prevents other actors arriving on the French nuclear generation market, which could be criticized by the European Commission.
Finally, the law does not compensate EDF for losses caused by the accelerated closure of the plants. EDF would have strong arguments in the event of an action for damages against the State for expropriation. However filing such an action remains doubtful since the State holds 85% of EDFs shares and there is a risk that, as such, it might sacrifice the interests of EDFs 15% floating shareholders.