Low-carbon industries key to the renaissance of French energy sovereignty
France attracts the fourth-highest energy investments in Europe per year, after Germany, Norway and the UK. Rystad Energy expects European capital investments in energy will total $173 billion this year, driven by solar photovoltaic (PV) (25%), onshore wind (23%) and upstream oil and gas (19%) spending. Investments will keep rising next year, by 13% to $196 billion, as activity accelerates in low-carbon industries such as wind, hydrogen and carbon capture, utilization and storage (CCUS). This provides ample opportunities in France's different energy sectors as the country holds a central position in Europe’s power industry and related value chains.
The French energy debate has historically centered on nuclear power versus renewable energy. However, the government now aims to boost low-carbon power generation using all available options to meet an expected rise in power demand. Rystad Energy modeling shows a 14% increase in demand from 2022 to 2030, which raises questions around domestic energy security – an enduring concern since the onset of the war in Ukraine and the resulting energy crisis.
The recent shortfalls in French nuclear power generation have highlighted the importance of having a reliable low-carbon power system. To address this issue, France is working to maintain and expand its nuclear fleet while simultaneously unlocking its renewable energy potential. The Renewable Energy Acceleration Act and the growing solar and offshore wind sectors are major steps towards achieving this goal. Successfully balancing a decarbonized yet reliable power supply will not only strengthen France's energy framework but also reinforce Europe's power grid. The country is also committed to decarbonizing its industrial and transportation sectors, with the battery and hydrogen industries in place to reduce emissions. This transition is catalyzing investment and revenue generation, positioning France as a key player in fortifying Europe's clean-tech supply chain.
Europe faces a significant challenge in grid development, where France's strategic role is increasingly important. The main concern with inadequate and insufficient interconnection capacity is renewable energy curtailment during an oversupply situation, which would threaten producers’ profitability. However, this risk is low in France because of its robust export capacity and diverse power mix. Improvements in France's grid infrastructure are therefore set to benefit the wider European system costs more than its own as they will address a broader regional need rather than a pressing domestic issue.
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France produced 62% of its power with nuclear reactors last year, amounting to 293 terawatt-hours (TWh). This was the country’s lowest nuclear share in several decades, dropping from 68% in 2021 due to high maintenance rates at Électricité de France's (EDF) reactors. EDF's maintenance schedule has improved this year and nuclear power generation is expected to rebound to 321 TWh. However, French power generation levels may remain lower than pre-shutdown levels and production is forecast to remain steady between 320 TWh and 350 TWh.
The French power mix has one of Europe's lowest shares of electricity generated from fossil fuels. Coal-fired power generation is set to be phased out completely by 2027 while gas will remain part of the power mix for flexibility reasons. Renewables accounted for 26% of France's power generation last year – including hydropower – and is expected to climb to 39% by 2030. The nation is on track to have 93% of its power coming from non-fossil fuel sources in 2030, well above the European average of 80%.
Integration of batteries becomes imperative as France commits to become carbon-neutral. The transportation sector is a major contributor to the national carbon footprint with nearly 42% of French emissions. Electrifying this sector would be a significant step towards a low-emission society and will be the primary catalyst for battery demand in France. In addition to batteries for electric vehicles, buses and commercial vehicles, there is a growing need for energy storage applications.
The large nuclear share means the French power grid has low emissions. Nevertheless, there is a pressing requirement for battery energy storage systems (BESS). These systems are essential to tackle the intermittency of solar and wind power sources, enhance energy security in distributed grids and bolster grid stability, especially in the context of electric vehicle (EV) charging infrastructure.
The battery supply chain in France has been steadily expanding, marked by last year’s discovery of a lithium mine and the establishment of stable battery manufacturing facilities. France’s production capacity for batteries is projected to reach 3 gigawatt-hours (GWh) at the end of this year and announced facilities and plants indicate a steep trajectory to more than 100 GWh by the end of 2030.
Rystad Energy estimates that France's battery production capacity will be around 60 GWh annually by the end of the decade. However, this will not be enough to meet its battery needs and the country will have to import over 60% of its requirements.
France early identified hydrogen as a factor in the energy transition push, setting initial targets for industrial and transport applications in 2018. This was followed by an official hydrogen strategy released in 2020, in which $8.2 billion was earmarked to get 6.5 GW of electrolysis installed in the country by 2030.
The country is currently the second-largest consumer of hydrogen and hydrogen derivatives in Europe after Germany, using around 1 million tonnes split between refinery use and the fertilizer sector (through ammonia). France produces around 800 kilotonnes hydrogen domestically and imports the rest as ammonia products (anhydrous, urea, and ammonium nitrate).
France requires 42% of its grey hydrogen used in industry to be replaced with renewable fuel of non-bio-origin, in line with the EU's Fit-for-55 Renewable Energy Directive. By 2040, France's hydrogen demand is expected to increase to 3.4 million tonnes to achieve its climate goals. The country has proposed 670,000 tonnes of clean hydrogen projects, mostly in the form of electrolysis, but over 80% of this is still in the concept stage.
To advance the development of these projects, France is allocating €4 billion for subsidy tender for domestic hydrogen production, offering support to both renewable and nuclear electrolysis. The subsidy will be based on the contract-for-difference mechanism and the auctions will be for 150 MW to be held in 2024, 250 MW in 2025, and 600 MW in 2026.
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Laura R. Skaug
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