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Nuclear Townhall
January 19, 2011

EDF’s plans to spend $35 billion to upgrade its aging nuclear fleet are suddenly being threatened by a runaway subsidy for solar energy. “This is a time bomb EDF needs to defuse as soon as possible,” Bertrand Lecourt, an analyst at Deutsche Bank AG, told Bloomberg News. 

The program began two years ago when France established a “feed-in tariff” – a fancy name for a price support – that required the national utility to buy solar electricity at ten times the price of other sources.  Payments grew tenfold in two short years as shopping centers and other buildings all over France threw up solar panels.  Some farmers even built new barns just to take advantage of the program.  With money gushing out the door, the government cut the subsidy twice during 2010 but was finally forced to impose a three-month suspension in December. “We just didn’t see it coming,” French lawmaker Francois- Michel Gonnot told Bloomberg. “What’s in the pipeline this year is unimaginable. Farmers were being told they could put panels on hangars and get rid of their cows.”

The fiasco – similar to other government-led solar bubbles in Spain and the Czech Republic – has seriously impacted EDF’s finances. Shares dropped 20 percent in 2010, compared with a 3.7 percent decline in Europe’s Stoxx 600 Utilities Index. The Paris-based company now has a debt of $57 billion euros. 

It’s not hard to see why. The law requires EDF to pay 546 euros per megawatt-hour in 2011, almost ten times the spot price of 55 euros. Unlike Spain, which had visions of growing a solar industry, France’s solar bubble seems to have been created for purely altruistic purposes. “Most panels installed in France were made in China with a highly questionable carbon footprint,” Environment Minister Nathalie Kosciusko-Morizet told parliament last month, according to Bloomberg. He said public policy must “create jobs in France, not subsidize Chinese industry.”

Meanwhile, in the real world of energy production, EDF announced this week it has hooked up all 58 of its reactors to the French grid to deal with a 5 percent increase in demand over last year. Many reactors had been down for prolonged periods of maintenance. It marked the first time the utility had been at full strength since 2004.

Read more about it at Bloomberg News


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