Costs of the electricity system: the Court of Auditors publishes its “final observations”

The Court of Auditors published on December 13 its “final observations on the costs of the electricity system in France”. Here are some thoughts from the public accounts audit authority and its 4 recommendations.

Production costs of the channels and full cost of an electricity mix

The Court of Auditors recalls that the costs of electricity production “can be calculated for a particular production technology (nuclear, hydraulic, thermal, etc.) or for the electricity system considered as a whole (including the means of production, the networks of routing, means of storage or flexibility of demand, etc.)”.

The estimate of the cost of a production mix "does not correspond to the simple addition of the production costs of each sector", thus warns the Court of Auditors. And it is indeed “the cost of the electrical system as a whole that accounts for the production cost associated with an electrical mix”. An approach followed by the network operator RTE in its recent report "Energy Futures 2050" which details the overall cost of the French electricity system by 2060 in 6 scenarios.

The economic cost of an electricity mix must "take into account, in addition to the means of production, the cost of the means of storage, flexibility of demand, those of the transport and distribution network, interconnections and finally the balance sheet of external electricity exchanges (imports and exports) which depend on the electricity mix of our European neighbours”, summarizes the Court of Auditors ⁽¹⁾ .

Cost of production: “accounting” and “economic” approaches

In its report, the Court of Auditors also recalls that the average production cost of a sector "can be estimated using so-called "accounting" or "economic" approaches, which differ essentially in the way in which investment costs”:

There is nothing trivial about the approach adopted and it can lead to “very different results depending on the effective rate of accounting depreciation”. Thus, to assess the full production cost of the existing nuclear fleet for the years 2011 to 2020, the Court of Auditors applied these different methods and reported a "cost fluctuating around €42/MWh over the period, taking the accounting method” (price used within the framework of the Arenh since 2012) but “around €60/MWh” with the economic approach ⁽²⁾ .

“Hybrid” approaches are also possible, combining accounting elements and economic calculations”, specifies the Court of Auditors.

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— Rachel Wed Dec 30 03:20:31 +0000 2020

Factors affecting the production costs of each sector

The cost of electricity production "depends on the characteristics of each sector, and in particular on the division between investment and operating costs, the price of the fuel used and the annual operating time considered for this means of production (certain means of production can operate almost constantly while others depend on weather conditions)”, recalls the Court of Auditors.

Knowing that the different sectors are thus "characterized by different ratios between fixed costs and variable costs", the hierarchy of the different technologies in terms of production cost varies "according to the duration of operation to be ensured in the year, and therefore the factor annual charge.

The nuclear fleet “extended to 50 years” is, for example, “more competitive than combined cycle gas technology (CCGT) for annual operating times greater than 4,200 hours (annual load factor greater than 50% if the means produce at nominal power). Furthermore, photovoltaics and onshore wind power are "potentially more competitive than combined cycle gas-fired power plants (CCGT) or nuclear power plants, whatever the operating time considered, but their load factor is in fact limited and , without adding storage, they do not necessarily produce during the most tense periods in terms of supply-demand balance”.

The 4 recommendations of the Court of Auditors

The Court of Auditors makes the following 4 recommendations in its report:

The Court of Auditors emphasizes in the preamble that "knowledge of the costs of electricity production is essential for public decision-makers when it comes to clarifying future choices, for example to determine the share that the nuclear sectors or 'renewable energies should take over French electricity production in the next 30 years'.

It thus deplores once again in this report the fact that "the second PPE was largely dominated by the question of the rate of reduction of the share of nuclear energy in electricity production and the preparation of the possible decision to launch a construction program new nuclear reactors, without the comparison of the costs associated with the decision occupying an important place in the reflection”.