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Analysis: Cold, calm and cloudy may mean power cuts for Western Europe

By Vera Eckert and Muriel Boselli

FRANKFURT/PARIS (Reuters) - Western Europe faces a potential electricity supply crisis this winter as France and Belgium struggle with their ageing reactors and after Germany took out a big chunk of its nuclear capacity.

Tight power supply may spark local blackouts in the event of a severe cold spell and could also trigger price spikes at a time industry, bruised by the economic slowdown, badly needs to save energy costs.

As winter nears, policymakers and the energy industry are under high pressure to implement pre-emptive remedies to avoid any disruption.

France, the world's most nuclear-reliant nation, has been grappling with heavy maintenance work and delayed restarts at its reactors for the past six months. Germany shut eight of its oldest reactors after the Fukushima disaster in 2011.

"In statistical terms, there is more probability to have heightened problems (this winter)... and we are more worried about extreme scenarios," said Fabien Roques, who leads European power research at IHS Global Insight.

Extreme weather conditions could be a cold snap with grey skies and no wind, curbing wind and solar power output, he said.

"That would be a catastrophic situation, not just in Germany but also in neighboring countries... a situation of maximum (network) tension with a higher probability of local blackouts or bigger electricity cuts."

Cross-border flows in Europe are meant to even out problems in individual countries. Electricity flows between France and Germany represent capacity equivalent to five nuclear reactors.

But Germany in the first half of this year saw a 40 percent drop in imports from France, on which it relied last year to make up for shortfalls, industry data shows. France in 2011 had stepped up exports to Germany by nearly a third, but is not currently in a position to do that.

A big blow to supply in the region has also come from cracks at Belgian nuclear reactors Tihange 2 and Doel 3, which have grounded 2,000 MW when Belgium would be typically expected to be a net exporter to France.

LUCKY ESCAPE IN FEBRUARY

The region was already hit by a cold snap in February when French consumption peaked at 102,100 megawatts (MW), pushing the network to its limits and obliging it to import a record of 9,000 MW from its neighbors, including Germany.

Germany then came dangerously close to a network breakdown because of errors in the forecasts for balancing power made by suppliers.

If anything the situation is more critical now. In February, French nuclear power capacity, which meets three-quarters of electricity consumption, stood at over 95 percent, compared to just 72.6 percent today.

Wind turbines were also operating at full capacity during the cold snap in Germany, Denmark and Belgium, Roques pointed out, adding this may not be the case in future tight scenarios.

While France generally has steady power supplies thanks to its 58 nuclear reactors, it lacks flexible capacity - usually generated by gas, coal or oil-fired plants - to meet peak evening-time demand during cold snaps when workers return home and switch on heating and appliances.

"In case of insufficient production, several solutions exist such as calling on the population to turn down their heating... as well as cutting electricity for one or two hours in some neighborhoods that don't have hospitals," said Jean-Marie Chevalier, who heads Paris-Dauphine university's energy centre.

France and Germany make up two-thirds of European power consumption in a converging wholesale market that relies on cross-border flows and trading in order to optimize prices and allocate of supplies.

If freezing weather comes earlier this winter, France's EDF may not have enough time to bring its nuclear reactors back up to full capacity, leaving the system vulnerable to supply strains.

EDF and its transport arm RTE declined to comment on the matter. RTE will release a study on the issue later in October.

France relies heavily on electric heating developed by successive governments to absorb supplies generated by its nuclear reactors. Germany uses mainly gas and fuel oil heaters.

"France has also pushed for electrical heating beyond reasonable levels so during extreme cold temperatures there is additional demand which is hard to manage," Chevalier added.

France reaches new power demand records nearly each time a cold snap hits. Although its population is 15 million less than Germany's, its power use can be double that recorded by its neighbor.

NO PRICE SHOCK YET

Germany, the euro zone's biggest economy, has nearly 60,000 MW of wind and solar capacity - equivalent to France's nuclear power capacity, quite apart from large thermal capacity.

This green power provides it with a buffer, but the variable nature of both wind and solar can reduce its ability to offer supply at home and across its borders.

Wind can come in variable gusts and the midday sun wanes - challenging engineers who have to balance the networks accordingly, and managers buying balancing power.

Germany otherwise has comfortable supply, thanks to thermal power stations fuelled by gas, uranium and coal, but bad forecasts and unplanned outages can threaten the balance.

Network disruptions have grown significantly over the years, Germany's lobby for industrial users (VIK) said. Outages below a duration of even one second can matter significantly for makers of high-precision goods.

"This can briefly idle production in some firms and cause enormous costs," said Hans-Peter Keitel, the head of Germany's Federation of Industry (BDI).

To maximize safety, Germany's energy regulator requires 2,000 MW of thermal reserve capacity for this winter.

"When things became a bit hairy last February, Germany accessed its cold reserve and they had enough to cover," said Paolo Coghe, a senior power analyst at Societe Generale.

So far lower demand due to the euro zone crisis and mild weather forecasts have played a part in preventing an electricity price spike on the fragile winter supply scenario.

But a more important factor has been the increasing mismatch of price levels and supply risk. German green power, which must be absorbed by grids when available, curbs prices and erodes the profitability and investment case of conventional power.

"The huge additions of especially solar capacity this year mean that spot prices have fallen," said Konstantin Lenz of Berlin-based Lenz Energy.

"As a consequence, the price levels overall are down and make it increasingly difficult to achieve profitability with power capacity fired by gas."

(Editing by Mark John and William Hardy)

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