Segolene Royal Helms Energy Ministry at Critical EDF Time

Apr 04, 2014 5:16 am ET

(Adds comment on shale in penultimate paragraph.)

April 4 (Bloomberg) -- During the presidential debate in 2007, Segolene Royal, like her opponent Nicolas Sarkozy, got her facts on France’s dependence on nuclear energy famously wrong.

Her estimate that France got 17 percent of its electricity from nuclear was way off the 77 percent it was. Also, her contention that the French-promoted EPR reactor was a mere “prototype” made industry executives cringe. Royal, 60 -- a former partner of President Francois Hollande and the mother of his four children -- who on April 2 was named France’s environment and energy minister, will have to get her facts on the sector straight, and quickly.

She takes over the ministry at a critical juncture for the French energy industry. A sweeping law that could shape energy policy for decades and frame Electricite de France SA’s billions of euros in annual investments is expected to be unveiled as early as June. Hollande has vowed to wean France off its reliance on nuclear to half of total power output by about 2025. With 58 atomic reactors, France is the most dependent country in the world on the energy and EDF the biggest operator.

“There is a risk that the law could be delayed because the new minister wants to make changes,” said Jacques Percebois, an economics professor and energy specialist at the University of Montpellier, France. Royal isn’t known for her “fervent backing” of nuclear energy, he added.

Although she said little on specific policies she might pursue as she was sworn in on April 2, Royal may tread lightly, said Roland Vetter, head of research at fund-management firm CF Partners U.K. LLP in London.

Greenpeace Nod

“I don’t think the French will lay out a straight path to phase out nuclear like Germany,” he said. “Keeping existing nuclear is cheaper than alternatives. They can always shut down nuclear but someone will have to pay for the replacement. 2025 is very far away. There isn’t a need to change anything right away.”

Hollande’s nomination of Royal, who was a candidate in the 2011 Socialist primaries, got a cautious welcome from the environmental-activist group Greenpeace.

The anti-nuclear group, which got Royal to spell out her positions on key issues during her failed bid to become the Socialist candidate for the 2012 presidential elections, said in a statement issued after her nomination that her stance was “quite clear and ambitious,”

During that campaign, Royal vowed to lower dependence on nuclear energy and keep France’s ban on fracking, according to the Greenpeace document that is in the form of a questionnaire.

At the time she called for a phasing out of nuclear energy within a “maximum” of 40 years, according to Greenpeace. This could be done through an “extremely big effort” to reduce energy consumption and raise output from renewables.

Royal Homecoming

Royal claimed she would halt the building of an EPR in Normandy, a reactor that EDF has said will cost 8.5 billion euros and start up in 2016. The utility is developing two other EPRs in China while designer Areva SA has one under construction in Finland. Royal was also against a plan to develop a nuclear- waste repository at Bure.

For Royal, the new job is something of a homecoming.

She was named environment minister for almost a year by France’s last Socialist president, Francois Mitterrand, more than 20 years ago in 1992.

The backdrop to the industry, however, has changed dramatically over the period.

The nuclear meltdown in 2011 in Fukushima, Japan, prompted France’s neighbors Germany and Italy to turn their backs on atomic energy and raised questions at home about the risk-reward balance of the source of energy.

Shale Boom

Also, the shale boom that began in the U.S. has changed the dynamics of the industry. Use of techniques like fracking has helped push U.S. crude production to the highest in two decades and led to a surplus in natural gas, which is providing relatively cheap power for industry.

A study by the European Commission published in January concluded that the region’s industry pays more than double the price for electricity than in the U.S., prompting companies like Solvay SA to say they can’t compete.

As a result of the changes in the industry and voter perceptions of the sector, Hollande’s energy policies have proved to be a period of uncertainty for state-controlled EDF, Europe’s biggest power generator.

The utility could lose market value if the government decides to halt some of its existing reactors earlier than expected, analysts at Raymond James Euro Equities said in a note last week following testimony by French energy ministry officials to lawmakers.

Environmental Power

The officials estimated as many as 20 reactors may have to be halted by 2025 to meet Hollande’s pledge to lower atomic reliance and boost renewables. The president has already announced a planned halt of EDF’s oldest plant at Fessenheim at the end of 2016.

Hollande has also promised to keep France’s ban on hydraulic fracturing, a drilling technique used to explore and produce oil and natural gas from shale. The country, along with Poland, is estimated to have some of the biggest shale reserves in Europe.

While Royal has backed the ban, she has also called for research into alternative energies and “clean” extraction methods, according to the Greenpeace document.

With that stance, she may join the camp of Industry Minister Arnaud Montebourg, whose newly enlarged ministry includes economy. He has spoken out in favor of developing unconventional hydrocarbons to make French industry more competitive.

‘Strong Personality’

Royal yesterday called for “time to listen and collect expertise on the subject” of shale, Agence France-Presse reported, citing comments made in Poitiers, France.

For now, though, Royal is likely to stick to Hollande’s line. France should become “one of the biggest environmental powers in Europe,” she said in Paris on April 2 at a ceremony when she took over from Philippe Martin.

The new minister is a “very experienced political personality, a strong personality, a personality with charisma” Jean-Pierre Jouyet, chief executive officer of the state-owned Caisse des Depots et Consignations and a classmate and friend of Hollande, said today on Radio Classique.

Hollande and Royal know how to “draw a line” between politics and their private lives, he said.