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29 Apr 2014

GEM launches its energy market Barometer

Shale gas, nuclear energy, energy prices, CO2 emissions... All these subjects have been examined by the 1st edition of the energy market Barometer launched by Grenoble Ecole de Management. The aim: to find out the short, medium and long-term trends in the French energy market.

“The aim of this barometer is to ‘take the pulse’ of the energy sector and identify the keys and challenges to be defined over the coming 6 months and 5 years”, explains Joachim Schleich, researcher at Grenoble Ecole de Management and survey coordinator. He adds “We have therefore questioned two hundred experts from industry, the academic world or the civil service.”  

This first edition is centred on the panel’s expectations concerning shale gas, the share of nuclear energy, renewable energies in the future and energy price developments. 

Among the major conclusions drawn were:

Shale gas

A majority of experts are convinced that it will be legalised soon

France is one of the countries in Europe with the highest potential for the exploitation of shale gas, and its extraction by hydraulic fracturing (‘fracking’) has been forbidden since 2011, due to the controversial nature of the extraction procedure. On this subject, 31% of the experts questioned think that the exploitation of shale gas will be authorised within the next 5 years, whereas 40% believe that it will take longer than 5 years for its exploitation to be legalised.

And what about the break-even point?

Considering the geological characteristics and the infrastructures of Europe, will shale gas exploitation be as profitable as in the United States? 50% of the experts on the panel situate the break-even point at between 20 and 40 euros/MWh. The average equilibrium price is fixed at 31 euros/MWh (currently 27 euros/MWh on the wholesale market in France).

More than 70% of the experts questioned expect a growth in the production of natural gas in the European Union over the next 5 years. In their view, this growth with be due exclusively to shale gas.

Nuclear energy: targets set but difficult to reach

The experts estimate that in 10 years, nuclear energy will still be responsible for 65% of the production of electricity in France,  this figure dropping no further than to 52% in 30 years.

Anne-Lorène Vernay, faculty-researcher and member of the Energy Team at Grenoble Ecole de Management, explains: “According to the experts’ estimations, it will take about three times longer than the target of 2025, set by the current government, for the share of nuclear energy in the production of electricity to drop from 75% to 50%…”  

The drop in nuclear energy may be made up for by other renewable energy sources (except hydroelectricity).

These sources currently cover 11% of electricity production, reaching 13% over the 10 coming years and 24% in 30 years. In comparison, the share of hydroelectricity should remain stable. 
The specialists consider that the share of natural gas in French electricity generation will continue to grow regularly, in particular over the next ten years. Nevertheless, its share will remain at under 10% for the next three decades. Finally, coal will continue to play a relatively minor role and will even lose half of its market share in the long term.

Rising sale prices in the medium term

Over the next 6 months, most experts do not expect to see a rise in the price of the following energy sources: electricity, oil, gas and coal. However, over 80% think that the sale price of electricity and oil will rise within 5 years.

The price of CO2: very (too?) low

The economic crisis has led to a decrease in CO2 emissions from industrial activity. The price of carbon credits is currently very low (5.5 euros/t). The experts on the panel expect this price to remain stable for another 6 months (about 5.4 euros/t), but that it will rise within 5 years, eventually reaching 13 euros/t.

“This price level is not high enough to encourage the construction of a low-carbon European economy. Bearing in mind that the EU’s target for 2050 is to lower carbon emission rates by at least 80 %)” comments Joachim Schleich.