Areva - Reference Document 2016

06

BUSINESS OVERVIEW

6.1 Markets for nuclear power and renewable energies

On a global scale, nuclear power has already avoided the release of approximately 57 billion metric tons of CO 2 since 1971, equivalent to almost two years of global emissions at current levels ( source: WEO 2015 ). Faced with the climate issue, nuclear power is increasingly proving to be an essential component of the energy mix, producing baseload electricity that supports sustainable economic and social development. Competitiveness of nuclear power Nuclear power generation costs are not very dependent on the price of uranium. The percentage of raw materials in the total cost of nuclear power (at net present value) is minimal, and the impact of a doubling of uranium prices on the full cost of power generation in new power plants is only about 5%. Conversely, the price of fossil energies has a very strong impact on the cost of the electricity generated in thermal power plants fueled with coal and especially natural gas. In fact, natural gas fuel represents 70 to 80% of the total cost of the electricity generated by a combined cycle gas turbine. The price of carbon is also an important component in the cost structure of gas-fired power plants, and even more so for coal-fired plants, but it has zero impact on the cost of nuclear power. Short-term gas and oil prices can fluctuate widely as they are subject to financial, economic and geopolitical risk: a very high level of uncertainty about production costs (deep offshore, shale gas, etc.), economic environment (financial crisis followed by an economic crisis), and financial speculation in the commoditymarkets. Nonetheless, the consensus is that there is a long-term upward trend due to rising demand, the shift from coal to natural gas and the depletion of conventional resources. Regional imbalances exist, however, especially for natural gas.

Fluctuations in supply and demand therefore remain the key determining factors in fossil fuel price trends. While gas prices are high in Europe and Asia, this source of energy has become very cost effective in the United States thanks to the shale gas made available by new technologies such as hydraulic fracturing and horizontal drilling. Still, substantial uncertainties remain as to its price volatility, its competitiveness in other regions, potential reserves, and the acceptability of the potential environmental consequences of its extraction, such as ground pollution and the significant use of fresh water resources. In Europe, shale gas productionmay appear attractive in viewof the region’s growing dependency on imported gas. However, there are several obstacles to developing shale gas on a large scale: the difficulty of accessing the deposits in some cases, the lack of harmonization in the regulatory systems of European countries, and much higher development costs than in North America. In Europe, carbon prices remained low in 2016, in particular because planned EU-ETS (1) reforms will take several years to be put into practice. However, increasingly stringent commitments in terms of emissions reductions are expected to push carbon prices up in countries where a regulated carbon market has already been established, while in other countries, carbon restrictions appear to be unavoidable in the medium to long term. Thus, the volatility observed in commodity markets and the uncertainty surrounding the price of carbon make it difficult to predict the cost of electricity generated with gas or coal. For countries that export fossil energy, nuclear power helps secure current and future income for national budgets: the resource extracted can be used to generate cash from exports rather than using it to produce electricity locally.

OIL PRICE SCENARIO

COAL PRICE SCENARIO

$

/ barrel

2015

120 100 $

140

/ ton

2015

120

100

80

80

60

60

40

40

20

20

0

0

2015

2020

2030

2040

2015

2020

2030

2040

Source:WEO 2016.

Source:WEO 2016.

(1) European Union Emission Trading System: the European system to trade emission quotas.

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2016 AREVA REFERENCE DOCUMENT