Context, impacts and challenges

In 2017, the questionnaire evolved on one point: one of the five items was removed, as it systematically ranked lowest on the scale of expectations. The statement “My supplier must demonstrate its stability and provide security” was thus not included. It was replaced by the question on innovation, above.

 

In the traditional sectors, many external factors fall outside the control of EDF Luminus, especially::

  • The evolution of prices on the wholesale market, which are more volatile than ever before
  • The uncertainty regarding the outlook for thermal and nuclear power plants
  • The very frequent changes to the regulatory framework, both commercial and environmental
  • The evolution of the provisions made for dismantling nuclear plants.

A sector with highly specific constraints

Very little electricity is stored, especially in Belgium, due to the lack of large-scale hydraulic power (no high mountain dams).

 

High-voltage transmission grid operator Elia must ensure the production/consumption balance at all times, in order to avoid any untimely electricity supply failures. To guarantee the continuity of the energy supply to the end-customers, Elia contracts various services from Belgian or foreign electricity producers, for different timeframes (very short term, or longer term).

 

In its “balance management” role for the systems operator, EDF Luminus must be ready at any moment to inject into the system a volume of electricity equal to the consumption of its customers. Guaranteeing the balance between production and consumption requires:

  • Accurate estimation of the consumption of customers in the long-, mid- and short-terms, to predict in advance the resources required to cover these needs in an optimal way, from the point of view of cost and reliability of the energy provided.
  • Adjustment in real time of the flexible production capacities (gas turbines, combined cycles, cogeneration, etc.) in order to compensate for variations in renewable energy production or failure of base units (nuclear power plants).
  • Coverage for the financial risks associated with very wide fluctuations in the wholesale prices of electricity and gas. These can notably increase sharply, for example in the event of an unexpected downtime. Inversely, prices can strongly plummet, due to excess production compared to need, which reduces producer revenues.

The energy market configuration totally aligned in recent years. The share of renewable energy in the European energy mix increases each year, causing frequent fluctuations, up and down, depending on the strength of the wind or the amount of sunshine.

Increased risks due to major short-term price fluctuations

In 2017, an unprecedented situation caused a very strong fluctuation in short-term prices. There were two primary causes of this phenomenon:

  • The unexpected unavailability of several nuclear power plants in Belgium (Tihange 1, Doel 3) and a limited import potential of nuclear power (unavailability of several base plants in France).
  • A production of renewable energy below average, due to very low hydro-production during the year, and particularly low levels of wind during the months of January and April.

These two factors had a significant impact both on the Belpex (day ahead) prices and on the imbalance prices. The price fluctuations led to an increase in supply costs (which cannot be recuperated from the prices billed to residential customers) and thus to a decrease in EDF Luminus margins.

 

As an example, the average MWh day ahead price in 2017 was 45€. This price reached very high peaks, up to 700 €/MWh in January 2017, during the end-of-day high-energy-demand periods (see the right graph).

 

The left graph shows that the number of hours with a Belpex price above 100 €/MWh doubled from 2016 to 2017.

Source: Elia.

Source: Elia.


Imbalance prices also increased

Imbalance prices (applied if an imbalance is found between injections and offtakes in an Access Responsible Party’s balance area) were also impacted by the situation described above, and followed the same trends as the Belpex prices.

On the left graph, below, we see a strong increase (64%) in the number of hours with imbalance prices above 300€/MWh – 571 hours in 2017 compared to 48 hours in 2016, to be exact. On the right, we see the strong volatility of the prices, exacerbated during the winter periods (from January to March and October to December).

Source: Elia.

Source: Elia.


Supply chain: 2017 update

The EDF Luminus value chain identifies the activities over which the company has direct control and others that fall under its sphere of influence, in accordance with ISO 26000 recommendations.

 

In the table the activities are sorted according to:

  • the level of control of EDF Luminus on the activity, from low to high: in the right-hand column is the result obtained;
  • the chronological order of the activities, the "upstream" activities at the top of the table, "downstream" at the bottom
  • whether it concerns directly or indirectly people, customers, the environment or financial aspects.
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Value chain RDD 2017 ENG.pdf
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The only change in terms of the 2016 supply chain is related to the extension of the range of services provided to individuals and to companies. With the acquisition of Insaver in particular, EDF Luminus is now able to offer customers the installation of home batteries and cavity wall insulation.

Issues and impact, according to GRI standards

The new GRI standards recommend the inclusion of an “explanation of the material topics and their parameters” in the sustainable development report.

 

For each of the 18 issues listed below, an impact assessment has thus been carried out, in order to define the role played by EDF Luminus: direct responsibility, contribution through its commercial relationships, or dependence on external decisions.

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Stakeholders & impacts V3ENG.pdf
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