FRANCE'S ENERGY SECURITY POLICY

C O N F I D E N T I A L SECTION 01 OF 03 PARIS 000018 SIPDIS SIPDIS STATE FOR INR, EB/ESC, EUR/WE, EUR/ERA, NEA/NGA E.O. 12958: 01/03/2022 TAGS: PINR EPET ENRG KPRP ECON FR SUBJECT: FRANCE'S ENERGY SECURITY POLICY Classified by Econ Minister Thomas White for Reasons 1.5 (d) and (e). Ref: a) State 181979, b) Paris 7604 ¶1. (C) Summary. The GOF is enhancing its energy security through diversification of supply sources and increasing the percentage of nuclear and renewables in its energy mix, while decreasing the use of oil and coal. While these changes are guided partially by a desire to become more energy independent, it is also driven by France's Kyoto climate change obligations. The Government also wants to reduce France's energy consumption by a factor of four by 2050. France backs the development of cross-border power lines between EU members to improve their ability to cope with the shut down of a power plant or key power lines. The GOF liaises regularly with energy power producers and distributors to work out contingency plans in case of supply disruptions. It also manages strategic oil and gas reserves. End summary. ¶2. (C) This cable responds to reftel request for information on France's energy security policies, with information garnered from meetings with the Ministry of Economy, Finance and Industry General Directorate for Energy and Raw Materials Assistant Secretary-equivalent Sophie Galey-Leruste, Oil and Gas Supply SIPDIS Office Head Fabrice Noilhan, and International Strategy Bureau Head Jean Lamy, as well as GOF information provided during those December meetings. France's Strategy to Improve Energy Independence ¶3. (U) Since the two OPEC oil price increases in the 1970s, a leading concern of French energy policy has been to reduce France's vulnerability to supply disruptions. This has entailed a three-pronged strategy: reducing the country's dependence on oil by diversifying its energy mix; increasing the share of imported energy from dependable countries such as the UK and Norway; and raising the share of the energy mix met by domestic production. One consequence is that the government has encouraged the replacement of oil by electricity (most of it domestically nuclear-generated) and gas (mostly imported) as a source of domestic heating. ¶4. (U) France's energy sector accounts for 2 percent of total GDP and employs 233,000 people. In 2006 primary energy consumption amounted to an estimated 276 million tons of oil equivalent (TOE),making France's energy market the second-largest in the EU after Germany. Nonetheless, France is poor in natural energy resources, in contrast to several European Union (EU) countries that benefit from raw materials (coal in Germany and Spain, oil, gas, and coal in the United Kingdom (UK),and gas in the Netherlands). France imports almost all of its oil, natural gas, and coal needs. Nuclear Power - Strong and Now Due to Increase ¶5. (SBU) To ensure the security of its energy supplies, France gives priority to developing nuclear energy and renewable energies. Locally produced nuclear power generates eighty percent of France's electricity needs and forty percent of its overall energy needs. After the first oil shock, when oil accounted for 61 percent of France's energy needs, the GOF commissioned 59 nuclear power plants, so that now, oil accounts for only 34 percent of France's needs, mostly in the transportation sector. In the 1980s, France overtook Japan and the Soviet Union to become the world's second-largest producer of nuclear-generated electricity after the U.S. ¶6. (C) France just commissioned its first nuclear power plant in over twenty years, due to be completed in Normandy in 2020. The French public is much more accepting of nuclear power than are Americans. The GOF held two public sessions prior to commissioning the nuclear power plant. The French public had little resistance to the plant itself, but the public debate focused on the routing of the high tension wires carrying the electricity from the plant, with no one wanting the wires passing through their neighborhood. With the progress in nuclear power, domestic production now supplies half of France's energy needs. France is a net exporter of electricity, but its dependence on imported oil makes it a net importer of energy overall. Renewables Also Favored ¶7. (SBU) France wants to increase the percentage of renewable energy in its energy mix. Renewable energy, such as hydro, biofuels, solar power, and wind power accounts for seven percent of France's energy mix, and the GOF intends to increase this PARIS 00000018 002 OF 003 percentage to ten percent within the next five years. The GOF is emphasizing the development of biofuels, since it believes that this is the most cost effective alternative. The GOF would also like to increase the number of windmill farms, but the "not in my backyard" (NIMBY) syndrome is hampering progress. The GOF is planning for the establishment of new windmill farms off the Atlantic Ocean coast as a result. Diversification in Sourcing Gas ¶8. (C) The GOF also wants to decrease the chances of supply disruption of gas by diversifying the sources of supply, ensuring that no more than one-third comes from any one supplier, with Norway, the Netherlands, Russia, and North Africa being the main suppliers. Gas accounts for 15 percent of France's total energy needs. Norway is the largest supplier, with 26 percent of France's gas market. Netherlands, via other North Sea fields, supplies another 20 percent. On December 19, Gaz de France (GDF) and Gazprom signed a contract for Gazprom to deliver 12 billion cubic meters (bcm) of gas a year to GDF until 2030 and permit Gazprom to market 1.5 bcm a year directly to French industrial customers. This agreement will boost Gazprom's strategy of increasing margins by selling gas directly to end-users rather than wholesaling it to distributors. GDF also contracted to take 2.5 bcm of gas a year from 2010 from the Nordstream pipeline, which will connect Russia directly to Germany. With this accord, Gasprom cemented its status as the second largest supplier of gas to France, accounting for about 23 percent of France's gas supply. This percentage does not differ significantly from the historical average. During the week of December 11, GDF also signed a 20 year gas supply contract with Algeria's state-owned oil and gas company, Sonatrach, which will supply about one bcm of natural gas a year. Algeria supplies 13 percent of France's gas market. Nigeria and other markets account for the remaining 19 percent. ¶9. (C) France's gas infrastructure has five regions that are not interconnected. The GOF wants to ensure that infrastructure is built so that only two regions are not interconnected. The GOF is also expanding its infrastructure of plants that can turn liquefied natural gas (LNG) back to gas. France now has two regasification plants. It plans to add one on the Mediterranean Coast and two to three on the Atlantic Coast. Oil Supplies Cut and Diversified ¶10. (C) France also diversified its oil supplies after the 1970s oil shocks. In 1973, 71.5 percent of its oil came from the Middle East. In 2004, only 28 percent originated there. France sourced another 29 percent of its oil from the North Sea, 23 percent from the former USSR, 13 percent from Sub-Saharan Africa, and 7 percent from North Africa. Our interlocutors were impressed with the USG's transparency in publishing oil stocks believing that increased transparency can diminish volatility of energy prices. France seeks to publish oils stocks on the European level. This effort would also include completing an EU directive that would increase transparency on gas storage facilities. Coal Use -- Low and Decreasing ¶11. (U) France still has reserves of coal, but the last coal mine was closed and the state coal company, Charbonnages de France, is being wound down. This is partly for economic reasons (coal is more expensive in France than alternative sources) and partly on environmental grounds so that France can cut its carbon emissions to meet Kyoto Protocol emission targets. Coal accounts for only five percent of France's energy needs and GOF officials expect that this percentage will decrease further. EU Electricity Interconnection Increases Security ¶12. (SBU) France supports a proposed EU directive on the security of electricity supply and investment in infrastructure. France backs the approach of developing cross-border power lines between EU members to improve their ability to cope with the shut down of a power plant or key power lines. In addition, France believes European countries should invest in power-generation capacity. As an early step, the GOF advocates carrying out, at the EU level and in each Member State, a forward-looking supply and demand analysis to identify energy bottlenecks and imbalances in the medium term. Reduction of Energy Consumption Can Increase Energy Security ¶13. (U) France has a goal of reducing greenhouse gas emissions by three percent a year to reach a fourfold reduction by 2050 PARIS 00000018 003 OF 003 and will use technical, technological, economic, and social means to accomplish this aim. The Energy Policy Act (EPA) of July 2005 specified more near-term goals. The EPA sets a goal of lowering final energy intensity by two percent per year by 2015 and by 2.5 percent per year from 2015 to 2030. France has planned a substantial increase in the public and private research effort in new energy technologies to help it reach these goals, specifically in bioenergy, fuel cells, clean cars, solar power, positive energy buildings, carbon capturing and sequestration, and generation four nuclear reactors. The GOF created the National Research Agency and the "Agence de l'innovation industrielle," which has a budget of 2 billion euros from 2005-2007 (USD 2.6 billion),to help research these areas. ¶14. (U) The GOF has also established two "competitiveness clusters" (or "poles de competitivite" in French) to encourage the development of renewable energy technologies. These "poles" harness the research that the private sector is doing, combine it with the capacity offered by research and academic institutions, and offer government financing, to make innovative advances in specified fields. The State's Large Role in the Energy Sector ¶15. (C) The state plays a prominent role in the energy sector and France has long been one of the EU's most resistant countries to liberalization and privatization. Although it reduced its holdings in the two companies in 2006, the state retains majority states in both Electricite de France (EDF) and Gaz de France(GDF). The GOF sponsored an energy law that permitted the GOF to decrease its stake to a third in GDF so that it could merge with private French energy group Suez, but the courts have delayed the merger until July 2007. At that time, a new President and parliament could be hostile to the merger and the GOF decreasing its share in GDF. While the European Commission wishes to decouple electricity production and distribution, press reports indicate that the GOF is pressuring it not to proceed with these plans. GOF's Plans to Reduce Vulnerability to Terrorist Attacks ¶16. (C) While the GOF does not believe that terrorists are targeting their energy infrastructure, it takes seriously the possibility that they might do so and has developed plans to reduce its vulnerabilities. As part of this plan, the GOF interacts regularly with its energy companies to assess and combat terrorist threats to oil and gas production and exports. For instance, the GOF requires each power plant to inform the GOF of its plan for a six month disruption. The GOF also has strategic oil and gas reserves that exceed International Energy Agency (IEA) recommendations. France also has a national plan for security with different colors representing the terrorist threat (similar to that devised at the Department of Homeland Security). France was at "code red" in early December (the highest threat level),which required all energy installations to enhance security. ¶17. (C) The GOF is identifying France's most vulnerable energy-related sites, such as refineries, import pipelines, and oil storage facilities, and determining how further to secure those facilities. For example, all of the gas from Norway arrives in France in one pipeline and disruption would be significant if the pipeline were attacked. The GOF is therefore insuring that gas storage infrastructure increases along with increasing consumption. The GOF is confident that it could weather a disruption without difficulty. The GOF also has a contingency plan in place in case of simultaneous attacks on several facilities, which involves reducing consumption and prioritizing users. ¶18. (C) France does not have concerns about the security of transport of energy supplies, but it believes that diversity of supplies can diminish potential threats. GOF officials believe that the transportation of energy is a very small percentage of global emissions and does not have concerns about environmentally sound transport. However, it is making efforts to reduce sulfur in all of its maritime transportation. HOFFMAN