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DE RUEHFR #0304/01 0611649
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O 021649Z MAR 09
FM AMEMBASSY PARIS
TO RUEHC/SECSTATE WASHDC IMMEDIATE 5659
RHEBAAA/DOE WASHDC IMMEDIATE
INFO RUEHZL/EUROPEAN POLITICAL COLLECTIVE
RHEHNSC/NSC WASHINGTON DC

UNCLAS SECTION 01 OF 04 PARIS 000304 
 
SENSITIVE 
SIPDIS 
 
E.O. 19528: DECL: 12/19/18 
TAGS: ENRG EPET SENV PREL FR
SUBJECT: FRANCE ON ENERGY SECURITY 
 
REF: A) 08 Paris 1980 B) 08 Paris 0500 C) 08 Paris 
02222 D) 09 Paris 00294 
 
¶1. (SBU) Summary. French energy security policy 
centers on energy independence, security of supply 
through diversification, affordable but competitive 
energy prices via vertically-integrated utility 
companies, and low-carbon economic growth.   French 
activism in pushing its civilian nuclear know-how will 
continue as the GOF encourages further development of 
third and fourth generation nuclear plants.  France has 
diversified natural gas supplies and will pursue a 
"triangular" relationship with Russia and the Caspian 
Basin as it looks both to find new supplier 
relationships, and to shore up existing partnerships. 
Strong investments in energy efficiency in buildings 
and transport, and a commitment to boosting 
renewables, rounds out the GOF's approach to energy 
security.  The Sarkozy government considers the sector 
as "strategic" and will continue to favor strong 
vertically-integrated national champions and to oppose 
the European  Commission's aim of a fully liberalized 
gas/electricity market.   This message provides an 
overview of French energy security policy based on 
meetings with energy sector specialists in French 
government, research agencies, NGOs, and the private 
sector.  Our interlocutors provided a largely 
consistent view of how France sees its energy security 
going forward. End summary. 
 
¶2.  (SBU) France's primary energy supply mix informs 
its approach to energy security policy.  In 30 years 
its consumption pattern has evolved from 68 percent 
oil and 16 percent coal (followed by natural gas, 
nuclear, hydro and other renewables), to 41 percent 
nuclear, 33 percent oil, and 15 percent natural gas 
(followed by coal, hydro and renewables).  France's 
vision is to have an energy mix that is two-thirds 
carbon free by 2050.  The GOF intends to get there 
with a combination of domestic and international 
policies that expand the nuclear civilian sector, 
develop a renewable energy industry, foster strategic 
partnerships in wind and solar, increase liquefied 
natural gas capacity and introduce robust energy 
efficiency measures to control demand. 
 
Nuclear in the Lead 
------------------- 
 
¶3. (U) The preponderance of nuclear-generated 
electricity meets the domestic aims of low-carbon 
energy, price stability, energy independence and 
climate change.  France's 58 nuclear reactors cover 77 
percent of national electricity needs.  The French see 
their nuclear know-how not only as key to domestic 
supply, but also as a commercial interest in pursuit 
of which global energy supplies can be diversified and 
energy markets stabilized. 
 
¶4.  (U) The GOF and French industry aggressively 
promote France's nuclear know-how.  President Sarkozy 
has signed deals for the third generation European 
Pressurized Reactors (EPR) at home and abroad, 
including contracts with China, India, and the UAE. 
The GOF also signed MOUs with Algeria and Libya to 
develop a civilian nuclear industry.  The GOF 
complements its commercial policy with an agenda in 
international fora that encourages expanded use of 
nuclear energy within a framework of improved 
governance and safety in energy trade and investment. 
France is an active participant in the Global Nuclear 
Energy Partnership (GNEP) and other groups that 
support the development of civilian nuclear power. 
 
¶5.  (SBU) The energy security agenda is closely 
intertwined with France's commercial policy and its 
promotion of national champions in the energy sector. 
President Sarkozy designated GDF-Suez a partner in 
France's second EPR project, due to come on stream in 
2017, to promote it as an international exporter in 
the global nuclear civilian renaissance.  As Areva's 
German partner Siemens withdraws from the joint 
venture that is developing the EPR, Total has 
confirmed its "double digit" stake in the second EPR 
to be constructed in France (at Penly), a move blessed 
by President Sarkozy.  While Sarkozy has encouraged 
the emergence of an all-French integrated power sector 
champion in the wake of Siemens' announced departure, 
Total is reserved about the President's suggestion 
that it invest in Areva.  (Note: The latter will 
 
PARIS 00000304  002 OF 004 
 
 
require recapitalization to finance decommissioning 
and a move toward third generation EPRS.  President 
Sarkozy has suggested that Areva's capital be opened 
to Alstom and Bouygues, a move resisted by Areva CEO 
Anne Lauvergeon. End note.) 
 
¶6.  (SBU) To meet the EPR challenge, Areva is 
increasing uranium and ingot production domestically 
and internationally.  Areva renewed its agreement with 
Kazakhstan to secure uranium supplies until 2039 and 
is pursuing construction of a uranium enrichment plant 
in Eagle Rock, Idaho.  More longstanding is France's 
role in establishing international standards on the 
management of peaceful uses of highly-enriched 
uranium.  Working with IEA, France wants a greater 
role for the recently-created French Agency for 
International Nuclear (AFNI) in establishing 
blueprints for foreign governments to follow in 
developing civilian nuclear capabilities that meet 
international standards.  To diversify fuel supplies, 
Areva has also expressed interest in the use of 
thorium for nuclear energy. 
 
Turn to Emerging Markets for Nuclear 
------------------------------------ 
 
¶7.  (SBU) The French intend to capture 30 percent of 
global new nuclear reactor sales in the coming 30 
years.  Areva's strategy is to create international 
alliances via joint ventures, with eighty percent of 
its sales of nuclear equipment and services going to 
countries with an existing nuclear industry (Finland, 
U.K., U.S., Canada, Italy).  Under President Sarkozy 
the GOF is pursuing opportunities more widely (India, 
China, North Africa), while providing assistance to 
ensure that civilian nuclear development occurs within 
a framework of effective safeguards and verification 
for waste management and non-proliferation. 
 
From Nuclear to Electricity Exports 
----------------------------------- 
 
¶8.  (SBU) The nuclear renaissance underpins France's 
goal of becoming a major electricity exporter.  In 
2008, EDF boasted that half of its 64 billion euro 
sales came from international clients.  France's 
electricity and gas markets are highly concentrated 
(EDF, GDF-Suez).  In contrast to the EU Commission- 
favored policy of ownership unbundling, the GOF favors 
vertically-integrated energy companies that manage 
generation and distribution.  EDF claims that vertical 
companies are more competitive, able to dampen price 
shocks, guarantee transport and storage of energy, and 
carry out cross-border investments in energy 
efficiency, grid connections, and research and 
development.  The GOF sees France's national champions 
in electricity and gas as more able to deal with 
cartel-like suppliers than would a more diffuse 
network of market operators in a fully-liberalized 
regime. 
 
LNG Prospects 
------------- 
 
¶9.  (SBU) France argues its concentrated gas market 
supports expanding LNG capacity and shipments.  France 
is among the top three EU states in capacity for gas 
storage, equivalent to nearly 30 percent of annual 
consumption.  Two LNG terminals operate in France and 
four are in construction, making it a leader in 
Europe.  The GOF aims to complement imports of natural 
gas with an increase in LNG terminals to boost 
capacity. 
 
France and European Energy Security 
----------------------------------- 
 
¶10.  (SBU) France's energy security policy is shaped 
by the broader goal of a single integrated and 
regulated European energy market, with concrete 
targets on renewables, GHG emissions, and global 
temperature cap increases.  The GOF supports the six 
key EU energy security infrastructure projects 
proposed by the Commission.  The projects, fully in 
sync with GOF goals, aim to diversify LNG gas sources 
and supply routes, bolster strategic natural gas 
stocks, and improve electrical interconnections, 
energy efficiency measures, and CO2 transport and 
storage.  That the nuclear industry remains the 
purview of the Member States suits France, given the 
 
PARIS 00000304  003 OF 004 
 
 
ambivalence of some EU partners towards the nuclear 
option. 
 
Dialogue and Solidarity Mechanisms 
---------------------------------- 
 
¶11.  (SBU) To ensure energy supply and spread 
political risk, the GOF has become more active in its 
energy diplomacy with increasingly important oil and 
gas suppliers (notably Russia and Caspian Basis 
countries) and transit countries.  The GOF continues 
to stress the importance of maintaining a "triangular" 
relationship among Russia, Central Asia and the EU. 
During its recent EU presidency, and afterwards, it 
has supported efforts to develop a southern transport 
route from the Caspian Basin, including the Nabucco 
pipeline.  But in the French view, none of the various 
East-West pipeline projects make sense without Russian 
gas (doubts persist over gas supplies from 
Azerbaijan).  The French see Turkey as a critical but 
problematic partner in addressing supply challenges. 
Turkey's potentially adverse tariff policies and its 
perceived willingness to use its transit country 
status as bargaining chip for EU accession concern the 
GOF.  (Note: The GOF says it supports opening the 
energy chapter in Turkey's EU accession talks. End 
note.) 
 
¶12.  (SBU) The French spend significant diplomatic 
energy encouraging "solidarity mechanisms" in their 
push for interconnectivity in gas.  The GOF upholds 
the principle that all member states have access to 
oil and gas reserves in the face of supply 
disruptions.   France emphasizes improved 
interconnection as a means of dealing with Eastern 
Europe's energy supply challenges from Russia. 
 
A Strained Hydrocarbon Sector 
----------------------------- 
 
¶13.  (SBU) Natural gas, nuclear and renewables capture 
the attention, but oil will remain critical to French 
energy security policy.  With one of the world's top 
four oil companies (Total), France is sensitive to the 
growing policy challenges of accessing reserves in an 
era of increasingly nationalist producer country 
policies.  Total operates in some of the globe's more 
challenging political environments.  France provides 
Total with critical political support, but not at any 
price.  The GOF put the brakes on Total's investment 
in Iran last year and is prosecuting an illegal arms 
sale scandal know as "Angolagate" (which some 
observers say cost Total its position in Angola.) 
France imports the bulk of its oil and gas from 
Norway, Saudi Arabia, Russia, Kazakhstan, with North 
Africa/Gulf of Guinea playing an increasingly 
important role.  French diplomacy in these countries 
will reflect the occasional tension between Total's 
narrower commercial interests, and the broader common 
interests for creating conditions most conducive for 
bringing oil to world markets. 
 
Renewables Not Yet Competitive 
------------------------------ 
 
¶14.  (SBU) In 2007, Sarkozy added renewables and 
energy efficiency to France's energy security policy. 
To reach the EU target of 23 percent renewables by 
2020, France will require 90 billion euros of private 
investment in the next decade. Half the growth is 
expected in wood and biomass for industrial and 
residential heating, reflecting France's large and 
growing forests.  France also has considerable 
hydroelectric capacity (number two in the EU behind 
Sweden at 68 TWh yearly) though with little growth in 
the sector since 1979. , 
 
¶15.  (SBU) French energy experts note that at this 
stage renewable energy does not make for a viable 
business model.  The industry depends on a system of 
feed-in tariffs to provide security of long-term 
investment through price guarantees.  Price 
harmonization within metropolitan France and its 
overseas territories is financed by consumers in the 
form of an electricity public service tax.  State 
Minister Borloo announced that the GOF will put up one 
billion euros in the next three years for a "renewable 
heat fund" starting 2009 for biogas, thermal, and 
geothermal to encourage renewable heat for social 
housing, services, and industry.  The heat fund will 
 
PARIS 00000304  004 OF 004 
 
 
compliment other public aid to firms and local 
authorities to bring renewable-sourced heat prices 
five percent below the cost of heating from fossil 
fuels.  Poweo, the private sector competitor of EDF, , 
argues these mechanisms fail to expose customers to 
fluctuating prices which incite energy conservation, 
innovation, and investment. However, letting prices 
fluctuate will be a political challenge for Sarkozy 
who promised to address "purchasing power" concerns. 
 
Research and Efficiency 
----------------------- 
 
¶16.  (SBU) More than half of France's energy research 
funding in the recent pas has gone to fission and 
fusion nuclear (700-800 million euros per annum 2000- 
2006), and the GOF has announced its intention to 
allocate an additional one billion euros per year 
(until 2012) for energy/environment research.  The 
President has ordered the Finance and Sustainable 
Development ministers to orient state-funded research 
to renewables.  He has also pushed France's energy 
"champions" to invest aggressively in the sector, 
singling out EDF for attention.  The GOF has also 
pushed demand-side measures to boost efficiency. 
Building retrofits and transport-sector measures 
(including bio-fuels and electric/hybrid vehicle 
development) are centerpieces of the strategy (Ref D). 
 
Comment 
------- 
 
¶17. (SBU) France's energy security policy is closely 
linked to its commercial pursuits in nuclear energy 
and the aim to be a net electricity exporter.  French 
industry will continue to pursue international 
strategic alliances, while the GOF will avoid opening 
its national champions to foreign capital. 
Differences with the French over the ability of 
market-based mechanisms to arrive at first-best 
solutions, and the inevitable commercial competition 
in both nuclear and conventional fields, will 
occasionally challenge our energy relationship.  But 
our common agenda will provide plenty of opportunities 
to work with the French in advancing the frontiers of 
nuclear and renewables know-how, and to press for a 
more stable relationship between hydrocarbon producing 
and consuming nations. 
 
PEKALA