Vogon Today

Selected News from the Galaxy

StartMag

The reform of the electricity market at the center of the nuclear war between France and Germany. Le Monde report

The reform of the electricity market at the center of the nuclear war between France and Germany. Le Monde report

Europe is preparing a law to contain the volatility of electricity prices, but France and Germany are at loggerheads over nuclear power. Le Monde article

For France , which needs to modernize its nuclear fleet, the reform of the European electricity market, currently under consideration in Brussels, is an important issue. France has convinced the Commission to take account of its imperatives – the text under discussion bears witness to this – but it comes up against the stiff opposition of some partners, first of all Germany. As for its traditional pro-nuclear allies – Eastern European countries and Finland – they are now giving it cautious support. Before the summer break, he tried to rally his camp, but "the blocking minority around France remains fragile," explains a European source.

After the surge in energy prices in the summer of 2022, following the war in Ukraine, the Commission presented a draft law on 14 March to contain the volatility of electricity prices, provided it is decarbonised. The bill would allow member states to subsidize energy production on their territory, both from renewable and nuclear sources and from existing or future plants, without infringing state aid legislation. It would also allow them to capture the super profits made by electricity producers when prices rise.

Today, households and businesses pay the price per kilowatt-hour at which the latest power plant, often gas-fired, is brought into operation to meet demand. The Commission is proposing an alternative model which allows them to benefit from the price of energy produced on their territory. Through long-term contracts between low-carbon electricity producers and the state, the latter would guarantee a fixed price to the former. According to this mechanism, the producer would pay the State the profit obtained if the market price exceeds the guaranteed price and would receive compensation if not.

No progress

For Berlin and its allies in Luxembourg and Austria, it is out of the question that Paris finances its "grand carénage", the renovation program to extend the life of its nuclear power plants, with disguised subsidies. “Berlin is in a panic over the loss of competitiveness of its industry. He wants to keep electricity prices high so that France does not benefit from nuclear power,” says a pro-nuclear European diplomat.

On the other hand, Germany, which is stepping up its renewable energy projects, is in favor of the mechanism proposed by the Commission to subsidize the construction of future electricity generation plants. For France's allies, who do not have a large existing nuclear fleet and above all want to be able to provide financial support for the construction of new plants, this is the main problem. “Paris risks remaining isolated in its battle,” explains a European source.

At the European Council meeting on 29 and 30 June, Chancellor Olaf Scholz and President Emmanuel Macron discussed the issue, but failed to make progress. They were due to discuss it again on July 3, during the French President's state visit to Germany in early July, but the Elysée had to cancel the trip due to unrest following the death of the young Nahel. Since then, despite regular contacts between the two capitals, the situation has not changed.

“In return, Germany wants to be able to provide more state aid,” says a European diplomat. In particular, it intends to subsidize part of the electricity costs of energy-intensive industries, for an amount of 30 billion euros by 2030, but to do so it would need authorization from the Commission, which is not easy given the current rules. “In Germany, energy comes mainly from fossil fuels. This limits the scope of the mechanism envisaged by the Commission in its reform of the electricity market”, continues the source.

The resistance of the European Parliament

France is also facing reluctance from the European Parliament, whose Industry committee on July 19 amended the reform bill to make public support for existing nuclear power plants more difficult. "France lost this battle in the Industry Committee, but it will repeat itself in the September plenary session and above all in the Council," says macronist MEP Pascal Canfin, chairman of the European Parliament's Environment Committee.

In this affair, EDF has not helped the government: the electricity company has gone around the MEPs to explain why the state should not be able to recover part of its super profits. The Elysée did not appreciate it and its secretary general, Alexis Kohler, let the management of the state group know in terms that were not exactly friendly. “It is strange, in Brussels, to see the French State and EDF defend opposing positions when the French State is a 100% shareholder of EDF”, adds Pascal Canfin.

Since Berlin decided to withdraw from nuclear power after the Fukushima disaster in 2011, France and Germany have been at loggerheads over the fate of the atom in Europe. It is an endless economic, political and diplomatic war, brought back into the limelight by global warming and the war in Ukraine. It is being fought on various battlefields, including the various bills aimed at decarbonising the European economy, strengthening its energy independence and preventing energy prices from skyrocketing as they did in the summer of 2022.

Complex compromises

Sometimes Paris wins a round, as in the epidermal debate on the inclusion of nuclear power in the taxonomy, the label given to green activities to guide private investment. Other times it is Berlin that has the upper hand, as demonstrated by the bill presented by the Commission on 16 March, which aims to support the development of a low-carbon industry in the Old Continent in the face of Chinese and American offensives and does not envisage no special treatment for nuclear power. The agreement is not concluded – the text still needs to be negotiated in Parliament and among the 27 member states – but the initial draft is not in favor of Paris.

Europeans regularly come up with complex compromises that allow each side to get more or less what they want. An example is the Renewable Energy Directive, which provides that by 2030, 42.5% of the European energy mix will come from wind turbines and photovoltaic panels. Adopted in mid-June after tough discussions, it finally allows France to take into account the hydrogen produced by nuclear power when measuring its efforts. “It was a difficult negotiation and we had to fix things in the home straight. But we will have to put things right when we have to set goals for 2040,” says a European diplomat.

Another battle is that of the European Investment Bank (EIB), whose next president should be appointed by the end of the year. The Elysée, which fights for the institution to go beyond its traditional mandate and finance nuclear energy in particular, expects the candidates to succeed German Werner Hoyer to give guarantees in this regard. Germany sees things differently…

(Excerpt from the press release of eprcommunication)


This is a machine translation from Italian language of a post published on Start Magazine at the URL https://www.startmag.it/energia/riforma-mercato-elettrico-francia-germania/ on Sun, 06 Aug 2023 05:09:26 +0000.