European Electricity Market Reform: Public Support for Nuclear Power and Lower Bills

2023-10-17 18:22:00

The cooling towers of the French Bugey nuclear power plant in the town of Saint-Vulbas (Ain), July 24, 2023 (AFP / Emmanuel DUNAND)

The Twenty-Seven reached a compromise on Tuesday on a reform of the European electricity market, agreeing in particular on the framework of public support for nuclear power, the subject of bitter negotiations between Paris and Berlin.

The objective of this reform, proposed by Brussels to lower bills and encourage investment, was hardly debated, but the Franco-German quarrel over nuclear energy has long blocked negotiations and revived concerns regarding industrial competitiveness. .

The agreement, concluded by energy ministers in Luxembourg, will now be negotiated from Thursday with MEPs.

After the surge in electricity prices last year, the reform intends to moderate the bills of households and businesses thanks to long-term contracts which make it possible to smooth out the impact of the volatility of gas prices.

The approved text must also offer greater predictability to investors by making mandatory the use of “contracts for difference” (CFDs) at a price guaranteed by the State for any public support for investments in new electricity production installations. carbon-free (renewable, nuclear).

In this mechanism, if the wholesale market price is higher than the set price, the producer must return the additional revenues earned to the State, which can redistribute them to consumers. If the price is below, the State pays compensation.

Paris and Berlin disagreed for a long time on the conditions required to also apply these CFDs to investments intended to prolong the existence of existing nuclear power plants.

Germany, having left the atom and weaned off Russian gas on which it had long been dependent, feared competition, according to it unfair, from French electricity made more competitive thanks to massive public support. She was alarmed by the generous redistribution of revenue from CFDs to French manufacturers.

Conversely, France saw it as a convenient framework for financing the repair of its aging nuclear fleet and maintaining low prices, a major asset for its companies.

A crucial debate at a time when European manufacturers are worried regarding their competitiveness, between soaring energy prices and massive subsidies for green industries in the United States.

-“Justice of the peace”-

Finally, in the case of existing power plants, CFDs will not be obligatory, but remain a possibility, according to the agreement. They might therefore apply to the entire French nuclear fleet.

But if countries make this choice, “they will have to submit to EU rules on state aid, and the Commission will ensure that such instruments are adequately designed, without generating unwanted and disruptive distortions of competition. of fairness in the internal market”, summarized Energy Commissioner Kadri Simson.

“The Commission will be the judge of the sincerity of the price set (…), our German partners needed reassurance on the functioning of the French market, this gives them a certain number of guarantees”, observed the Élysée.

Berlin has long called for drastic supervision of CFDs applied to existing nuclear power, proposing for example a cap on the volumes of electricity covered. Such constraints do not appear in the final agreement.

The Élysée hailed “a great French and European victory”, satisfied that the text does not distinguish between atoms and renewables.

“We cannot discriminate once morest nuclear power”, low-carbon energy “which balances the system (in the face of the intermittency of renewables), secures the supply of Europeans and lowers their bills”, French Minister Agnès Pannier-Runacher insisted on Tuesday .

“The agreement improves access for consumers and industry to cheap electricity prices throughout Europe,” commented German Economy Minister Robert Habeck.

The text also provides, in the event of a new lasting surge in prices, the triggering of a crisis situation at European level allowing States to adopt price shield type measures to protect vulnerable households and businesses.

Another subject was debated: “capacity mechanisms” which allow States to remunerate the unused capacity of power plants to guarantee their continued activity and avoid future electricity shortages.

Several countries wanted to be exempt from the planned ecological constraints (CO2 emissions limits), notably Poland, wishing to apply this tool to its coal-fired power plants. Finally, the agreement provides for possible exemptions, but under strict conditions and only until the end of 2028.

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