France threatening to fly solo on electricity market reform

France may come up with national rather than European solutions to reduce electricity prices if discussions on reforming the EU market do not progress fast enough, the country’s Energy Transition Minister Agn?s Pannier-Runacher said on Tuesday (29 August).

Read the original French article here.

French President Emmanuel Macron lashed out at Germany on Monday, accusing Berlin of deliberately countering the growing acceptance of nuclear power across the EU.

“It would be a historic mistake to […] slow down investment in nuclear power […] in Europe”, especially if this ends up favouring “more coal,” asserted Macron.

With winter approaching and energy bills likely to rise as a result, Macron seems aware that an agreement on reforming the EU’s electricity market is needed.

The European Commission tabled its proposal in March but Berlin and Paris have since appeared at odds on key aspects of the reform.

Brussels has proposed that any public support for new energy generation capacity – or major repowering of existing power plants – be financed through public-private contracts for difference (CfDs).

But while the system will apply to new nuclear projects, France wants to extend the CfD scheme to existing nuclear assets.

This is opposed by Germany and other EU member states like Austria, Luxembourg, Belgium and Italy, who say this amounts to state aid and will lead to distortions in the EU’s internal market.

Most other EU countries have remained silent on the issue, not even those who have joined the new “nuclear alliance” set up in Paris.

The outcome? The most recent negotiations held in June failed, delaying the timetable for approving the reform.

French executive strikes back

Battling in isolation, the French executive has decided to strike back.

Following in Macron’s footsteps, Pannier-Runacher told the annual summer gathering of the French business association MEDEF on Tuesday (29 August) that if France’s demands went unheeded, “we will not hesitate to secure, in our national legislation, what we are proposing to do in Europe”.

However, her remarks have left observers perplexed. Speaking to EURACTIV, her office explained: “If the negotiations [on reform of the EU electricity market] come to a standstill, we will have no choice but to implement measures to achieve the same objective [bringing electricity prices closer to production costs] using instruments that fall within the exclusive remit of the French authorities”.

According to Phuc-Vinh Nguyen, an energy policy researcher at the Institut Jacques Delors think tank, Paris may be referring to over-the-counter contracts concluded between producers and consumers of electricity (PPAs), which can be adapted to companies and private individuals.

Indeed, EU countries have exclusive powers to “promote the legal framework for PPAs”, Nguyen told EURACTIV France.

France could, therefore, make massive use of them if the EU market reform does not open up the possibility of issuing CfDs for existing nuclear power, he suggests.

Raising the pressure

French power utility Electricit? de France (EDF) is on the same page, with chairman Luc R?mont openly advocating for PPAs rather than CfDs.

However, EDF should be able to finance its maintenance and life extension programme for its existing reactors from the proceeds of its sales rather than through public subsidies, R?mont said when presenting the company’s first-half results at the end of July.

In any case, Pannier-Runacher’s declaration on Tuesday “needs to be clarified”, said Nguyen.

The minister’s words could also, quite simply, be a way of “putting pressure [on Germany] to move the negotiations forward, rather than a real threat”, a representative of the sector told EURACTIV.

“They’re testing the waters”, the representative said.

Reform calendar

From the very start, the Franco-German couple have indeed been at odds over the timetable of the electricity reform.

The European Commission’s initial intention was to conclude the reform ahead of the winter heating season.

Berlin, however, said it would prefer to conclude the talks after the EU elections in June 2024, to which France replied that at least a partial deal should be achieved before the end of 2023.

In the European Parliament, the industry committee backed a minimal reform of the bloc’s electricity market in July, but negotiations have since stalled in the Council where the 27 member states are sitting.

On Tuesday, Pannier-Runacher said she was “concerned that the discussions have fallen behind schedule”.

Little progress was achieved during the summer under the Spanish EU presidency, sources say. Following the breakdown of talks in the Council, discussions were referred back to the ambassador level and no meeting of the 27 energy ministers is scheduled before 5 December.

As a result, there is no clear view of the conclusion of the negotiations, even if Spain says it wants to reach an agreement under its presidency, which ends on 31 December.

While France’s patience is running short, the German government is currently meeting for a two-day retreat, where energy matters are on the agenda.

[Edited by Fr?d?ric Simon/Nathalie Weatherald]