The discourse on the energy bill being too high, in the program of a National Rally (RN) which aims to “remake France an energy paradise”is firmly part of the “it’s Brussels’ fault” series.
The promised method seems simple on paper: “Let’s first find a French price for electricity by freeing ourselves from the rules of the European energy market. » The reestablishment of a French electricity price would thus reduce the price of electrons by 30 to 40%, according to Jordan Bardella’s program.
The European market has been accused of numerous ills since the start of the energy crisis. While France produces electricity at low cost thanks to nuclear and hydraulic power (which represents most of the national electricity mix), the French price of electricity is indexed to the cost of the electron taken out of the gas and coal power plants of our neighbors, and causes our bill to skyrocket.
To remedy this, it would therefore be enough to price electricity according to the French production cost to bring prices down. Is it that simple?
Ensuring interconnection
Let’s first remember how the price of electricity is formed. This energy is very special because it cannot be stored, and production must always be equal to consumption, otherwise there will be a widespread outage. Then, between a wind turbine, a nuclear power plant, a hydroelectric dam or a gas or coal power plant, the production price varies greatly.
To achieve the same price and balance the network, it is therefore at each moment the cheapest unit available to produce an additional electron which is called upon to respond to variations in consumption.
Thus, in the middle of the night, when demand is low, only wind turbines and certain dams operate. Then, when everyone gets up, turns on their toaster, their coffee machine and the TGVs start, the nuclear power plants operate at higher power and the gas power plants burn fuel to supply the network.
It is the production cost of the last power station called to balance the network which determines the price for the entire market, at each moment. The rules of the European electricity market have mainly consisted of extending these mechanisms to the entire European electricity system.
The networks are widely interconnected in order to reduce the risk of outages, but also to optimize the use of the production fleet
The networks of the different countries are in fact largely interconnected in order to reduce the risk of outages, but also to optimize the use of the production fleet. To allow that, when demand increases in a country, the cheapest available plant can be used, regardless of which side of the border it is located.
Certainly, but why is our bill determined by the operating cost of German gas power plants, whose price of an electron has followed the surge in gas prices against a backdrop of war in Ukraine, while 75% of the national production is nuclear and hydroelectric?
Already, gas power plants are not so marginal in the French mix (10% of electricity production in 2022). Above all, the energy crisis that France experienced was not solely caused by the increase in the price of gas, but also by the collapse of the country’s nuclear production. Maintenance, corrosion problems: more than half of French power plants were unavailable during the peak of the energy crisis.
In 2022, production from atoms has fallen by 30% compared to the average of the last twenty years. And, for the first time in more than forty years, France exported less electricity than it imported.
A biased approach
In other words, at many moments during the energy crisis, the balance of the French network was maintained thanks to the import of power from our neighbors, and in particular from Germany. The volumes involved are not negligible, because electricity imports represented 12% of consumption in 2022. Germany and Belgium alone accounted for 6.8% of our consumption.
If gas was of great importance during the crisis, it is because gas-fired power plants played a major role in balancing the network.
However, thermal sources (gas and coal) still represent 41% and 33% of the European mix, respectively. Contrary to what is often stated, the price of electricity is not indexed to that of gas, but to that of the last power station called. If gas was of great importance during the crisis, it is because gas-fired power plants played a major role in balancing the network.
Taking national production costs as a reference when the country’s fleet is not capable of meeting demand is a biased approach: in one way or another, the gas burned in German power plants – which have allowed the French network to hold – must be well paid.
The situation is different today. The level of nuclear production has increased, thus reducing for the moment our dependence on gas, and the price of this fuel has fallen at the same time. As a result, the price of electricity on the wholesale market is also falling.
Let’s also remember that half of our electricity bill is made up of network usage costs and taxes. The price of the KWh therefore only represents a small half of the bill. What’s more, in the regulated electricity tariff (EDF blue tariff), the price of the KWh is made up of two thirds of that of regulated nuclear power, which is fixed and determined by law.
The market-dependent share therefore only represents a third of the price of the KWh. Hoping for reductions of 30 to 40% through this means is therefore illusory. The RN certainly adds a reduction in VAT, from 20 to 5.5%, but this tax only represents 15% of the total amount of the invoice.
The rules of the European electricity market are not exempt from criticism, and have in fact been the subject of recent reforms. But they are far from being the only cause of the setbacks experienced by the French electricity system.
Find our series “The 10 main untruths of the National Rally »
