Energy Transition Minister Agnès Pannier-Runacher said she was “confident” that France’s requirements under the EU electricity market reform will be met, just weeks before formal negotiations are due to resume following the collapse of talks at the end of June.

Read the original French story here.

The European Commission tabled proposals in March to reform the bloc’s electricity market to counter soaring electricity prices that hit consumers hard after Russia invaded Ukraine.

Low supplies of Russian gas and French nuclear-generated electricity have meant that other, more expensive sources of fossil-based energy were called as back-up, pushing up the price of all electricity generation in line with the merit order principle.

In response, the Commission proposed that newly built renewable and nuclear plants should be able to benefit from guaranteed sales prices through two-way contracts for difference (CfDs), thereby incentivising their development.

In June, France even went so far as to suggest that these long-term public-private contracts could be used to finance the refurbishment of France’s existing fleet of nuclear reactors and ensure lower prices for consumers.

However, the proposal has fallen on deaf ears, slowing the adoption of the reform that the European Commission and Paris initially hoped to complete before the winter.

Speaking to an audience of business leaders and industrialists gathered in Paris by the French Business Confederation (MEDEF), Pannier-Runacher said Paris would activate “instruments that fall within the exclusive remit of the French authorities” if EU negotiations did not lead to a satisfactory outcome.

More contract types

Asked about the issue on Monday (4 September), Pannier-Runacher’s entourage said her comments were meant to reassure French people and businesses that public authorities had other levers than CfDs at their disposal to reduce electricity prices.

“We want to have as complete a toolbox as possible: caps, regulation, market offers, etc.,” said Pannier-Runacher’s office at a meeting organised by the French Association of Energy Journalists.

For example, the government wants to introduce over-the-counter contracts between electricity producers and large industrial consumers of energy.

Luc Rémont, CEO of the French energy utility EDF, shares this view and wants to finance the maintenance and life-extension programme for existing nuclear reactors from selling their electricity production.

“We think it would be interesting to have this discussion with EDF and other producers to share the burden in the long term (10 to 15-year contracts) and thus guarantee production supplied at a price as close as possible to the cost of production,” the minister’s office added.

Preparing for the end of France’s ARENH scheme

Long-term contracts could also provide a framework to prepare for the exit from the so-called ARENH scheme on 1 January 2026, which regulates the sale of electricity from EDF’s historical nuclear fleet.

Under the scheme launched in 2011, EDF’s competitors can buy electricity from the French utility at competitive prices. In turn, they are supposed to pass on lower prices to their customers, ensuring that the French electricity market complies with EU competition rules.

But while preparations are being made to leave the ARENH scheme, “it is not necessary to have everything wrapped up in the text of the European market reform,” says the minister’s entourage.

Still, the possible massive recourse to this type of contract could find EDF in a dominant position on the French market, a situation that Brussels is closely watching to avoid any abuse of EU competition rules.

What about SMEs?

As for France’s more than 140,000 small and medium-sized enterprises (SMEs), special arrangements will be needed as they “cannot commit to long-term contracts” like large industrial consumers can, the ministry says.

The issue could be raised at a meeting with the French electricity suppliers scheduled by the ministry for Friday (8 September).

“CfDs are not necessarily needed” to achieve this, the ministry added: “We must not confuse the objective of an abundant electricity mix, with prices close to the cost of production, and the technical means needed to achieve it”.

Negotiations to be continued

In this context, Pannier-Runacher said she was “confident that we Europeans will be able to conclude the ongoing negotiations” on the reform of the EU electricity market.

Negotiations broke down in June, with Germany, Luxembourg and Austria, in particular, strongly opposing the French proposal to include CfDs for existing nuclear power, saying this could cause distortions of competition on the EU internal market.

In the last round of negotiations, EU countries belonging to the “nuclear alliance”, such as the Netherlands, did not particularly support the French proposal, while the Belgian and Italian observers supported the German position.

Negotiations at the level of EU energy ministers will resume in mid-October, while discussions at the level of EU ambassadors will continue this week, Pannier-Runacher’s office confirmed.

[Edited by Frédéric Simon/Alice Taylor]

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