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The nationalisation of French energy giant EDF was “inevitable” because of the “huge amount of regulatory and economic constraints” put on the company as well as France’s new ambitious nuclear programme, according to Professor Jean-Michel Gauthier.
Read the original article in French here.
The government’s decision to nationalise Electricité de France, announced on 6 July, provoked mixed reactions in the French Parliament.
Yet, according to Jean-Michel Gauthier, director of the Energy & Finance Chair at HEC Paris, the decision was “inevitable” because of the regulatory constraints faced by the company.
Under French law, EDF must sell part of its nuclear electricity to the competition at a set price (€42/MWh) and buy it back on the market like any other supplier.
But because of the pandemic and the war in Ukraine, the current market price stands above €200/MWh, according to France’s electricity transmission system operator RTE.
This means EDF is selling at a loss to feed the competition, something unions and many observers have decried as a “plundering” of the French company.
On top of that, the state has also asked EDF to dish out €8 billion for the so-called “tariff shield” to limit gas prices in times of crisis.
EDF’s market capitalisation has collapsed in the past few years, going from €150 billion in 2007 to less than €40 billion today.
A debt estimated at more than €43 billion, fuelled by delays in constructing its new fourth-generation reactors, also puts the company in a difficult spot.
Nuclear plans
But according to Professor Gauthier, the company’s debt “is not at all the subject”. It is even “irrelevant, with regard to the major subjects of energy and industrial policy in France,” he told EURACTIV.
According to Gauthier, the main challenges lie in the company’s vast nuclear programme. First, EDF will have to spend more than €50 billion by 2030 to extend the life of existing nuclear power plants.
As announced by President Emmanuel Macron in February, the French energy giant must also adopt measures to build six new fourth-generation EPR-type reactors. According to the latest estimates, that effort will cost €50-60 billion.
Going under full state ownership will offer EDF a debt guarantee, as well as lower rates to raise additional debt, Gauthier says.
More worrying, according to him, is the number of key points the state has dropped from its nuclear industrial policy in recent years.
“These are the major issues: what is to be done with the EPR 2, the third generation reactors, the ASTRID project and the small modular reactors (SMR),” he said.
The professor also questioned the state’s means to meet its pledged energy ambitions.
Renewables in all this?
However, these multi-billion euro projects only deal with nuclear without addressing EDF’s capacity to deploy renewable energies – another major priority of the government.
“Today, given the bubble around green finance, there is no reason for the state to own solar or wind power capacity,” explained Gauthier.
“We can therefore imagine [that we] go back to square one […], i.e. that the State puts the portfolio of EDF Renewables, a subsidiary wholly owned by EDF, on the market,” he added. This project could revive divisions between the state and the unions if green-lighted.
For the time being, it is necessary “to keep a single EDF”, the company’s CEO Jean-Bernard Lévy told broadcaster BFM TV on Monday (11 July).
EDF without renewables would be a dark “utopia”, he also said.
When it comes to energy-related decisions, the state must be the “only pilot” on board and the “only decision-maker”, Gauthier concluded.
[Edited by Frédéric Simon, Daniel Eck/Alice Taylor]
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