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Following several months of negotiations, the French government and EDF have agreed a price for nuclear electricity. Economy Minister Bruno Le Maire told a press conference that the agreement “lays the foundations for new French nuclear regulation and brings EDF into the 21st century”. It guarantees a reference price level of around €70 ($75) per MWh for nuclear electricity with a ceiling of €110/MWh.

The mechanism currently in force for regulated access to historic nuclear electricity (ARENH) will cease at the end of 2025. The ARENH, which was established in 2011, obliges EDF to sell part the electricity produced by its nuclear fleet to other suppliers, to guarantee competition between the different market players, in accordance with European rules. Currently the price under ARENH is €42/MWh, but this only relates to a third of electricity production. The rest is subject to market conditions. The new agreement, however, includes all production. “Protection that only covers part of production is incomplete and ineffective protection,” said Le Maire, who welcomed the establishment of “permanent protection” for consumers and businesses.

Several levels have been defined between the reference price and the ceiling price. The mechanism will operate through progressive levies, based on the income tax model. The levy rate associated with each tranche was the subject of intense negotiations. For the first tranche (€78-80/MWh), it will be 50% and 90% beyond a price of €110/MWh. “This new arrangement will make it possible to disconnect energy prices from gas prices, putting an end to a certain number of ARENH weaknesses because the redistribution is done directly to consumers,” explains Minister of Energy Transition Agnès Pannier-Runacher.

She said the agreement "is in line" with that decided recently at the European level. The new tariff based on a threshold taxation system is intended to mitigate possible increases in the market. “This means that for households and small businesses, regulated prices will be preserved and will only increase according to the reality of our electricity production costs. As for businesses, this is an incentive to negotiate contracts long term, which is the best way to have visibility on prices." She added that the establishment of an anti-crisis mechanism makes it possible “to avoid an explosion in prices similar to that of 2022”.

“We had to consider all of our country’s economic and electricity issues in making this decision,” said EDF CEO Luc Rémont. “This is a demanding decision for EDF.” Earlier, when addressing the Senate, he stressed the need to develop a price system which “gives sustainability, stability and visibility to everyone”, in particular in order to guarantee French competitiveness with respect to electricity.

EDF, with debts of €65bn, faces a double challenge: stabilising its deficit, while freeing up investment margins to finance, with the support of the State, the relaunch of the French nuclear programme. This envisages the construction of six EPR reactors at a cost of €50bn and at the same time maintaining facilities, estimated to cost a further €65bn.

“With this agreement we have succeeded in finding a vital balance between the competitiveness of our industry, the stability of households and the profitability of EDF,” said Le Maire. “EDF must be profitable. We are not in the Soviet Union. Just because EDF is nationalised it does not have to operate at a loss. EDF must generate [profit] margins.” insisted the Minister of the Economy.

Rémont provided more detail on how the €70 reference price for nuclear electricity was determined. “This is the result of our long-term expectations over 15 years after 2026, he explained. Looking back over the last 15 years, market prices have had periods well below €42/MWh and also well above €100/MWh. He added that, at present, the prices proposed by EDF are €83/MWh for 2027 and €77/MWh for 2028.

Date: Saturday, 18 November 2023
Original article: neimagazine.com/news/newsfrench-government-and-edf-reach-agreement-on-nuclear-electricity-pricing-11306213