Energy crisis: why does Macron want to reform the European electricity market?

Baptiste Morin, edited by Laura Laplaud 06:46, September 06, 2022

After meeting with German Chancellor Olaf Scholz, Emmanuel Macron announced on Monday that "European solidarity" would be put in place for the exchange of gas and electricity.

But the Head of State has also announced that he wants to get rid of the rule that sets the price of electricity in Europe.

What are we talking about ?

Who benefits? 

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What is this rule?

This is the so-called marginal cost rule.

The price of electricity is calculated on the basis of the cost of the last means of production requested to produce it.

When demand is strong, as at the moment, it is the gas-fired power stations that produce, so the price of electricity is correlated to the price of gas.

Originally, this rule was designed to encourage the various plants to produce.

It is thanks to this rule, for example, that renewable energies have been able to develop when their cost was initially very high.

It is also thanks to them that EDF has long sold nuclear electricity, which is inexpensive to produce, at a higher price in Europe.

But today, as the price per megawatt hour reaches 1,000 euros before stabilizing around 600 euros, the rule seems to have reached a limit. 

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Who are the beneficiaries of this increase?

In fact, when the price of gas is a reference, the other means of production make it possible to sell electricity at a much higher price than it costs them to produce.

But as the economist Jacques Percebois, a specialist in energy issues, explains, it is not the suppliers who collect the profits.

"Suppliers are bad because they often sell cheaper than they buy. Those who win are the producers. So they can be suppliers. But the winners in the case are those who have electricity cheap and sell at a high price," he said.

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So who ?

Via its nuclear power plants in Belgium, Engie currently sells a megawatt hour at 380 euros when it costs around forty euros to produce.

The Belgian government estimates that the group has made 2 billion euros in profit since the start of the war in Ukraine.

There is also RWE, the equivalent of EDF in Germany.

RWE operates five coal-fired power stations and the company posted nearly 3 billion euros in profit in the first half.

A significant figure, but these producers respect the rules of the market and these circumstantial profits are often reinvested.

RWE has decided to increase its investments in renewable energies by 30%.