Is the European market responsible for the rise in electricity?

• Several candidates for the presidential election are making the European Union their scapegoat, especially when it comes to criticizing the rise in the price of electricity.

• European and French energy policy researcher Phuc Vinh Nguyen explains that the price of electricity in France does indeed depend on European market tariffs.

• However, he points out that a withdrawal from this market is currently not possible due to France's dependence on imports, because the country has too little production.

Against a background of inflation and war in Ukraine, some politicians blame the European Union: the latter is responsible for the rise in the price of electricity in France.

And tariffs would be lower if France was not part of the European electricity market, argue several candidates for the presidential election.

For the candidate of the National Rally, Marine Le Pen, guest of France Info on March 21, "we must leave the European electricity market and find regulated prices in France".

A few days earlier, on the CNews antenna, Eric Zemmour held the same position: “Electricity prices are increasing because Europe has pegged French prices to other countries.

“A story close to the side of the LR candidate, Valérie Pécresse, who declared on BFMTV: “Thanks to nuclear power, we produce our electricity cheaper but its price on the European market is indexed to gas.

I ask the government to disconnect the price of our electricity from the European market by decree.

»

Several months ago, the French government already expressed its desire to reform the European electricity market, as the daily

recently recalled .

At the end of September, the Minister of the Economy, Bruno Le Maire, considered it “obsolete”, and pointed the finger at the tariff link between gas and electricity.

To clarify the matter,

interviewed Phuc Vinh Nguyen, researcher on European and French energy policies within the “energy center” of the Jacques Delors Institute.

The European electricity market brings together most of the Western European markets.

How does it work ?

The European electricity market was created a relatively long time ago, during the 1990s. Today, we talk about it because prices are abnormally high, in particular because of the gas shock that occurred in the summer of 2021, which worsened recently with the situation in Ukraine.

The principle is to have the same mechanism for determining the wholesale price of electricity in the Member States.

There are imports and exports between all these States, and therefore this harmonization of the price promotes trade between countries.

How are electricity prices set?

To explain it clearly, it is necessary to make some clarifications.

On an electricity market, there must always be a balance between supply and demand.

If not, you are in a

situation .

Production units are therefore needed which must operate and be able to produce electricity continuously.

As soon as you turn on the heating or even press a switch, you participate in the demand.

On the European market, the price of electricity is set according to the cost of the last energy source used.

If demand is weak, it is wind and solar which are mobilised, then hydro, nuclear, gas and lastly fuel oil.

At present, and like every winter, there is a peak in consumption because there is more need for heating.

During peaks, gas meets demand, so we need gas-fired power stations, which are expensive to operate.

Thus, the price of wholesale electricity currently depends on the cost of gas.

In France, we are rather protected from this increase in electricity prices, in particular thanks to the commitments of the State [blocking at 4% of the increase in regulated tariffs for the sale of electricity, tariff shield, etc.] and the ARENH (Regulated Access to Historic Nuclear Electricity), a mechanism that allows all alternative suppliers to obtain electricity from EDF under conditions set by the public authorities.

Can we cap the price of electricity in France?

This question comes up often and for the price of electricity to be capped, validation by the European Commission is required.

This is a temporary cap, for very exceptional situations.

On this side, the Commission is quite open.

It is also possible to cap the price of gas, which would obviously have an impact on the price of electricity.

In this case, it requires validation by the European Council.

A discussion will be held at the end of the week and several European countries have already positioned themselves in favor of this ceiling, as is the case of France.

Can France leave the European market and produce enough electricity?

Currently, electricity production is not sufficient to cover France's needs.

In particular because several nuclear reactors are shut down, for example for maintenance.

We are therefore forced to import electricity from Germany and other European neighbours.

Some put forward the argument that prices in France would then be lower, but this would deprive French electricity producers of the possibility of selling their electricity to our neighbors and making a profit.

However, it would be possible to reform, but that would take time.

Economy

Energy: Five EU countries, including France, call for a European approach to rising prices

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• Valerie Pécresse

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• Eric Zemmour

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