Electricity prices: why the European Union stands out
Although the European energy market regulates the price of electricity in Europe, many voices are being raised to leave it to lower the bill for the French. A decision that the government strongly opposed, rather reforming the system.
Should we leave the European energy market? While certain sectors of activity, such as bakers, are collapsing under huge electricity bills, the European energy market system is being singled out by the opposition because it would be unprofitable, especially for France, which can produce its own electricity. thanks to nuclear power.
In concrete terms, the system is as follows: European Union countries have agreed to combine their means of energy production, first to use those with the lowest operating costs, i.e. renewables and nuclear, and then those with the highest costs. such as gas or coal. Therefore, the market is first supplied with the cheapest energy sources, but when the demand increases, the most expensive takes its place.
It is then the production price of these resources that serves as a reference for the entire network. The reason for this system is quite simple: to incentivize the operators of these power plants to keep producing, to provide a safety net in case of excessive demand, thus preventing layoffs.
The pollution of the price of gas to the price of electricity
However, this system therefore creates a polluting effect of the price of gas on the price of electricity. For example, France produces electricity cheaper than Germany, which produces with gas, thanks to nuclear power, but we pay a high price for our participation in the market, because we use the price of gas as a benchmark, there is strong demand. It is linked to the current context with the war in Ukraine and the desire to give up Russian gas.
And this system is valid for all the different countries of the European Union that are connected to each other. In order to import electricity from abroad or export it to neighbors, European countries are connected by cables that allow electricity to be transported across borders.
Still in the example of France and Germany, the two countries are interconnected, if there is capacity from Germany to France and the price in Germany is lower, the algorithm will automatically offer German energy offers to French participants, which will reduce costs. Electricity in France.
“The aim is to ensure fair access to it and a well-functioning market offering a high level of consumer protection, as well as appropriate levels of interconnection and production capacity,” the European Parliament website reads.
The war in Ukraine causes prices to skyrocket
However, as the price of gas exploded with the war started by Vladimir Putin, the rules established at the time became useless, and with it, the price of electricity also fell. Therefore, it is a direct result of mechanisms built on the logic of supply and demand.
A discrepancy highlighted by the opposition and recognized by the government. “Having carbon-free electricity whose price is indexed to fossil fuels is economically stupid and climate-rebellious”, Bruno Le Maire announced in CNEWS last September.
Is exiting the market a bad idea?
However, is it wise to withdraw from the system demanded by the opposition, especially the right and far-right? The answer is complicated, because the European market also has advantages for the country. For example, it allows France to easily import power when it needs it, thus avoiding blackouts or blackouts if consumption peaks, as has been feared in recent weeks.
In addition, it should be remembered that this system stabilizes the financial health of EDF, which can easily export electricity. Moreover, thanks to our presence in the European market, the share of the retail price paid by consumers is only one third. The remaining two-thirds correspond to route costs and various taxes.
Finally, while countries such as Spain and Portugal may benefit from temporary concessions to exit the market, especially due to the characteristics of their electricity grids and their geographic location, which makes them less dependent on the European grid, France is not the same and our country could face major supply difficulties and therefore layoffs.
That is why, while he rules out any exit from the European energy market, he cannot get government money and, with the support of European Commission President Ursula Von der Leyen, is pushing for global reforms to the system. Some tension with Germany, which has no interest in France’s nuclear dominance.