Nuclear Politics

France / EDF And Government Strike Deal To Cap Price Of Nuclear Energy

By David Dalton
15 November 2023

Agreement comes as country gears up for ambitions reactor new-build programme

EDF And Government Strike Deal To Cap Price Of Nuclear Energy
EDf Operates a fleet of 56 commercial nuclear power plants and is preparing to build more.

The price of nuclear energy is to be capped and profits from its sale returned to consumers if prices rise above set thresholds under a new deal agreed between EDF and the government on Tuesday (November 14).

The complex deal, reached after months of negotiations, is aimed at protecting consumers and businesses from rising prices but also ensuring state nuclear operator EDF can find the funds it needs to build future nuclear reactors.

The two sides agreed on €70/MWh as an average reference level for nuclear power prices.

France generates around 65% of its electricity from 56 commercial nuclear reactors and also has ambitious plans to add to the fleet with a new generation of plants.

The new framework will include taxing some of the EDF’s revenues if energy prices exceed certain thresholds and redistributing the funds to consumers and companies.

The goal is to try to keep the price of nuclear power at an average of about €70/MWh over a 15-year period, above EDF’s estimated production costs. French wholesale power prices are still well above €100/MWh at present.

Under the agreement, which will need approval from the European Commission, if energy prices head upwards of about €78/MWh the state would recoup half of the extra revenues earned in tax, while any revenue above a threshold of €110/MWh would be taxed at 90%.

The new framework would apply from 2026 after the expiry of an existing one known as Arenh, under which EDF is obligated to sell a third of its electricity to rival companies at a price regulated by the state, currently set at €42/MWh. Energy companies then sell this electricity to customers at their own prices.

When they have used up their quota of energy from EDF at the regulated rate, energy companies must buy electricity at the market rate, which can fluctuate greatly according to supply and demand.

At one point in 2022, the market rate for electricity reached €600/MWh, in large part due to market speculation and the war in Ukraine.

EDF claims that the current €42/MWh state-regulated price for its nuclear energy is too low to allow it to operate, maintain and invest in its nuclear reactors.

The deal announced on Tuesday will replace Arenh and aims to help avoid price fluctuation whilst ensuring EDF can invest in its nuclear reactors.

“This deal was indispensable to guarantee the competitiveness of our industry, the visibility and stability of prices for our households and the development of EDF,” finance minister Bruno Le Maire told reporters.

He said the full nationalisation of EDF this year did not mean it could function at a loss.

“We are not in the Soviet Union,” Le Maire said.

“EDF must be able to be profit making and raise the money it needs for future investments.”

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