It is at the heart of the programs of Emmanuel Macron and Marine Le Pen, the first advocating a reform, the second an outright exit.
Exit for Marine Le Pen, reform for Emmanuel Macron: the two finalists in the presidential election again spread their differences on their vision of the European electricity market, during the debate between the two rounds on Wednesday evening. A technical subject, at first sight complex for the uninitiated, yet crucial, since this market partly determines the price paid by French consumers.
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With the outgoing president as with his rival of the National Rally (RN), the current surge in the price of electricity is attributed to the functioning of this wholesale market, based on the economic law of supply and demand. “The price is set by the production cost of the last plant used to meet the demand», explains Thomas Pellerin-Carlin, director of the Energy Center of the Jacques Delors Institute. The cheapest generation sources are called first, in this case renewables and nuclear, and finally coal and gas, as demand increases. Thus, in France, the wholesale price is generally determined by a gas plant, most often located in Germany.
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This is why the surge in gas prices, which has been observed since autumn 2021 – caused by the post-Covid economic recovery and aggravated by the war in Ukraine, has mechanically driven up electricity prices. This pricing mechanism is justified by a simple observation. Let’s imagine that the electricity tariff is lower than the production cost of the last plant called. The operator of the latterwould have no interest in making it work“Says Jacques Percebois, professor emeritus at the University of Montpellier and energy specialist, because he would lose money. As a result, there would not be enough electricity on the network and blackouts would therefore be inevitable.
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Setting the wholesale price at the level of the marginal cost of electricity is therefore essential to balance the market. A system which, indeed, may seem unfair for countries like France, which depends little on gas to produce its electricity (6% of the energy mix in 2021, according to RTE), compared to the European average (around 20%). Nuclear power being its main source, up to nearly 70%.
Interconnections between national networks
But the European market also has its benefits, experts point out. The interconnections between the various national networks allow France to import electricity when it needs it, in particular during winter consumption peaks. “France is a net importer of electricity at peak times», notes the economist Jacques Percebois. Conversely, “when France is an exporter, the market contributes to EDF’s economic balanceadds Patrice Geoffron, director of the Center for Geopolitics of Energy and Raw Materials (CGEMP) at Paris-Dauphine University.
Note that the wholesale price on the European market does not correspond to the retail price paid by the consumer. “It is only one of its elements“says Jacques Percebois. The regulated sales tariff (TRV), proposed by EDF, can indeed be broken down into three thirds: taxes, transport costs and the production of electricity itself. It is in this last component that we find the wholesale price, alongside the cost of EDF’s historical nuclear production, called ARENH.
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Despite the arguments of economists in favor of the European market, Marine Le Pen persists in her desire to get out of it if ever she were elected President of the Republic this Sunday. She hammered it home during the between-rounds debate on Wednesday night, saying she wanted “regulated prices“. In this case, “we would be much less sensitive to the evolution that we are currently experiencing in energy prices, which are also the consequence of an energy price set at European level“, she said.
It would be “a huge mistake“, replied Emmanuel Macron, who pleads for a reform of the European market, “so that it no longer depends on the small additional shares of gas that we sometimes import, but on the installed base, in particular ours, which is much more nuclear“. France has been negotiating in this direction with its European partners for several months already, under the impetus of the Head of State, but has so far struggled to convince.
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