French government, EDF agree on €70 MWh for nuclear power

The French government and EDF have struck a deal on nuclear electricity prices to shield consumers from increases and enable the state-owned utility to fund new reactor construction, drawing criticism from energy-intensive businesses.

NOVEMBER 15, 2023 GWÉNAËLLE DEBOUTTE, more https://www.pv-magazine.com/2023/11/15/french-government-edf-agree-on-e70-mwh-for-nuclear-power/

The French government and utility EDF have reached an agreement on the price of nuclear energy after “long, sometimes difficult negotiations,” according to Finance Minister Bruno Le Maire. The new average price for nuclear power was set at €70 ($76.10)/MWh for a period of 15 years starting from 2026.

The new pricing scheme will replace the so-called Regulated Access to Incumbent Nuclear Electricity (ARENH) mechanism, which requires EDF to sell 100 TWh per year of nuclear production to its competitors at €42/MWh. EDF currently owns and operates most of France’s nuclear power fleet and sees the current price as two low, given current market prices for electricity.

The government and EDF determined €70/MWh by modeling prices over 15 years, considering capture and redistribution mechanisms, bilateral power purchase agreements (PPAs), and medium-term contracts. Two levels were established: if the average price surpasses €78.80/MWh, 50% of the additional income beyond this threshold goes to the state budget; exceeding €110/MWh results in a 90% capture, with surpluses returned to consumers.

“If this agreement secures EDF – the armed arm of our energy policy – over the long term, it also sets the non-negotiable conditions for electricity produced in France at a price competitive,” said Agnès Pannier-Runacher, minister of energy transition.

Yann Dolbeau, co-founder of consulting firm Enoptea, said that the mechanism would successfully disconnect the electricity price from gas prices. Consequently, there won’t be any more capping, and the portion of nuclear power in supply prices will increase, leading to lower costs.

CLEEE, the French association of energy-intensive businesses, has defined the new measure as “a big step backwards” for French companies. “The new system will guarantee EDF an expected income well above the full production cost, with a retrocession threshold to consumers equal to almost double the production cost,” said CLEEE.

CRE, the French regulator, estimated the full cost of existing nuclear power at €60/MWh between 2026 and 2030. Compared to the threshold of €110/MWh, it is almost double.

“If we share the need to give EDF the means to invest, we regret an arbitration made for budgetary reasons to the detriment of price stability and the protection of French industry. A bill must soon be tabled by the government and detractors still hope to be able to influence certain aspects of the reform,” the association stated.