Why is France suffering from rising electricity prices?

Analyze. It may seem counterintuitive, counterintuitive, some energy experts say. Since the installation of its nuclear fleet, after the first oil crisis in the 1970s, France has developed its autonomy to reduce dependence on Gulf hydrocarbons. An investment now amortized, for a unique electrical mix in Europe: mainly nuclear, in unbeatable proportions, and hydraulic. With wind and photovoltaic energy, the whole constitutes a unit free of carbon in more than 90%. Much more so than neighboring countries, where the share of coal or gas, which is otherwise polluting, is higher.

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A question arises, necessarily sensitive for the wallet: why, like neighboring countries, is France currently suffering from the rise in electricity prices, while this increase is due to a European rebound in the price of gas? Answer: the market. Or rather its dead ends, which make it even more difficult to take into account the interests of users at the same time as those of climate change. In this case, the very principle of the continental electricity market is that of selling at marginal cost. In other words, the prices depend on the cost required to start up the last call center for support to cover the demand peaks of the electricity grid. If it is a coal-fired power plant (in Germany, for example), or gas, electricity prices will be indexed accordingly.

However, like other raw materials, gas has returned to peaks during the current year. Its boom in Europe is due to the strong economic recovery after Covid-19 and, in particular, to the recovery … of Asia. It should stop after the first quarter of 2022, when the winter and heating needs have passed. Another factor explains the current increase in fuels: the price of European CO2 emission rights, these “polluting permits” to which large manufacturers are entitled, has doubled in one year.

“Risk of explosion”

These elements are not without impact on the wholesale electricity market on a day-to-day basis. Above all because “prices in the French wholesale market are correlated with prices in neighboring countries, due to electrical interconnections”, recalls Jacques Percebois, emeritus professor of economics at the University of Montpellier and specialist in these issues. The futures market is also taking off: in France, on September 9, the electricity available for 2022 crossed the symbolic bar of 100 euros per megawatt hour. Well above the highest price recorded in July 2008 (93.29 euros), shortly before the financial crisis.

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