Macron wants to rein in electricity prices for consumers by year-end; France will not wait for the EU

French President Emmanuel Macron promised earlier this week that his government would rein in electricity prices by the end of the year. The government is expected to unveil the specific measures in October, following the extreme price volatility of last year. A strong fleet of nuclear and hydropower plants, which cover most of France’s electricity consumption, should help bring prices down for consumers there.

Macron has so far provided no specific details on what the measures might look like. However, French state-owned utility EDF and the government are in intensive talks over the future regulation of electricity sales from the country’s nuclear power plants. According to Montel, this could involve setting a price cap on their output or introducing two-sided contracts for difference.

"In October, we will be able to announce electricity prices… and we will regain control over our electricity prices by the end of the year. Because we have nationalized EDF and are fortunate to have a generation base built on nuclear power, we will be able to announce electricity prices in October that will give households and industry greater certainty and put us in an advantageous position at the European level," the French president said on Monday, according to Montel.

According to French Energy Minister Agnès Pannier-Runacher, the government is considering introducing a long-term system that would keep prices among the lowest in Europe. It should also help prevent the sharp price swings that the European market has experienced in recent months.

New regulated prices could be in the range of 60-70 EUR/MWh, according to an unnamed source in the French administration. This low level compared with market prices reflects the fact that France generates around 90% of its electricity from low-emission sources. Nuclear and hydropower plants account for just under three-quarters of generation.

Under the ARENH mechanism currently in operation, EDF sells around 100 TWh of electricity from its plants to competitors each year. At 42 EUR/MWh, the price is very attractive given developments in recent years. However, the mechanism is set to remain in force only until the end of 2025.

We will not wait for the EU

In August, the French energy minister said that if efforts at EU level fail, France will reform its market on its own. A national reform of the electricity market is also intended to protect consumers there from price volatility. According to the minister, this poses "a danger: the inability to predict the context in which investment will take place".

"The aim of reforming the European electricity market is to send long-term signals. Everyone knows that there is a debate about the place of nuclear energy. I will be very clear: if what we want to do at the European level does not work, we will do it at the national level," Minister Pannier-Runacher said at an event organized by the French employers’ association Medef.