Tensions are rising between the state and the EDF. The latter announced, on Tuesday, that he had submitted an appeal to the Council of State demanding compensation from the state worth 8.34 billion euros. The electrician therefore intends to receive compensation for the losses caused by the “tariff shield” imposed by the state. With the aim of containing the rise in regulated electricity prices to 4% in 2022, this system forced it to increase the annual share of electricity sold at a discount to its competitors by 20% to 120 TWh (compared to 100 TWh previously) according to the principle ” Regulated access to historic nuclear electricity” (ARINA). The latter requires the EDF to sell its energy at a very favorable price to its competitors, compared to current market prices, to enhance the diversity of offerings and allow consumers to benefit from attractive prices.
And the conflict intervened, as the state announced at the beginning of July the nationalization of the Syrian Democratic Forces by September. After acquiring the remaining 16% of the electricity capital – the state already owns 84% - this process raises many questions, starting with the role of the EDF and what the state wants to give it to, as shown Phuc-Vinh Nguyen is a researcher in European and French energy policies at the Energy Center at the Jacques Delors Institute in La Tribune.
Why the customs shield at the heart of the EDF’s grievances against the state?
EDF is in a difficult position for two reasons. On the other hand, due to the weak production of its nuclear fleet which will lead to a large deficit. In fact, France usually exports electricity in the summer. However, this year we will have to import it. The weakness of the nuclear fleet will appear this winter as well. There is also this question ” Tariff Shield » Partially funded by EDF under Arenh.
This appeal by the EDF, which finds itself implicated, can also be seen as a way to challenge this action. Indeed, the fact that it funds a price shield may raise questions, as the EDF is not necessarily intended to protect the consumer from a possible increase in the price of energy. Instead, it is up to the government to introduce measures to support consumers. The system currently in place has been put in place in the event of an emergency, allowing the executive branch to respond quickly. But it shouldn’t be intended to be permanent.
Especially since if the Arenh was negotiated at the European level, the state accepted its foundation in France in exchange for other concessions on the matter. There is a dissonance that needs to be clarified about the picture and the role that the EDF should play and what the government intends to play. Perhaps the nationalization of the EDF can clarify this situation.
What will EDF nationalization change?
The state already owns 84% of the capital of the EDF, so the fact of increasing its capital to 100% will not change much. It is, in a way, the first stage of the missile that will allow a large-scale overhaul of the EDF. Although the government justifies this nationalization as essential to its new energy policy, it is above all a clarification of the EDF’s role in this new policy. So this has more symbolic significance, just for the signal that is being sent to public opinion. When you want to take over a country’s energy policy, it’s best, in terms of publicity, to have 100% EDF.
What are the challenges posed by this nationalization?
Although it has already been announced that the government will launch a €9.7 billion public offer takeover (OPA) by the beginning of September, we still know little about the timeline for the acquisition and there are many questions that need to be answered in no time. This is especially the case for the Arenh Mechanism, which expires at the end of 2025. It is therefore necessary to agree on this subject with the European Commission and to have an agreement, at least broadly, before the next European elections that will take place in 2024 because the main players in this The file is not only Emmanuel Macron and Economy Minister Bruno Le Maire, but also European Commissioner for Competition Margrethe Vestager. However, it is not certain that she will remain in this position after the election.
Another topic likely to raise tensions: the topic of Hercules reform (This project plans to split the EDF into three entities: a public company for nuclear power plants, a publicly listed company for electricity distribution and renewable energies, and a third dedicated to hydroelectric dams, Editor’s Note). When it was discussed in 2019, the topic raised strong tensions among unions who feared that deconstruction would involve some form of privatization. However, the question of Project Hercules could return to the table. So the country will have to clarify which direction it wants to go.
Finally, it will be necessary above all to provide guarantees of the technical feasibility of the energy policy desired by the state through the nationalization of the EDF and this is still largely unknown. The state will get its hands on the wallet, but will the EDF be able to deliver EPR orders? Does the group have the necessary manpower and experience? What is not clear at the moment. Answers are also expected regarding the succession of its CEO, Jean-Bernard Levy. The challenges ahead for EDF are great and we need to find someone who is knowledgeable about energy issues. Finding the perfect candidate is not an easy task, especially in such a short time, as all these questions require quick answers.