After a confrontation ten days ago, the government and EDF began an intense negotiation phase. On both sides, there is now a pause and time for discussions. “We talked, everyone wants things to converge,” summarizes a source close to the matter. The intervention of Emmanuel Macron, who declared that he wanted to “regain control of prices” of electricity, encouraged the public company and the Ministry of Energy Transition to reach an agreement.
The government has set the framework for its system. He wants to cap electricity prices to protect consumers and businesses. If they exceed this limit, the State “would recover these ‘excess profits’ obtained by EDF to pass them on to customer invoices,” explains a good expert on the subject.
Range between 70 euros/MWh and 100 euros/MWh
First, the government must set this maximum price. Without saying it officially, EDF wanted it to be high, 120 euros per megawatt hour (MWh) to allow financial flexibility, while current prices are around 130 euros/MWh.
In reality, EDF has already reduced its ambitions. Two weeks ago, the group marketed offers to supply electricity until 2027 with prices slightly below 100 euros/MWh.
The Government, for its part, reasons based on a minimum price although it would not be applied because the European Commission would reject it. The Energy Regulatory Commission (CRE) estimates the costs of the nuclear park at 60 euros/MWh.
Until 2030, EDF will invest 3 billion euros per year to start the construction of the first EPR in Penly. RTE has even published a first estimate of a cost of 85 euros/MWh for 2035.
Each camp is making an effort and the price range is reducing. “Between the regulator’s estimate and the EPR futures, it will be difficult to go below 70 euros/MWh, estimates Nicolas Goldberg, partner at Colombus Consulting. On the other hand, the futures prices are around 100 euros, so the range is wide. “.
Playing with nuclear electricity volumes
The government and EDF then discuss the amount of electricity that will be subject to this future maximum price. Today, the Ministry of Energy Transition has nuclear production of 280 terawatt hours (TWh) destined for individuals and SMEs that will benefit from this advantageous price.
EDF will sell the rest of its production at market price. Except that it will remain at low levels until 2030, around 360 TWh, so these remaining 80 TWh would only represent 22% of its production.
The executive could agree to reduce this regulated amount a little if EDF agreed to lower the price. “The goal of this system is to force EDF to produce more electricity,” explains a person familiar with the matter. “Each additional electron can be sold more expensive in the markets.”
The amount of electricity that would thus “come out” of the regulated prices could come from the consumption of large companies, the richest, which do not need to be subsidized. EDF could then sign more expensive long-term contracts with them. The group believes they are asking for it.
This is one more parameter that the public company and the government will have to decide in the coming weeks. The objective is to reach a first agreement in mid-October. The new regulation must be decided by the end of the year in order to be applied at the end of 2025.
Source: BFM TV
