Energy crisis: five questions about the record rise in wholesale electricity prices, to more than 1,000 euros per megawatt hour

Energy crisis: five questions about the record rise in wholesale electricity prices, to more than 1,000 euros per megawatt hour

A vertiginous ascent. In the midst of the energy crisis, the wholesale price of electricity for 2023 in France broke a new record on Friday, August 26. It reached more than 1,000 euros per megawatt hour (MWh), compared to around 85 euros a year ago, under the double effect of rising gas prices and the temporary shutdown of 32 of the 56 French EDF nuclear reactors. If the increase for households is currently contained thanks to the tariff shield established by the State, the French electricity bill could still increase in 2023. Deciphered.

1Why is the wholesale price of electricity soaring today?

The thousand euro mark was crossed last Friday. Thus, in one year, the wholesale price of electricity has multiplied almost by 12. Two causes explain this rise in market prices, where electricity is negotiated and purchased by suppliers from producers before being marketed.

“In the first place, there is the considerable increase in the price of gas, on which we depend a lot to produce electricity, for a year and a half, with a price increase of 1,500%, which is historical, analyzes Thomas Pellerin-Carlin, director of the Center for Energy at the Jacques Delors Institute. Then there is a very specific element of France: a very low production of the nuclear park that forces us to import a lot of electricity from abroad, where the gas plants work.

The wholesale price of electricity for delivery next year, which last week was still around 750 euros per megawatt hour, increased considerably after EDF announced on Thursday, August 25, the extension of the closure of four reactors affected by corrosion problems in your security systems. , including three reactors at the Cattenom (Moselle) power plant. Result: 32 of EDF’s 56 French nuclear reactors are closed, which has an impact on electricity production and forces France to import electricity, part of which comes from foreign thermal power plants, which run on gas.

In the European market, it is the cost price of the last source of electricity mobilized to meet demand, often gas-fired power plants, that determines the price imposed on all operators on the continent. This price soared along with rising gas prices linked to the drastic drop in Russian gas deliveries to Europe. According to Thomas Pellerin-Carlin, “We were already talking about a gas shock in August 2021”in particular with the post-Covid-19 economic recovery, but the war in Ukraine accelerated this increase with the depletion of Russian gas flows to Europe.

twoIs this increase temporary?

According to the experts interviewed by franceinfo, the question lies less in the duration of this increase in electricity (and gas) prices than in its intensity. “All the indicators say it: the high prices will continue during the three or fournext years. But to what extent will they remain excessively high? asks Nicolas Goldberg, an energy expert at strategic consulting firm Colombus Consulting.

“Since the Russian invasion, there is a risk of shortages [de gaz] enormous, for at least five years. Unless there is major geopolitical turmoil in Russia, we will be independent of Russian gas, but we will be dependent on liquefied natural gas (LNG), which is more expensive.”, adds Thomas Pellerin-Carlin. The European Commission wants to reduce gas consumption by 15% in the EU to deal with the depletion of Russian gas to Europe.

3Why doesn’t the household electricity bill increase?

At the beginning of 2022, in the face of the dizzying rise in electricity and gas prices, the government implemented an energy tariff shield in order to contain the rise in the regulated price of electricity to 4% in 2022 and freeze the regulated tariff of the gas, which must not exceed the October 2021 tariff.

While wholesale electricity tariffs are skyrocketing, retail prices for consumers in France are currently regulated – for those who benefit from regulated tariffs – by the State, which has thus cushioned the increase in prices . “The State has lowered taxes on electricity and increased the amount of regulated nuclear energy, that is, EDF sells more regulated tariffs. A part [de ce bouclier] is provided by the State, the other by EDF”, summarizes Nicholas Goldberg. Electricity prices are thus regulated until February 2023.

“Without a tariff shield, prices for households would have increased. Just look at the increase in the UK.”, Justice Thomas Pellerin-Carlin. On the other side of the Canal, regulated energy prices will increase by 80% starting in October.

4Should we expect an increase in the electricity bill of French households?

The question is whether or not to maintain the tariff shield, which has already cost the State more than 20,000 million euros. Within Le Parisien (paid article), Prime Minister Elisabeth Borne has promised that the executive will not “don’t let energy prices explode” for households, while the Economy Minister, Bruno Le Maire, assured that the increase in electricity and gas in 2023 would be “contents”.

The government spokesman, Olivier Véran, recognized however that the government could not “do not freeze prices indefinitely”. “The electricity and gas bill will increase, it is inevitable. But when? And by how much? That is a political choice”argues Thomas Pellerin-Carlin.

5What are the ways of the government to contain this increase in prices?

“We will take specific measures to support the most vulnerable”announced Elisabeth Borne, while the tariff shield should normally end at the end of 2022. The government now regularly calls the “small everyday gestures”, to save energy. Olivier Véran specifically requested “disconnect your wifi” before leaving for the weekend.

“Faced with the risk of scarcity, there is only one way: reducing energy consumption”, the prime minister hammered again at the opening of the Medef French Entrepreneurs Meeting on Monday, encouraging companies to establish their own sobriety plan. the Delegate Minister for Industry, Roland Lescure, The possibility of establishing an over-the-counter energy market between companies is also being considered, which could resell to each other what they have not consumed, following the model of CO2 emission rights in Europe.

Le Ministry of Energy Transition finally proposes relaunching the Tempo offer, encouraging individuals and small businesses to moderate their electricity consumption during peak demand linked to cold, in exchange for advantageous rates the rest of the year.

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