five questions on the record surge in the wholesale price of electricity, to more than 1,000 euros per megawatt hour

five questions on the record surge in the wholesale price of electricity, to more than 1,000 euros per megawatt hour

A vertiginous rise. 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 dual effect of the rise in gas prices and the temporary shutdown of 32 of the 56 French nuclear reactors. EDF. If the increase is currently contained for households thanks to the tariff shield put in place by the State, the electricity bill of the French could still increase in 2023. Decryption.

1Why is the wholesale price of electricity currently exploding?

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

“First, there is the considerable rise 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 historic, analyzes Thomas Pellerin-Carlin, director of the Energy Center of the Jacques Delors Institute. Then there is an element very specific to France: a very low production of the nuclear fleet which forces us to import a lot of electricity from abroadwhere gas-fired power plants are operating”.

The wholesale price of electricity for delivery next year, which was still running at 750 euros per megawatt hour last week, rose sharply after EDF announced on Thursday August 25 the extension of the shutdown of four reactors. reactors affected by corrosion problems on their safety systems, including three reactors at the Cattenom power plant (Moselle). Result: 32 of EDF’s 56 French nuclear reactors are shut down, which has an impact on electricity production and obliges France to import electricity, part of which comes from foreign thermal power stations, which run on gas.

On the European market, it is the cost price of the last source of electricity mobilized to meet demand, often gas-fired power stations, which determines the price imposed on all operators on the continent. This price soared in concert with the surge in gas prices linked to the drastic drop in Russian gas deliveries to Europe. According 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 drying up of Russian gas flows to Europe.

2Is this increase temporary?

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

“Since the Russian invasion, there is a risk of a shortage [de gaz] huge, for at least five years. Unless there is a major geopolitical upheaval in Russia, we will be independent of Russian gas, but 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 cope with the drying up of Russian gas to Europe.

3Why is the household electricity bill not increasing?

In early 2022, faced with soaring electricity and gas prices, the government implemented an energy tariff shield in order to contain the rise in the regulated electricity price to 4% in 2022 and to freeze the regulated gas tariff, which must not exceed the October 2021 tariff.

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

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

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

The question depends on whether or not to maintain the tariff shield, which has already cost the State more than 20 billion euros. In The Parisian (paid item), Prime Minister Elisabeth Borne has promised that the executive will not “not let energy prices explode” for households, while the Minister of the Economy, Bruno Le Maire, assured that the increase in electricity and gas in 2023 would be “contained”.

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

5What are the government’s ways to contain this price increase?

“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 on the “little everyday gestures”, in order to save energy. Olivier Véran notably called for “unplug your wifi” before leaving for the weekend.

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

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

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