Nuclear, a French bankruptcy: EDF and the ball and chain of opening up to competition

Nuclear a French bankruptcy EDF and the ball and chain

It took a war at the gates of Europe for the question of France’s sovereignty and energy independence to once again become a priority subject. So that France finally stops being ashamed of its nuclear model and announces a little over a year ago the relaunch of its program with the construction of at least six new EPR reactors. It was about time, because the French atom sector has been wrung out of decades of renunciations, reversals, political cowardice and shaky compromises. How did we come to this? Internal industrial wars like the one that for years opposed two French giants, EDF and Areva, partly explain this rout. But also political, geopolitical, ideological and technological battles that supporters of the atom have often lost. L’Express tells the story in five episodes of a French bankruptcy.

EPISODE 1 >> Nuclear, a French bankruptcy: the cessation of the Astrid project, “a historic error”

EPISODE 2 >> Nuclear, a French bankruptcy: how the United States won the “Polish file”

On June 8, a few champagne corks will perhaps pop discreetly in the austere offices of EDF’s headquarters, avenue de Wagram, not far from the place de l’Etoile, in Paris. On that day, the state will officially control 100% of the French energy giant. A renationalization that leaves a bitter taste to all those who sing the praises of the king market. This takeover “will allow us to carry out the construction program for six new EPRs in the best possible conditions” And “strengthens the country’s energy independence”, Bruno Le Maire has been bragging for weeks. Another time, another chorus. On November 18, 2005, the French State then celebrated the IPO of EDF. “The greatest success of popular shareholding ever obtained in France”, welcomed Bercy. Except that the sequel didn’t really go as planned.

Between a voracious and visionless State shareholder, an EDF management succumbing to delusions of grandeur and enemies in ambush to torpedo the French atom sector, these last seventeen years have taken on the appearance of financial routs for the energy company: abysmal losses (17.9 billion euros in 2022, a record) and an astronomical debt of nearly 64 billion euros.

At the heart of this debacle, a barbaric acronym: Arenh (regulated access to historical nuclear electricity). This device, invented in 2010 by the French State, obliges EDF to sell to its competitors almost a third of its nuclear electricity production at a fixed price – 42 euros per megawatt hour – a fiercely negotiated tariff intended to cover the costs of production of the energy company. A Meccano imposed by the European Commission to promote the opening to competition of the electricity market in France.

“From the start, we knew that this sale price was insufficient to finance the extension of the life of the nuclear fleet and the construction of new power plants”, regrets, bitter, a former pundit of the financial management of the energy company. “More serious, the alternative suppliers have never built new production capacities, confining themselves to playing traders on the wholesale markets”, adds Jean-Jacques Nieuviaert, the president of the Society for Energy Studies and Prospects. The situation turned into a nightmare with the war in Ukraine, the State forcing EDF to sell even more electricity at knockdown prices, to avoid a surge in bills with soaring prices on the wholesale markets.

The planned death of the Arenh

While the thorny issue of overhauling the European electricity market is on the Brussels agenda, the disappearance of the Arenh system is scheduled for the end of 2024. Behind the scenes, the game has already begun to design the new mechanism . And everyone plays their part.

The European Commission scrupulously ensures that competition in the French electricity market survives. No question of recreating the good old monopoly of EDF. The energy company insists that the new system will allow it to reconstitute its margins, which are vital for investing in future EPRs. The State, for its part, is running its calculators so that the French consumer’s bill does not ignite, while the production costs of the nuclear fleet are today much higher than the 42 euros per MWh engraved in marble in 2010. Finally, large energy-intensive companies that also benefited from Arenh tariffs are already beginning to wave the red flag of the loss of competitiveness in the event of a tariff increase. An idea is beginning to emerge: set up very long-term contracts between EDF and alternative suppliers – or large consumer companies – in order to encourage them to take part in the financing of the new nuclear fleet.

Still, the hell is in the details. What will be the arrival price supposed to cover EDF’s new nuclear production costs? What volumes can be secured by these long-term contracts? The battle has only just begun, but it is crucial for the future of EDF… and the tricolor atom.

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