Germany is alarmed: France is planning industrial-scale electricity.

IIn the German debate on industrial electricity prices, the focus is primarily on global competitiveness. Unions emphasize the challenge for Germany to keep up when its energy costs are six to seven times higher than in China and four times higher than in the USA.

EU diplomats warn that the greater danger could come from a neighboring country. France already supplies its industry with cheap nuclear power today. However, in the coming years, there is expected to be even more without the European Commission being able to impose burdensome state aid requirements.

Die Pläne von Wirtschaftsminister Robert Habeck (Grüne) für einen Industriestrompreis von 6 Cent je Kilowattstunde sind auch als Antwort darauf zu sehen. Berlin versucht aber auch sonst mit allen Mitteln zu verhindern, dass Paris seinen Wettbewerbsvorteil zementiert und ausbaut. In den kommenden Wochen dürfte es zum Showdown kommen.

The background is a proposal by the Commission that receives very little public attention in Germany: the reform of the EU electricity market. Since prices are no longer skyrocketing from record to record as they did in the summer of 2022, the design and functioning of the electricity market have become an expert topic again. This revolves around the central question of the energy transition: How can the EU promote the expansion of low-carbon energy sources while also including consumers and industry?

Das perfekte Vehikel

In France, there is a mechanism called ARENH that ensures that industries can purchase electricity at an extremely low fixed price of 4.2 cents per kilowatt-hour. Up to 100 terawatt-hours from the nuclear power plant fleet are available for this purpose annually, which is slightly more than one-fifth of the country’s total electricity consumption. Industrial companies must apply for this subsidy every year. Recently, the demand exceeded the supply significantly, so the companies had to procure additional quantities of electricity at higher prices from the wholesale market to meet their remaining needs.

Ende 2025 aber läuft der französische Fördermechanismus aus, und dass die Kommission einer Verlängerung zustimmen würde, gilt in Brüssel als unwahrscheinlich. Genau deshalb versucht Paris nun, die Reform des Strommarkts zu nutzen, um die Subventionen auf anderem Wege zu sichern und auszubauen.

The electricity market reform provides the French government with the perfect means to do so. It aims to transition the state support for wind and solar power, as well as other low-carbon sources such as nuclear energy, entirely to an instrument with a complicated name: so-called two-sided difference contracts, abbreviated as CfDs. These contracts are intended to ensure reliable income for electricity generators while reducing the risk of significant price fluctuations.

The process works as follows: The government and electricity producers agree on a type of guaranteed price. During periods when the market price is lower than this guaranteed price, the government covers the difference and subsidizes the producers. Conversely, the producers must transfer their profits to the government during periods when the market price is higher.

Enorme Summen

Berlin is concerned that Paris plans to use this to finance almost its entire fleet of nuclear power plants. Contracts are being discussed with facilities that generate 300 terawatt-hours of electricity annually, which accounts for around 70 percent of French consumption. This is expected to lead to significant distortions in competition.

Diplomats say that the Chancellor’s Office is alarmed. There, they fear that Paris could agree on a guarantee price with the operator of the nuclear power plants, the recently fully nationalized EDF group, which is far below the usual market conditions. The price mentioned is 6 to 7 cents.

Das würde es dem französischen Staat erlauben, großzügig Geld abzuschöpfen. Genau das könnte er dann anschließend nutzen, um einen Strompreis für seine gesamte Industrie – sprich nicht nur für einen Teil wie in Deutschland – zu finanzieren, mit dem niemand in der EU ernsthaft mithalten kann.

In order to prevent the European Commission from imposing any state aid requirements, Paris originally wanted to stipulate in the law that the funds must be allocated to all electricity customers, including the industry. If this provision applied to all EU member states, the Commission would not have been able to veto or impose any conditions to prevent competition distortion.

Paris now relies on distributing the revenue to all electricity customers, both private consumers and industries, based on their respective share of total consumption, in order to bypass the Commission’s control over state aid. However, due to the significant sums that France is expected to have from the differential contracts with EDF, this would still be sufficient to disadvantage industries in other EU countries.

„Absolute rote Linie“

The Ministry of Energy of Agnès Pannier-Runacher does not confirm the figure of 300 terawatt-hours. However, they do consider CfD with facilities representing the share of nuclear power in the French electricity mix to be reasonable. This share has recently been 60 to 70 percent. It should be clear that the electricity price for industry should no longer be based on the expensive gas price, as is the case in the current market design. French consumers should pay the „true“ price for electricity, one that is close to the low production costs of the nuclear power plant fleet.

Wie hoch dieser „wahre“ Preis und folglich auch der künftige CfD-Garantiepreis sein könnte, darüber schweigt sich das Haus Pannier-Runachers aus. Die Gespräche liefen. Die französische Energieregulierungsbehörde CRE hatte vor drei Jahren für die bestehenden Reaktoren durchschnittliche Produktionskosten von 4,8 Cent je Kilowattstunde ermittelt und arbeitet aktuell an einem neuen Bericht, der Betreiberkonzern EDF setzte die Durchschnittskosten damals mit 5,3 Cent etwas höher an.

In Paris, there is little willingness to compromise rhetorically. „For France, after investing billions in nuclear energy, it is non-negotiable that our industry pays a price close to the production cost,“ government sources say. In June, Finance and Economy Minister Bruno Le Maire referred to it as an „absolute red line“ to give up the competitive advantages associated with nuclear energy.

The other side also draws red lines in the Council of Ministers. According to EU diplomats, France is supported by Romania, Bulgaria, Slovakia, and the Czech Republic in being able to conclude CfD with existing nuclear power plants. However, Germany, Austria, Italy, the Benelux countries, and Denmark are opposed to this.

The anticipated advantage would be lost.

Berlin ist nur bereit, CfD-Verträge bei neuen Investitionen in bestehende Kernkraftwerke zu akzeptieren. Dass Frankreich darüber hinaus einen ­regelrechten „Schattenatomstrommarkt“ zur Finanzierung seiner Industrie aufbaue, könne Deutschland nicht akzeptieren, heißt es in Brüssel.

The European Parliament shares a similar view. While the Council of Ministers is still debating, it decided on Thursday that only new investments in nuclear power can be supported through CfD. According to the Parliament’s wishes, the revenues from CfD should primarily be used by states to support financially weak households. Otherwise, it should be flexible and flow into both infrastructure and industry.

Berlin is satisfied with that. As long as at least a portion of the revenue can flow into the industrial stream, it is willing to agree. Berlin can also live with the fact that the Commission will examine it from a perspective of subsidy law.

However, for Paris, it would be a significant defeat. It would only be able to provide a fraction of the desired 300 terawatt hours under differential contracts. Consequently, the revenues and industry support would also be significantly reduced. The anticipated competitive advantage would be lost.