Why the price of electricity depends on the price of gas, and other questions about future bills

Why the value of electrical energy is dependent upon the value of gasoline, and different questions on future payments

The wholesale value of electrical energy in France reached 1,000 euros per megawatt-hour (MWh) on the finish of August. Confronted with this outbreak devastating to family incomes and nationwide economies, European vitality ministers urgently gathered on Friday 9 September in Brussels to seek out options.

Why do wholesale costs go up a lot?

The buildup of things led to the explosion of electrical energy costs, which affected Europe as a complete, and never with out France.

  • Financial and industrial restoration. Demand, linked to the tip of the financial disaster on account of Covid-19, has led to increased costs because the finish of 2021.
  • The warfare in Ukraine. A lot of Europe’s electrical energy is produced from pure gasoline, which ends up in the value coupling between gasoline and electrical energy. Nevertheless, the value of the primary rose with the European ban on Russian gasoline, after which firstly of September (+ 30%) with the extension, for an indefinite interval, of the closure of the Nord Stream 1 gasoline pipeline.
  • In France, the case of the nuclear fleet. Between meteorological situations — droughts have affected the rivers used to chill reactors — and getting old infrastructure requiring upkeep, a lot of the nuclear fleet has been shut down. Thus, in 1Verse In September, solely 24 of the fifty-six nuclear reactors of EDF have been working. Nevertheless, France, which is often self-sufficient and even an exporter, can be obligated to produce itself within the European electrical energy market, which contributes to the strain on costs.
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Why are electrical energy costs so risky?

Because the Nineties, the European Union has progressively opened up nationwide electrical energy markets to competitors as a way to harmonize and liberalize the European market, and to raised join it. The European electrical energy transmission community now ensures safety of provide and change between thirty-five international locations.

This market is predicated on the European inventory change, Epex Spot SE, on which MWh is traded, with costs that fluctuate by nation relying on provide and demand. It constitutes a speculative place that brings collectively producers, suppliers and merchants who purchase and promote electrical energy (nuclear, renewable or fossil vitality) for fast or deferred supply.

Nevertheless, on this wholesale market, the value is about not in line with the typical price of electrical energy manufacturing in Europe, however primarily based on the “marginal” manufacturing price of the final megawatt-hour pumped into the grid. If demand is low, nuclear or renewable amenities are enough, however when demand is excessive, thermal energy crops are used, then the price of electrical energy is listed to the value of gasoline (or coal). Added to this can be a tax on carbon dioxide emissions2inside the European carbon market.

Learn column: This text is reserved for our subscribers Electrical energy: “It’s crucial that we break away from extremely risky and uncontrollable wholesale costs.”

Can the EU act on costs?

sure. On Wednesday, European Fee President Ursula von der Leyen outlined methods to scale back the vitality invoice:

  • fixing the value of Russian gasoline imported by the European Union, which might restrict the excessive volatility of the megawatt-hour value within the wholesale markets, which is linked to the value of gasoline;
  • capping the megawatt-hour produced at €200, excluding gas-fired energy crops, as a way to eradicate the electrical energy promoting value index from the value of pure gasoline;
  • Creation of a solidarity contribution to fossil gas firms that generate income;
  • Redistribution ‘Sudden advantages’ Electrical energy producers, who mobilize nuclear energy crops, wind energy, solar energy or hydroelectric dams and “Reaching big revenues that don’t mirror manufacturing prices”To assist households and companies “susceptible” ;
  • Enable member states to make use of these windfall monetary income to assist customers, but in addition to put money into clear vitality sources;
  • Lastly, the physique goals “Sensible Demand”with Necessary aim to scale back electrical energy consumption throughout peak hours.
Learn the editorial: The Power Disaster: Rebuilding the European Electrical energy Market

Do the French pay for electrical energy on the European value?

Not fully, regardless of the very apparent improve. ” Solely part of the kilowatt-hour is purchased “on the excessive value” within the wholesale market, Explains AFP Patrice Gauvron, professor of economics at Paris Dauphine-PSL College and director of the Middle for Geopolitics of Power and Uncooked Supplies.. the remaining ” It corresponds to nuclear manufacturing, and its price is way decrease than the extent of wholesale costs “. Nevertheless, costs shall be contained additional if the nuclear fleet is ready to function at full capability.

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Furthermore, French customers’ payments are usually not immediately linked to wholesale market costs, however to state-regulated customs duties. However it’s preventive. In September 2021, the Jean-Castex authorities carried out a “customs defend” that limits the downstream value hike to 4%.

Learn additionally: This text is reserved for our subscribers Tariff defend reduce in half Affect of upper vitality costs in France

It goes via a double mechanism:

  • Tax discount. The native tax on ultimate consumption of electrical energy (TICFE) has been decreased from €22.50 per MWh to 50 cents in 1Verse February as a way to scale back the rise within the regulated tariff.
  • Reorientation of nuclear vitality. The nation pressured the EDF to extend the quantity of its nuclear manufacturing by 20%, i.e. from 100 to 120 TWh in 2022, to its opponents at low costs via regulated entry to historic nuclear electrical energy. Towards this, the invoice value for this reserved electrical energy elevated from 42 to 46.20 euros per megawatt-hour.

As compared, UK regulated costs are anticipated to rise sharply, by 80% over 1Verse October.

In France, the disaster may fade extra rapidly, however relying on unsure components. Our gasoline inventory is superb. If we are able to restart nuclear energy, if climate situations are adequate for wind energy, and if the nation maintains the tariff defend, that ought to restrict the harm, but it surely’s arduous to foretell,” he mentioned. Karen Seppi, an economist at Grenoble Faculty of Administration, delays.

Will the tariff defend be renewed in 2023?

Sure, however not essentially similar. In the beginning of the college 12 months, the Minister Delegate for Public Accounts, Gabriel Attal, introduced its renewal on 1Verse February. The precise outlines shall be mentioned on the time of the 2023 funding invoice beginning on the finish of September. “There shall be a rise in vitality costs in early 2023, however will probably be contained and affordable in comparison with this worst-case situation,” Guarantees of the Minister of Economic system, Bruno Le Maire, in reverberation.

At stake is the query of price for the state. The electrical energy value cap measures the associated fee, in line with Percy, of €10.6 billion to the state for 2022 — and in complete, with the value of gasoline frozen and the low cost on the pump on gas, €24 billion, or 1% of GDP. . Would it not be attainable for public funds to postpone such a tool equally?

One other problem: guaranteeing social justice. Based on a current evaluation by INSEE, the tariff defend has failed to scale back the gaps between social teams. General, it has made it attainable to halve the rise in vitality costs, however the extra modest households are essentially the most affected by the consequences of the value hike. in ParisianPrime Minister Elizabeth Borne promised Particular provisions to assist essentially the most susceptible. »

As a shopper, how will you scale back your vitality invoice?

For people who wish to scale back the influence of value will increase, there are completely different options, at completely different scales, time scales and prices.

Make the precise gestures. Excessive electrical energy costs notably have an effect on households who use it as a way of heating, and winter temperatures chime in with dangerous payments. “The one resolution is to alter the behaviour, for instance going from 22°C to twenty°C, realizing that the advice is nineteen°C”Karen Sippy, an economist at Grenoble Faculty of Administration (GEM) who specializes within the vitality sector, explains. Decreasing the thermostat by 1°C saves 7% in your heating invoice. Lastly, it’s attainable to make useful financial savings by solely activating the water heater at decreased intervals, and by lowering the usage of some energy-intensive gear, reminiscent of garments dryers.

Put together your self properly. Main family home equipment (fridges, washing machines, dryers, and so forth.) devour most of their vitality throughout use, therefore the curiosity in changing previous fashions with newer ones. “We should select essentially the most economical, even when we don’t all the time save as a lot cash as CO22 »Sophie Attali, Vice President, Topten Environmental Procurement Information. Different good choices: Ban halogen lamps and aquariums, choose fridges with no freezer or select a small water heater.

make investments. Doorways, home windows, partitions… “You need to insulate first. It’s nonsense to attempt to warmth rooms that don’t retain warmth.”Sophie Attali remembers. There are lots of monetary aids for thermal regeneration. One other resolution: select a extra environment friendly heating system, reminiscent of a warmth pump, which is inexpensive to make use of and subsequently economical in the long term.

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