Électricité de France - A Discussion of European Energy Security and the Future of Nuclear Power
July 7, 2022 Yefren Nye
For our first blog post of this new series, we will explore recent developments which have important ramifications for the future of France. As both the second largest economy in the EU, and the second largest producer of nuclear power in the world, the direction of the French electricity sector will have influence on the future of nuclear power beyond its own borders.
French Prime Minister Elizabeth Borne confirmed last week that the French government will renationalize EdF (Électricité de France), after its nearly two-decade experiment in partial private ownership which began in 2005. The company is already 84% owned by the French state, but this decision will see the remaining 16% of shares bought out, with a total budget for the operation standing at 12.7 billion.
This nationalization is an important moment for a number of reasons, but three main ones stand out; namely that it is a step in the direction of French energy independence, a move to support the future of nuclear power in Europe, and a sign of change towards more active state intervention in the energy market.
The move is not unexpected and has been in the works for some time. The company has been facing significant debts due to its commitment to build a series of 14 new nuclear reactors. France has long been the largest user of nuclear power as a proportion of its overall consumption, with 56 reactors generating 69% of the country’s electricity in an industry which employs 220,000 people, meaning that the question of French energy policy is intimately tied up with the question of the future of nuclear power in Europe.
In the European context, nuclear power has long been controversial, and a decade ago it seemed as though it might be on the way out, with historically low popularity ratings. However, with the recent and dramatic change in Europe’s security situation, the question of strategic autonomy looks to have altered the calculus back in favor of nuclear energy. Even before the outbreak of large scale hostilities in February 2022, the question of European Strategic Autonomy was the subject of intense debate, with France’s president Emmanuel Macron taking a leading role in advocating for Europe to look to its long term strategic independence, with another notable backer in Ursula Von Der Leyen, the president of the European Commission.
Against this background, and following a year of intense lobbying, the European Parliament recently voted to count both gas and nuclear power plants as ‘green investments’, meaning that investing institutions will be legally allowed to label their investments as ‘green’. Having passed the European Parliament, the law could still theoretically be blocked if 20 out of the 27 member countries vote to do so at the Council of the European Union, but this is unlikely to happen, meaning that it will almost certainly become law in 2023. The law has been criticized by several member countries like Austria and Luxembourg, as well as activist groups like Greenpeace, some of whom have stated they will mount legal challenges.
The long-term background for the tussle over the definition of green energy is that of net zero commitments made for 2050 which France voted into law in 2019. Although this target is at the national level, it is in line with the EU’s stated aim of carbon neutrality in the same year. The use of nuclear power to achieve this is not uncontroversial, with some arguing that it is not an effective route to decarbonization, but with the president’s very public backing and revived popular support, it seems that France is likely set on this course.
All the issues of both decarbonization and European strategic autonomy have come to a head with the war in Ukraine. With Russian crude oil and coal exports to Europe sanctioned and gas exports under threat, questions of energy security are now at the forefront of policymakers’ minds across the 27 countries of the Eurozone. Indeed there is a growing argument that renewable energy infrastructure is an important element not just of tackling climate change, but also securing Europe’s energy independence.
All that brings us back to France’s move last week. Renationalizing EDF has been justified as part of a strategy to create a more secure energy system. With nationalization, the government will be able to borrow at lower cost to fund the nuclear expansion and it will have complete control over pricing of current energy supplies. In the words of Bruno Le Maire, Minister of Economy and Finance “Nationalising EdF would give us all the chances to be more independent in the years to come in terms of energy”.
Energy costs have soared across the EU in the last year and in January EdF was forced by the government to sell electricity at a loss, which pushed it further into debt. This received criticism in some quarters, where it was seen as a bribe to the electorate ahead of France’s April presidential poll, but with Europe currently gripped by a cost-of-living crisis and much hand wringing about coming high energy bills in the winter, the crucial short-term test is soon to come.
Domestically the move may win political support. In elections in June, both left- and right-wing parties gained seats in the French legislature, and Macron’s centrist grouping lost its majority. What that means is that although the president will still be able to set the policy direction, bills will have to be negotiated with opposition parties in the legislature, with the move to nationalization likely to be popular with the left-wing parties, as well as some of those on the right who see the company as a symbol of French strategic independence.
It is impossible to know at this stage whether other European countries will follow suit, and the question remains as to what will be done with this opportunity, but it is a move which may well signal a turn away from the trend towards greater privatization of the European economy which has predominated for the past 40 years.