France said on Wednesday it would renationalize the state-backed electricity giant to help ensure energy sovereignty in the country as Europe faces a deepening energy crisis from Russia’s war in Ukraine.
The move would give the government more control to fix the vortex of problems that have plagued France’s nuclear power programme, the largest in Europe, while President Emmanuel Macron pledged to ease the pain of rising costs of living by protecting consumers from surges. energy prices.
Elizabeth Bourne, France’s prime minister, told lawmakers on Wednesday in her first major address to Parliament that this shift is necessary to ensure France’s energy independence while achieving a key goal in the fight against climate change.
“The energy transition requires nuclear power,” she said.
Although France gets about 70 percent of its electricity from nuclear power, a larger share than any other country in the world, Ms Bourne said it could no longer rely on Russian oil and gas.
She said the government must ensure its sovereignty in the energy field by owning 100 percent of the share capital of the company, EDF, or EDF, up from 84 percent currently. The company is the main producer of electricity in France and operates all of its nuclear plants.
Economic intervention by the government is a strong tradition in France, although it mostly moved away from the sweeping nationalizations of the 1980s under François Mitterrand, the socialist president at the time.
However, the move was symbolic for President Emmanuel Macron. A former investment banker, he was elected in 2017 on an advertised pro-business platform that promised to cut regulations and cut government spending. But it did not take long for him to follow in the footsteps of his predecessors.
In 2017, his government nationalized France’s largest shipyard, STX France, to prevent an Italian competitor from taking it. More recently, the COVID-19 pandemic and the conflict between Russia and Ukraine have accelerated his transformation from a free-market reformer to an advocate of state intervention.
Mr Macron now insists that the government must defend economic and energy sovereignty to advance France’s independence and achieve climate goals, including by regaining control of key national industries.
France is less dependent than its European neighbors such as Germany on Russian gas and oil. But to maintain this relative independence, modernizing the country’s old nuclear reactors has become crucial for the government as the war in Ukraine has driven up energy prices, driving up inflation and making the cost of living one of the French people’s biggest concerns.
Europe’s shift away from fossil fuels
The European Union is beginning to transition to greener forms of energy. But financial and geopolitical considerations could complicate efforts.
In February, Mr Macron announced a €51.7 billion plan to overhaul France’s nuclear programme, which included plans by EDF to build the first of up to 14 massive next-generation pressurized water reactors by 2035.
Eli Cohen, an economist with Lesson The nuclear sector said that “the only solution is nationalization” because “the government has chosen an energy mix centered around nuclear power, and because EDF is now forced to build more reactors while it doesn’t have the resources to do so.”
The government had already indicated that it was considering resettlement. During his re-election campaign, Macron said at a press conference that he wanted to implement long-term energy plans that would entail “restoring capital control to many industrial players”.
EDF is one of the leading industry giants in France. Last year, the company employed more than 165,000 people and generated revenue of about 85 billion euros, or about $86 billion.
But most of France’s nuclear infrastructure was built in the 1980s and has suffered from underinvestment that has peaked in recent months with a combination of unexpected maintenance problems shutting down about half of the country’s atomic reactors – the most in Europe. And it brought France’s nuclear production down to its lowest level in nearly 30 years.
Problems included a two-year backlog of required maintenance for dozens of old reactors that were put on hold during coronavirus shutdowns; safety issues such as corrosion and defective solder seals on systems used to cool the radiant reactor core; The high temperatures in the spring and summer made it difficult to cool the reactors.
Mr. Cohen, who works for CNRS, France’s national research organisation, said that since its partial privatization in 2005, EDF has faced increasing industrial, financial and economic challenges.
In keeping with the rules of French and European competition, the company was forced to sell energy to smaller external vendors at a price below actual production costs and market prices.
The plan was intended to grant equitable access to nuclear energy and fulfill a political pledge to protect French families from rising energy prices, but it proved to be punishing for EDF.
As recently as January, the government ordered the EDF to sell more nuclear power to competitors in order to curb an increase in electricity prices in France, a measure that Bruno Le Maire, the finance minister, said would cost up to 8.4 billion euros, or about $8.5 billion. .
The government has also occasionally ordered EDF to restrict its prices to keep market prices low, which is actually putting pressure on the company’s margins, even with its 43 billion euros in debt, about $45 billion.
“EDF cannot behave like a normal company, seeking normal investments and profitability,” Cohen said.
Yves Marignac, a nuclear energy specialist at the négaWatt research group in Paris, said the company was “no longer competitive under market conditions and no longer has financial resources”.
This bleak economic situation has made it impossible for EDF to respond to Mr Macron’s ambitious plans for a wave of new generation atomic reactors, in line with France’s goal of cutting carbon emissions and reducing its dependence on foreign energy.
“The renationalization simply reflects the fact that EDF is not in a position to invest in the maintenance of existing reactors and the construction of new reactors on the scale of the projects announced by the president,” said Mr. Marignac.
“It signals the end of the illusion that nuclear energy can be integrated into the private economy,” he added.
France created the EDF in 1946, after World War II, by nationalizing and merging more than 1,400 smaller electricity producers. It remained state-owned until 2005, when the company was partially privatized.
Although Ms Bourne did not specify whether the government would go ahead with the nationalization bill or buy out minority shareholders, who currently hold a 14% stake in EDF, her letter suggested the latter option. EDF employees own the remaining 1% stake.
“This development will enable EDF to enhance its ability to implement ambitious projects essential to our energy future as quickly as possible,” said Ms. Bourne.
The French announcement came on the same day that EU lawmakers voted to designate some gas and nuclear power projects as “green”, giving them access to cheap loans and even government subsidies – a change France has lobbied for amid Europe’s growing push to wean itself off. Russian oil and gas.
Eurozone inflation recently soared to a record 8.6 per cent, as fallout from the war in Ukraine and the economic conflict it has ignited between Russia and Western Europe continue to drive up energy prices – although France’s inflation rate, at 6.5 per cent, is comparatively lower. from other European countries.
Mr Macron’s newly appointed government is expected to introduce a bill on Thursday aimed at helping the French keep pace with inflation by increasing welfare benefits, limiting rent rises and creating subsidies for poor families to buy basic food products.
Liz Alderman Contributed to reporting from Georgia..