PARIS – France said on Wednesday it would renationalize its state-backed electricity giant to help ensure the country’s energy sovereignty as Europe faces a worsening energy crisis stemming from Russia’s war in Ukraine.
The move would give the government more control to solve a whirlwind of problems that has plagued France’s nuclear power program, the largest in Europe, at a time when President Emmanuel Macron has vowed to ease the pain of the rising cost of living. by protecting consumers against rising energy prices.
Élisabeth Borne, France’s prime minister, told lawmakers on Wednesday before her first major address to Parliament that the shift was necessary to ensure France’s energy independence while achieving an important goal of fighting 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 Borne said it could no longer rely on Russian oil and gas either.
The government must ensure its energy sovereignty by keeping 100 percent of the capital in the company, Électricité de France, or EDF, she said, up from 84 percent currently. The company is France’s main electricity producer and operates all of its nuclear power plants.
Economic interventionism by government is a strong tradition in France, even if it has largely moved away from the sweeping nationalizations of the 1980s under François Mitterrand, the then socialist president.
Still, the move was symbolic for President Emmanuel Macron. A former investment banker, he was elected in 2017 to an openly pro-business platform that promised to reduce regulation and cut government spending. But it wasn’t long before he followed in the footsteps of his predecessors.
In 2017, his government nationalized France’s largest shipyard, STX France, to prevent an Italian competitor from taking over. More recently, the Covid-19 pandemic and the conflict between Russia and Ukraine have accelerated his pivot from free-market reformer to advocate of state intervention.
Mr Macron is now urging the government to champion economic and energy sovereignty in order to strengthen France’s independence and achieve climate goals, including by regaining control of key national industries.
France is less dependent than European neighbors such as Germany on Russian gas and oil. But to maintain that relative independence, upgrading the country’s aging nuclear reactors has become critical to the government, as the war in Ukraine has soared energy prices, fueled inflation and made the cost of living one of the most important. has caused the greatest concern of the French.
Europe’s shift from fossil fuels
The European Union has started a transition to greener forms of energy. But financial and geopolitical considerations can complicate the effort.
In February, Macron announced a €51.7 billion blueprint for the overhaul of France’s nuclear program, including plans for EDF to build the first of up to 14 next-generation giant pressurized water reactors by 2035.
Elie Cohen, an economist who has studied the nuclear sector, said that “nationalization is the only solution” because “the government has opted for an energy mix focused on nuclear energy, and because EDF is now forced to build more reactors when they are not.” the case is.” have the resources to do so.”
The government had already hinted that it is considering renationalisation. During his re-election campaign, Macron had said at a press conference that he wanted to implement long-term energy plans that would involve “regaining capital control over several industrial players”.
EDF is one of France’s leading industrial giants. Last year, the company employed more than 165,000 people and had sales of approximately $85 billion, or about $86 billion.
But most of France’s nuclear infrastructure was built in the 1980s and has suffered from a lack of investment that has peaked in recent months with a mix of unexpected maintenance issues affecting about half of the country’s nuclear reactors. shut down — most in Europe — and sent France’s nuclear production tumbling to its lowest level in nearly 30 years.
The issues include a two-year backlog in required maintenance for dozens of aging reactors that was postponed during the coronavirus lockdowns; safety issues such as corrosion and failed weld seals on systems used to cool the radioactive core of a reactor; and rising spring and summer temperatures that have made it more difficult to cool reactors.
Mr Cohen, who works at the CNRS, France’s national research organisation, said EDF has faced increasing industrial, financial and economic challenges since its partial privatization in 2005.
In accordance with French and European competition rules, the company is forced to sell power to smaller, third-party sellers at a price below its actual production costs and market prices.
The plan was intended to provide fair access to nuclear energy and to deliver on a political promise to protect French households from rising energy prices, but it has proved to be a punishment for EDF.
As late as January, the government ordered EDF to sell more nuclear energy to competitors in order to curb the rise in electricity prices in France, a measure that, according to Bruno Le Maire, the finance minister, would cost up to 8.4 billion euros, or about 8 billion euros. .5 billion dollars.
The government has also occasionally ordered EDF to cut its prices to keep market prices down, effectively putting pressure on the company’s margins, even though it already has 43 billion euros, about $45 billion, in debt. .
“EDF could not act like a normal company, looking for investment and normal profitability,” said Mr. Cohen.
Yves Marignac, nuclear energy specialist at négaWatt, a research group in Paris, said the company “is 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 nuclear reactors, in line with France’s goal of reducing CO2 emissions and reducing its dependence on foreign energy. Reduce.
“The renationalization simply reflects the fact that EDF is not in a position to invest in the maintenance of existing reactors and in the creation of new reactors on the scale of the projects announced by the President,” said Mr Marignac.
“It means the end of the illusion that nuclear power can be absorbed into the private economy,” he added.
France created EDF in 1946, after World War II, by nationalizing and merging more than 1,400 smaller electricity generators. It remained state-owned until 2005, when the company was partially privatized.
While Ms Borne did not specify whether the government would go ahead with a nationalization bill or buy out minority shareholders, who currently hold a 14 percent stake in EDF, her speech suggested the latter. EDF employees have the remaining one percent stake.
“This development will enable EDF to strengthen its capacity to implement ambitious projects essential for our energy future as quickly as possible,” said Ms Borne.
The French announcement came the same day European Union lawmakers voted to label some gas and nuclear power projects as “green”, giving them access to cheap loans and even state subsidies — a change France had lobbied for amid Europe’s growing pressure to get rid of Russia’s oil and gas.
Eurozone inflation recently soared to a record 8.6 percent as the fallout from the war in Ukraine and the economic conflict it has sparked between Russia and Western Europe continued to push energy prices up – although France’s inflation rate of 6, 5 percent relatively lower than that of other European countries.
Macron’s newly appointed cabinet is expected to introduce a bill on Thursday that aims to help the French keep up with inflation by increasing various social benefits, limiting rising rents and creating subsidies for poorer households to buy essential food items.
Liz alderman contributed reporting from Georgia..