The measure limiting the rise in the price of electricity will not end until the beginning of 2025, Bruno Le Maire announced on Friday. On the other hand, the device for the gas must stop during the course of the year.
Has France emerged from the energy crisis that seemed to threaten it at the end of last year? Difficult to get a simple idea by analyzing the announcements of Bruno Le Maire on LCI, Friday, April 21. On the one hand, the Minister of the Economy announced the extension of the tariff shield put in place to limit the rise in electricity bills. Supposed to last until the end of 2023, the device will eventually end “by early 2025”. On the other hand, the same measure on gas prices will disappear “from this year”, as expected. How to explain this difference?
While the two tariff shields had been extended until June 30, “there is no longer any reason to freeze gas prices”justified Bruno Le Maire on LCI, because “prices have returned to the pre-crisis situation”. However, the Minister has not formalized a specific date for the end of the measure.
For gas prices, a stabilized situation
The tariff shield on gas was decided at the end of 2021 to stem a rise in prices linked in particular to the post-lockdown economic recovery, then extended in 2022 after the Russian offensive in Ukraine and its consequences on the price of gas. Regulated tariffs were first frozen at their level from November 1, 2021 until the end of 2022. Their increase was then limited to 15% from January 1, 2023.
Since the peak of concern in the summer of 2022, prices have started to fall again, as the Minister of the Economy says. The reference price for natural gas in Europe was on Friday around 40 euros per MWh, i.e. the level for the summer of 2021. The increase which had preceded the price freeze has not, however, been erased: the gas price remains “twice as high as its pre-2020 level, and it is not certain that we will ever return to it”warns Nicolas Goldberg, energy market specialist for Colombus Consulting.
More than a year after the start of the Russian offensive in Ukraine, Europe has notably diversified its sources. “There are fewer uncertainties about the supply”, explains the analyst. Gas consumption has also fallen, due to its price, mild winter temperatures, but also a real effort of sobriety on the part of companies and households, he explains.
A “limited” effect on invoices
Europe is emerging from winter with gas reserves that are still full, although France is in a less favorable situation due to strikes in the LNG terminals. For Nicholas Goldberg, “there will be no race to fill gas stocks” for next winter, at least not in the same proportions as in 2022, when competition between European countries fearing shortages had caused prices to soar.
In these conditions, “the price of gas today would be more or less the same with or without the shield”, analyzes Nicolas Goldberg. The end of the scheme will therefore have an effect “limit” on the invoices of individuals and condominiums.
It will coincide, however, with the end of regulated gas prices, which will force the two million households still benefiting from these contracts to choose new ones. The fares they can get will depend on how prices move by the end of June. If the decline continues, these consumers may be winners. This is also another reason to give up the shield: since it is applied by freezing regulated tariffs, the disappearance of the latter renders the mechanism obsolete. “Deleting both at the same time seems consistent”confirms Nicolas Goldberg.
For electricity, persistent problems related to nuclear
The tariff shield on electricity was introduced later, in February 2022, limiting the increase in regulated tariffs to 4%, then 15% since the beginning of 2023. But the situation has evolved less favorably than on the gas market. . “Prices are not quite back to normal yet”, explained Bruno Le Maire on LCI on Friday. Electricity contracts for delivery in the 1st quarter of 2024 are now traded on the futures market at 367 euros per MWh, i.e. more than double the prices charged in Germany (164 euros/MWh) or in Italy (182 euros/MWh).
The crux of the problem remains the production difficulties of EDF’s nuclear fleet. She is “a little below what we could expect”underlined the Minister of the Economy, in particular because of the repairs linked to the problems of “stress corrosion” discovered in many reactors. If the company estimates that it will produce more electricity in 2023 than in 2022, the situation still forces France to buy electricity from its neighbors. In March, EDF had to submit a revised inspection schedule after the discovery of new cracks of unprecedented depth.
Purchasing part of its electricity abroad drives prices up. These tariffs are partly linked to the cost of production in the gas power plants, and therefore to the fact that the price of gas remains at a high level despite the drop observed.
“Electricity is much more ‘political’ than gas”
Extending the tariff shield thus makes it possible to temporize. The measure is also less difficult to finance than for gas, points out Nicolas Goldberg, because France can count on the “financial windfall” that it derives from the production of electricity on its soil.
Furthermore, the energy market specialist points out that “electricity is much more ‘political’ than gas in France”. Containing the rise in prices saves the government “to send a negative message” to consumers, while the conversion of many areas to electricity is essential to the energy transition. On LCI, Bruno Le Maire also pointed out the fact that he did not want “worry” the French. It is also a way of not emphasizing difficulties that do not depend on the international context, unlike gas, but on France’s choices in terms of energy.