Electricity: Companies are helpless in the face of ever higher prices
AFP, published on Thursday, August 11, 2022 at 08:53
Bills multiplied by two, even six: Some companies are concerned as electricity prices soar to unprecedented highs for this winter due to a number of causes including problems with France’s nuclear fleet.
Electricity prices have continued to rise, reaching record highs, particularly in France, where they have almost doubled in just a few weeks. Electricity for delivery next year was trading at more than 550 euros per megawatt hour on the futures markets, compared to less than 100 euros a year ago.
When individuals are protected by the government’s “energy shield,” experts are becoming increasingly concerned.
The National Timber Association (FNB) therefore wrote to Prime Minister Elisabeth Borne in July to draw her attention to a “dramatic” situation.
“Speculation in the power sector is increasing to such an extent that business continuity for our companies is no longer assured for this winter and beyond,” she said.
“Since this letter, the situation has deteriorated a lot because prices are only going up,” said Nicolas Douzain-Didier, the federation’s General Delegate. “We are at an impasse with no solution.”
-Generator-
A spiral well known to Yannick Chopin, whose Mayenne-based pallet manufacturer was struggling with the crisis in the energy markets.
“All small SMEs buy every day, we don’t have very long-term planning and we don’t have a purchasing manager,” emphasizes the boss of Palettes 53.
His company, which has a turnover of 3 million euros, normally spends 90,000 euros a year on electricity. But with the crisis, the bill could have climbed to around 600,000 euros, in his estimation. “It was completely incoherent,” he recalls.
A breakout that led the entrepreneur to a radical decision: rent a generator for three months earlier this year. The time to conclude a fixed electricity supply contract for the next three years, at a price that is certainly doubled (200,000 euros per year), but which still allows him to pass on the increase in costs to his customers.
A reflex that not all professionals have had, who often have contracts with variable prices that keep increasing. The FNB cites the example of a sawmill whose electricity costs will increase almost sixfold between 2021 and 2023.
– regulated tariff –
This market development can be explained by many factors: It is fueled in particular by the high gas prices following Russia’s invasion of Ukraine.
Indeed, wholesale electricity prices follow the evolution of gas prices due to the current market design, based on the “marginal price” rule: this is the cost of the last facility (usually in the case of gas) called to meet the demand price for Everyone.
French President Emmanuel Macron denounced an “absurd” orientation. The European Commission is also working on market reform, but it will take time.
Other factors are contributing to the increase, starting in France with the heavy maintenance work at nuclear power plants, with corrosion problems that have led to the shutdown of 12 out of 56 reactors, raising concerns about supplies this winter.
In the end, the heat and drought didn’t help. The reservoirs of the dams operated by EDF last Thursday “reached a volume fill rate of 65%, that is 15 points below the historical average”, states the electrician.
Ahead of fundamental reforms, which will take time, some companies are calling for an emergency regulated tariff, such as the TaRTAM (Transitional Regulated Market Adjustment Tariff), which was put in place during the previous market boom in 2007.
On the side of the Union of Energy Consuming Industries (Uniden), which brings together very consuming companies (refining, chemicals, steel, pharmaceuticals, etc.), there are fears that the regulated prices are too high.
“We advocate long-term contracts, say 15 years, which give visibility,” says its President Nicolas de Warren.
