IEA to France: Increase Electricity Prices and Competition

On Monday the International Energy Agency (IEA) released its latest country report on France. These reports are generally issued every five years.

Although France has not been immune to the global economic downturn, the climate change plan known as the Grenelle de l’Environnement is still considered by the IEA as having “many positive provisions”.

Indeed, the government is willing to cut by a factor of four the country’s carbon dioxide emissions by 2050 (compared to 1990 levels). To do so, important efforts will be dedicated to the building and transportation sectors, which account for a large share of greenhouse gases emissions in France.

It is estimated that 20 million homes will have to be retrofitted and insulated within the next four decades.

Thanks to nuclear power, France has one of the lowest per capita emissions amongst developed nations. According to recent research, France has lower per capita emissions than China . The IEA remarks, however, that the government must ensure that waste must be addressed in a sustainable fashion.

The IEA has identified two key issues which must be improved upon:

First, the utility sector, even if in line with European directives, suffers from a lack of competition.

The former national utility, Electricité de France (EDF), controls the lion’s share of the 56 nuclear reactors operating in the country and thus has lower production costs than its competitors. In 2006, the price for 100 kW-h was 12.05 € while the EU average was of 14.16 €. The OECD energy watchdog calls for increased competition and this would increase prices.

The heavily regulated EDF prices do not adequately reflect actual costs as the government subsidizes a portion of the nuclear reactors.

This might change with a law adopted on June 15 by the local Senate which would give to EDF’s competitors a share of its nuclear electricity. (see Le Figaro [Fr] for more)

Second, the French electricity grid lacks peak load capacity. Nuclear reactors can provide baseload capacity but can’t answer to higher demand. Investment in renewables and smart grids would be great solutions for this.

Throughout the year, France exports electricity to its neighbors. In 2003, it exported no less than 94 TW-h, but is nonetheless an importer of electricity in the winter to heat buildings. (The country developed massive electrical heaters to use the electricity generated by nuclear power).

Heat pumps might be a solution as they use up to five times less electricity than traditional solutions.

Overall, the French government is happy with the IEA findings. It is worth noting that in its official press release, in addition to having low overall CO2 emissions, the country is ranked second amongst European countries in terms of renewable electricity production.

The IEA also noted that France has a coherent and efficient policy as the Ministry in charge of climate change is also in charge of energy, transports and urbanism. This might be an idea for other countries.

The Minister in charge of these issues, Mr. Jean-Louis Borloo, called with his German and British colleagues for more action and believes the European Union must cut its emissions by 30 percent by 2020.

photo: Calips96