Major French electricity users unhappy at cost disadvantage compared to Germany

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1 February 2013, Electricity

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French retail customers enjoy some of Europe's lowest electricity prices, which stood at 0.142kWh (taxes included) in November 2012. This is due to the country's large nuclear industry. However, major industrial electricity users do not see the same benefits, and some may be extremely vulnerable to changes in price. ArcelorMittal, for example, uses 1% of France's electricity, and for other businesses in the aluminum industry electricity can account for up to 70% of costs.

In contrast, major industrial sites in Germany are largely exempt from distribution tariffs and pay roughly 80% of that for similar sites in France. Further, they are insulated from price rises due to carbon taxes, and they also receive relatively higher payments in exchange for voluntary cuts in supply. A large German user pays between EUR35.20 and EUR37.05 per MWh compared with EUR46.90 in France according to Uniden, the French union of large energy users.

The subsidies granted by the German government recognize the impact on competitiveness of the cost of electricity, and that large industry is geographically mobile. The government has already implemented a set of measures to spare major energy users the electricity price increases that the German public faces due to the replacement of nuclear generation by renewable energy.

In France Uniden has demanded that the government give large industrial users similar cost advantages. This topic was discussed recently in a seminar organized by the Union for a Popular Movement backbencher Francois-Michel Gonnot. The seminar brought together key representatives from regulatory bodies and utilities and focused on the costs and financing of the energy transition in France.

The minister of ecology Delphine Batho spoke at the seminar, and while recognizing the measures taken to protect German industry underlined the fact that their SMEs carried high costs. No concrete response to Uniden's lobbying is expected from the French energy regulator before October 2013, when the government will begin drawing up a new law on France's energy transition.

In times of fiscal austerity, Datamonitor expects the weight of Uniden to pale in comparison to that of France's small energy consumers; the government has already agreed to reimburse EDF EUR4.9bn out to 2018 for various costs incurred under the CSPE charge (including the extra cost incurred for buying solar and wind generation at guaranteed state rates).To avoid substantive electricity price increases, the government can be expected to prioritize subsidies to small consumers for political reasons, and may encourage large energy users to manage their energy procurement more effectively

For more information contact the Datamonitor Energy team:
Twitter: @DatamonitorEN

Source: MarketLine

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