France announced that it will nationalize its electricity giant to guarantee energy sovereignty, while Europe faces a worsening crisis due to the war in Ukraine. The measure will give the government Emmanuel Macron more scrutiny to fix a storm of problems at France’s nuclear power program, Europe’s largest, at a time when the president has vowed to mitigate rising costs of living by shielding consumers from rising rates.
Élisabeth Borne, the French prime minister, explained before Parliament that the change was necessary to guarantee the energy independence from France: The country gets about 70 percent of its electricity from nuclear power, a higher proportion than any other country in the world, a range that it will expand after ruling out a return to Russian oil and gas.
To this end, the Macron government is promoting a 100 percent acquisition of the capital of the company Électricité de France (EDF), compared to the current 84%: the company is the main producer of electricity in France and operates all its nuclear plants.
statist
Although the economic interventionism by the government is a strong tradition in France, much of the political arc rejecting the radical nationalizations of the 1980s under François Mitterrand. And this is a strong step up from the symbolic for President Emmanuel Macron, the former banker elected in 2017 as president on an openly pro-business platform, promising to cut regulation and reduce public spending.
Promises that he quickly betrayed: shortly after assuming his government nationalized the largest shipyard in France, STX France, to prevent an Italian competitor from taking over. And more recently, the Covid-19 pandemic and the conflict between Russia and Ukraine have accelerated his turn from free-market reformer to advocate of state intervention.
Macron now insists that the government must defend economic and energy sovereignty of France and meet climate targets, regaining control of key national industries.
France is less dependent than its European neighbors – such as Germany – on Russian oil and gas. But to maintain that independence, upgrading the country’s old nuclear reactors has become crucial for the government, as the war in Ukraine has pushed up energy pricesfueling inflation and making the cost of living a major concern for the French.
Bet
In February, Macron announced a plan of 51,700 million euros to review France’s nuclear program, which included plans for EDF to build the first of 14 giant state-of-the-art water reactors by 2035.
Élie Cohen, an economist who has studied the nuclear sector, argued that “the only solution is nationalization because the government has chosen an energy mix focused on nuclear power, and EDF is now forced to build more reactors but they don’t have the resources”.
The government had already hinted that it was considering renationalisation during Macron’s re-election campaign. And this also allows the president to boost employment in a key sector: EDF employs more than 165,000 people and obtained revenues of about 86,000 million dollars.
But most of France’s nuclear infrastructure was built in the 1980s and has suffered lack of investment reached a critical point in lack of maintenance, shutting down about half of the country’s atomic reactors, plummeting France’s nuclear output to its lowest level in nearly 30 years.
Problems included a two-year delay in the maintenance required to dozens of aging reactors, and was postponed during the coronavirus shutdowns. Safety issues such as corrosion and faulty welds, and rising temperatures in spring and summer have made it difficult to cool reactors.
subsidies
In January, the government ordered EDF to sell more nuclear power to competitors to limit rising electricity prices in France. As Bruno Le Maire, the finance minister, acknowledged that it would cost the state about $8.5 billion. And the government has also ordered EDF to cap its prices to keep rates low, effectively cutting into margins for the company, which is already $45bn in debt.
France created EDF in 1946, after World War II, by nationalize and merge more than 1400 small electricity producers. It remained state-owned until 2005, when the company was partially privatized. But now the state would buy out minority shareholders, who currently hold a 14 percent stake in EDF.
The French announcement came on the same day that European Union lawmakers voted to consider some gas and nuclear power projects “indispensable,” giving them access to cheap loans and state subsidiesa change France had lobbied for amid Europe’s growing push to divest from Russian oil and gas.
Inflation in the eurozone recently rose to a record high 8.6 percent as a result of the war in Ukraine and the economic conflict it has triggered. Although the inflation rate in France is 6.5 percent, France’s high cost of living quickly pushed a segment of the population into poverty, prompting Macron to introduce bills to increase various social benefits, limit raising rents and creating subsidies for the poorest.
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