The European Union (EU) Energy Council, meeting in Luxembourg, have reached agreement on reforming the EU electricity market, resolving the long-running dispute between France and Germany over the role of nuclear power. France has welcomed a decision that nuclear power should be included in future state-supported models, while Germany insisted that this must not lead to unfair competition through publicly funding ageing reactors abroad. The proposal now moves on to the European Parliament, where concessions on nuclear and coal power could still meet opposition.

The EU’s 27 members are divided. Central and eastern European countries that have their own nuclear expansion ambitions are supporting France while non-nuclear powers including Belgium, Denmark, Luxembourg, Austria, are backing Germany.

After months of acrimonious discussion about the reform of the power market, the EU Energy Council agreed to protect electricity prices from fossil fuel price hikes, particularly regarding natural gas and also agreed to a compromise on the role of nuclear power. France’s Energy Minister Agnes Pannier-Runacher told France Info that the reform agreed in Luxembourg meant that “European customers will pay the average production price” for electricity and would not suffer the costs of price fluctuations on fossil fuel markets.

She argued that nuclear power was a major winner in the agreement. “Today, the funding of future nuclear power capacity, as well as that of existing plants and their runtime extension, has been guaranteed,” she noted. Investors could now be reassured that the state will guarantee predictable returns, she said. At the same time, she insisted the agreement would not push renewables expansion in France to the sidelines, saying: “We want to massively invest in nuclear and renewable power.” She welcomed the agreement as a success given Germany’s “reluctance” to accept the technology as an asset in EU climate mitigation.

German Energy Minister Robert Habeck said in a Ministry statement that the agreement had shown “Europe’s ability to act” on pressing issues and guarantee access to affordable electricity prices for households and industry. Consumers could now “benefit from the low production costs of non-fossil energy sources”. Earlier the German government had strongly opposed including nuclear power into the reform on both technical and environmental grounds. German officials were also concerned that the French government could use it to fund its nuclear power ambitions, which would disproportionately boost its national industry through state support. For Germany, the focus of the reform had been primarily to reassure investors in wind and solar power installations.

The drawbacks of the current system became evident during the 2022 energy crisis when a rapid rise in the cost of natural gas pushed up overall power costs with gas-fired plants determining market rates for electricity. Earlier this year, the European Commission (EC) proposed a reform including the introduction of long-term contracts for difference (CfDs). These are intended to cap the effects of market disruptions such as those caused by European sanctions on Russian oil and gas in the wake of its special military operation in Ukraine. If market prices rise above production costs, producers will have to pass on the difference to the state, which will use the funds to support customers. If they are lower, the state will compensate producers.

Currently, EDF, which operates France’s nuclear fleet, has to provide electricity at a cheap rate determined by a state commission. This mechanism is due to expire in 2025. French NPPs suffered a series of unplanned shutdowns throughout 2022, and France now hopes to use the proceeds generated with the new CfD scheme to invest in existing reactors. Germany had previously opposed this, insisting instead that only new installations should be funded through the scheme. However, the new agreement includes funding of existing installations with proceeds from CfDs provided the finance is used for retrofitting, runtime extensions or capacity increases.

However, France failed to win a further concession, for the EU to allow revenues from those schemes applied to existing power plants to be refunded to industrial consumers. The agreement also gives greater power to the EC to assess state aid benefits. French Energy Minister Pannier-Runacher said that the agreement was “a compromise which sets out a balance” that “allows member states to have room for manoeuvre and take action on the basis of their own energy mix”. Germany’s Robert Habeck said the reform would give “access for consumers and industry to low electricity prices across Europe”.

Although the agreement is generally being viewed as a capitulation by Germany to French demands, Germany is expected to press for changes when the agreement goes to the EU Parliament. Michael Bloss, a member of the EU Parliament for the German Green Party, said the focus had to be on expanding renewables and protecting consumers from price hikes. “New subsidies for coal or a special treatment of nuclear power are out of the question,” he noted. Protecting nuclear plants from market exposure as the new agreement proposed would be “inefficient and un-European”. He said the European Parliament “will demand improvements.” He added that “loopholes” for France’s exisitn NPPs and Poland’s coal plants in Poland were unacceptable. “These energy sources are a thing of the past.”

Spain’s Ecological Transition Minister, Teresa Ribera, representing the EU Council presidency currently held by Spain, said the new agreement would have been “unimaginable only a couple of years ago”. The reform will benefit consumers financially and also support the expansion of clean energy sources, she said. The Council presidency will now lead negotiations with the European Parliament for adopting the proposed reform. The final form of the agreement remains to be seen.

Image: After EU member states reached an agreement on the reform, the proposal will move to the European Parliament (courtesy of EU / Ansotte)