The change in electricity prices announced on November 14 by EDF, in consultation with the French government, has met with a frosty reception from the chemical industry. The latter, major consumers of electricity, are worried about the risk of relocation and job losses. Arkema’s Luc Benoit-Cattin points out that EDF’s new “scheme” does not take into account the specific needs of “electro-sensitive” plants, particularly in terms of protection against price volatility and fairness.
Industry Impacts and Reactions
EDF’s proposals to replace the current system of price regulation have not met with a favorable response from manufacturers. Their main concern is increased exposure to market prices, with no fixed ceiling. Luc Benoit-Cattin pointed to the risk of tariffs rising well above the current threshold in the event of a crisis, citing the example of 2022 tariffs. What’s more, France Chimie’s modeling suggests an average cost well above EDF’s estimates for the coming years.
Economic and social consequences
Frédéric Gauchet of France Chimie draws attention to the doubled cost of electricity post-Covid, a competitive advantage offered to Asian and North American players, and an increased risk of de-industrialization. Insee corroborates this fear, noting a significant drop in production in the chemicals sector following the rise in energy costs linked to the war in Ukraine.
The Financing and Equity Challenge
The new contract system proposed by EDF, involving pre-financing of new power plant construction by customers, is perceived as unfair and financially restrictive. The chemical industry is calling for a revision of this model, including a lowering of the price trigger threshold, the maintenance of tax breaks, and fairer access to capacity reservation contracts.
EDF’s reform poses a major dilemma for the French chemical industry, as it faces financial, competitive and equity challenges. Current negotiations with EDF are crucial to the future of the sector, the country’s largest energy consumer.
