France issued an ultimatum and Germany pushed back in an increasingly bitter standoff that lays bare the disruption unleashed by the combination of the region’s energy crisis and European Union’s green shift.
While the dispute revolves around the role of nuclear in the bloc’s future energy mix, it’s ultimately about where Europe’s industrial heart is located. Even as prices eased from record highs seen last year, positions have hardened as France and Germany seek to avoid being left behind as the EU seeks to become carbon neutral.
The EU can ill afford a protracted conflict within its industrial core. US President Joe Biden’s Inflation Reduction Act raised concerns about the US luring away investment, while the recent probe into Chinese subsidies of electric-vehicle maker reflects growing anxiety about the competitive threat posed by the Asian superpower.
Berlin is blocking the initiative as Germany scrambles to rebuild its own energy system following the collapse of Russian gas supplies last year and completing a decade-long journey to shut its nuclear reactors earlier this year. Europe’s largest economy is concerned France will be in position to undercut German energy prices if Paris’s proposed regulation allows EDF to sell power at uneconomical costs.
There is indeed cause for concern. With Germany’s energy costs still high and its supply security in doubt as the country exits coal too, France has attracted almost 50% more foreign direct investment projects than Germany over the past two years. “Industrial competitiveness is an important element in the discussion between Germany and France,” said Kristian Ruby, secretary general of the European power-sector association Eurelectric. “Germany is facing the issue that France can have cheaper electricity for many years from nuclear.”
The pressure is mounting in Paris as a domestic law that obliges EDF to sell large volumes of power at a deep discount to current wholesale prices expires at the end of 2025.
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