Les relations franco-allemandes dans le secteur de l'Energie Compte-rendu du \"Ifri Energy Breakfast\" du 18 décembre 2008
Dans le cadre de l'Ifri Energy Breakfast Roundtable, un séminaire avec Hinrich Thölken, conseiller économique à l'Ambassade d'Allemagne, Christophe Schramm, Bureau des Energies renouvelables, Ministère de l'Ecologie et du Développement durable, Jan Horst Keppler, professeur en sciences économiques, Université Paris-Dauphine et chercheur associé au Programme Energie de l'Ifri.
Jacques Lesourne welcomed the participants by reminding that the debate is based on a recent study published by Ifri"s Energy Program (“Les relations franco-allemandes dans le secteur de l"énergie” by Jan Horst Keppler, Sophie Méritet and Kristina Notz, available on our website, English translation to be published soon). He then highlighted that Franco-German energy relations are often dominated by debates on nuclear power. For many observers, the two countries seem far apart on this question. Indeed, very different political decisions have been made by either country on the issue. Surprisingly, opinion polls have shown that public opinion on nuclear energy is quite similar in both countries (see Jacques Lesourne (ed.) Nuclear Power and European Public Opinions. Ifri 2008). Furthermore, the cooperation between Areva and Siemens in the nuclear field is one of the best examples of Franco-German industrial cooperation. In more general terms, France and Germany have a quite different energy mix and hence both countries have divergent positions concerning some aspects of European energy policy.
Hinrich Thölken took up this last point and underlined that different political choices in France and Germany do not necessarily mean that both countries have divergent interests. Both countries decided to develop nuclear energy after the first oil shock, but to a different extent: France chose nuclear energy as a way to secure her energy independence, while nuclear development in Germany was overshadowed by the impact of the Cold War, as a significant number of nuclear arms were stationed in Germany. Public resistance against nuclear weapons for many included a dislike of nuclear in all aspects; hence a strong movement against nuclear energy emerged in Germany in the 1970s. In the 1980s, Germans were deeply shocked by the Chernobyl accident, whereas French political leaders tried to minimize the accident"s impact. Due to public resistance after Chernobyl, only four nuclear power plants have been built in Germany since then. German politicians have instead taken a different turn and done a lot in order to improve energy efficiency. According to Mr. Thölken, Germany has indeed made a lot of progress in this field - and this cannot be said about France.
He then stressed that Germany"s decisions on the choice of energy resources do not harm her energy development. The decision to phase-out nuclear energy and to develop renewable energy instead, which has always been supported by a majority of the German population, is far from being an “economic suicide”, as it has been dubbed by some observers. On the other hand, Germany does not pretend to convince others to follow suit and phase-out nuclear as well. One should rather acknowledge that there is not one single solution to the issue of energy. Still, German decision-makers are aware that the large share of coal for German electricity production poses a problem that needs to be addressed. CCS could be a good solution in this context and Germany is indeed very interested in developing this technology. Hinrich Thölken underlined that for this reason, he thinks that coal has a future and will be a modern form of energy, especially when coal plants are updated and equipped with cogeneration (combined heat and power).
As she is developing renewable energy resources, Germany also needs to upgrade her electricity grid. Electricity production from renewables generates larger capacity fluctuations than electricity production from conventional sources, so quick investments in the German grid and in interconnectors with other countries are needed in order to cope with the new requirements.
In the end, shared goals and common interests are however the most important aspect in Franco-German energy relations. Both countries have a joint vision and responsibility for the energy future, especially when it comes to climate change and reducing CO2 emissions. The differences on nuclear do not hinder cooperation and both countries have more credibility when they cooperate in the European context. Therefore, it is very important that the French presidency of the EU has been able to set Europe on the track for meeting the future challenges in the field of energy.
Jan Horst Keppler also underlined that the adoption of the “Energy and Climate” package has rightly been hailed as a success, as the EU, quite stunningly, now has a de facto energy policy looking forward to 2020. Mr. Keppler then presented the main points of the recent Ifri paper on Franco-German energy relations, focusing on the ability of the French-German couple to shape the energy and climate debate in the EU and the new contours of the energy sector in both countries.
Commenting on a comparative table on Germany and France"s overall energy situation (see PowerPoint presentation on our website), Jan Horst Keppler underlined that France is the world"s largest electricity exporter, with her electricity production being nearly as big as Germany"s. Both countries" electricity markets are already highly integrated today and the coupling of their power exchanges (Powernext and European Energy Exchange) will be another important step in this context. Currently, France exports nuclear baseload and Germany exports peakload based on coal, gas or wind.
On the delicate question of nuclear power, France and Germany are separated by obvious differences, but they also have common interests according to Mr. Keppler. France, which produces 80% of her electricity from nuclear, is currently building a new EPR reactor. This is in accordance with public opinion, as there is a generally good acceptance of nuclear. On the contrary, Germany has taken the political decision to phase out nuclear power by 2021; the 2009 parliamentary elections are the last window of opportunity to reverse or modify this phase-out. One should take into account that the acceptance of nuclear is growing in Germany, with a majority of citizens now favoring lifetime extensions. This change of mind is linked to the economic crisis, efforts to reduce CO2 emissions and high energy prices. Coalition politics might however constitute a hurdle for a change of position (only if a CDU/CSU-FDP government emerges from the 2009 elections, there will be a good chance for the phase-out being reversed). Overall, the situation in Germany is less clear-cut than in France. Despite these differences, France and Germany are working together in the nuclear field, as Siemens holds 30% in Areva NP. An all-French buy-out of Areva NP is regularly mooted, but the German government is strongly interested in a continuation of this cooperation.
When it comes to power market liberalization, the current situation in France is quite complex, as three types of pricing coexist (regulated tariffs, liberalized prices and special tariffs allowing the return from liberalized prices to regulated tariffs). What is more, wholesale prices are above regulated tariffs and rising, while tariffs are declining. As the tariff is above the marginal cost of nuclear but below its average cost, the sustainability of the current system is in question. The situation in Germany is different, as prices are theoretically free. Historical relationships between big companies are however limiting switching rates, and there is growing popular discontent with high prices and rents of power producers. As a result, legal procedures against “price fixing” have been undertaken. Concerning electricity networks, the situation in France and Germany is similar, as networks are regulated in both countries. The two governments are also sharing the same position on unbundling, as they are engaged in a fierce battle with the European Commission over ownership unbundling. According to Jan Horst Keppler, this battle is mainly symbolic and a test of wills. A last point on energy networks concerns interconnections between both countries: these are still imperfect, as they are sometimes overloaded. Here, market-coupling will equate prices and probably solve the problem.
Mr. Keppler then commented on both countries" efforts in the field of climate policy. He underlined that both countries fully subscribe to the 20-20-20 framework of the EU and pursue relatively ambitious policies. Due to the large part of nuclear, the share of French emissions under the EU ETS is smaller. France hence pays greater attention to domestic projects. On the contrary, Germany has voiced concerns about competitiveness issues in the recent negotiations and insisted on more lenient conditions for German industry (according to the adopted compromise, 100% auctioning of emission permits will only start by 2027 and export-oriented-sectors are completely exempt). However, German carbon-based power production did not receive additional concessions.
Addressing natural gas supplies, one should note the differences in the overall situation: France"s share of natural gas in her primary energy supply is 15% (with 27% of her imports coming from Russia), whereas this share is 23% in Germany (with 36% of imports coming from Russia). These numbers should be compared to those of the whole EU, where the share of natural gas in the primary energy supply is 26% (with 45% of imports coming from Russia). So the often discussed question of Europe"s energy relationship with Russia, the world"s largest gas exporter, has different implications for Germany and France. Both countries however, should continue their cooperation on issues like investment and availability of long term supplies, the Russian internal demand, Russian exports to Asia and alternative producers (in the Caspian Sea region, Iran, Iraq, Qatar). According to Mr. Keppler, Germany and France seem to have rather similar views on three key pipeline projects: Nord Stream, Nabucco and South Stream.
Another important issue in Franco-German energy relations concerns the debate on the reciprocal market entry of new actors. In this context, the establishment of a European energy oligopoly is in full swing, with both German and French companies being active players. There are however some signs that the great game of mergers is finally coming to an end. In the Franco-German case, EDF is today a key player in Germany through EnBW, and the company also begins its development in the gas sector. E.ON is now present in the French market through ex-Snet/Endesa, whereas E.ON Ruhrgas and GDF Suez have a good history of cooperation in gas projects. RWE is currently the weakest of the large players, due to its heavy reliance on coal. Some questions should be asked about state intervention, as a French law guarantees the French state at least 70% of voting rights in EDF and the German government implicitly protects RWE from foreign takeovers (with EDF being a potential bidder).
In conclusion, French-German energy relations are more “normal” today, but also less simple than in the past. While energy remains at the intersection of commercial, environmental and political interests, France and Germany share a similar vision about the interdependence of the political and economic spheres. After the successful conclusion of the 2nd package on energy and climate, some important topics remain for the future: the 3rd package on electricity and gas market reform, permitting the completion of the internal electricity and gas market, the creation of an European regulator, the creation of a common European interlocutor with third parties, the establishment of common rules for accompanying technologies with high fixed costs in liberalized electricity markets.
Christophe Schramm started by commenting on prior remarks on electricity networks. When analysing differences between France and Germany in this field, one should be aware that they are organised in a quite different way: there are regional oligopolies in Germany, but a single national grid operator in France. Despite this difference, both countries had a solid and common approach to ownership unbundling, as both were opposed to the European Commission"s proposals. However, this does not mean that France and Germany are opposed to a larger market opening. On the contrary, the coupling of the power exchanges into EPEX Spot, which takes effect on January 1, 2009, is a real success in this context. As France and Germany have quite different sport market electricity prices (due to their different choices in terms of electricity production), it will be interesting to see the effects of this merger of power exchanges. What is more, one should not forget that both countries cooperate in the field of nuclear waste, even if the political choices on nuclear energy are different: there has been a recent agreement on transport of nuclear waste.
France and Germany are also cooperating on the delicate issue of energy security. This cooperation does not only concern relations with producer countries, but also energy efficiency, interconnections inside the EU and strategic stocks. Much can be done in this field, and progress seems more feasible than in the field of foreign energy policy. Germany seems indeed to be less interested than France in further Europeanizing energy relations with energy suppliers, especially Russia. The reason therefore lies in the different underlying philosophies: Germany sees a higher level of interdependence with Russia as the best solution, whereas France advocates a better diversification of resources.
Finally, the recent European “Energy and Climate” package was a real issue in German-French energy relations, as it was much debated by the public, the media and the industry. French and German interests concerning the package were quite different on some points. Germany, for example, wanted free permits for her energy-intensive industries in order to avoid “carbon leakage”, whereas France preferred a border adjustment mechanism. The package hence was a real and difficult test for bilateral relations, but both countries managed to find compromises, permitting the setting of reduction targets for every country. In the end, this test was hence beneficial for Germany and France according to Mr. Schramm, as both countries could contribute to a European consensus. The negotiations were also remarkable insofar as the French position came out to be, for the first time, “greener” than the German one, as the French government seemed less influenced by national industry interests.
Still, one has to acknowledge that Germany has the biggest experience on renewable energies. Germany therefore had a very positive impact on the Renewables directive. If one compares both countries, Germany also seems a bit more ambitious on renewables, even if both countries now roughly follow the same line. The French government has recently decided to move forward on renewables, with the “Grenelle de l"environnement” and 50 measures for the development of sustainable renewable energies in the next years. For this reason, it seems likely that Franco-German energy cooperation will be strongest in the field on renewables in the next years, with both countries also cooperating on issues like the International Renewable Energy Agency (IRENA) and the Mediterranean Solar Plan in the framework of the Union for the Mediterranean.
The presentations were then followed by open public discussion. Questions were asked on the specific steps France will take in order to achieve her goals concerning renewable energies, the link between unbundling and investment decisions for important infrastructure projects and the energy relations with Russia. Other questions concerned the German policy on coal: Will there still be subsidies in the future and how large a part coal will play in German electricity production?
Commenting on these questions, Jan Horst Keppler estimated that much less than the currently planned 30 new coal power stations will be built in Germany. On ownership unbundling and its consequences on investments, he believed that one should not overestimate these consequences. What is more, there are important differences between electricity and gas, which have not always been understood by lawmakers. Christophe Schramm explained that France plans to meet her goal of 23% of renewables in final energy consumption by increasing energy efficiency and developing all kinds of renewables, notably biomass and wind energy. This will not be easy, as policymakers are increasingly challenged by local protests against the development of new wind farms. Hinrich Thölken finally commented on prior remarks concerning planned gas pipelines: the German government equally supports Nord Stream, South Stream and Nabucco, as Europe needs more gas in the future. Despite her good relations with Russia, Germany wants direct access to Caspian reserves and hence supports Nabucco.
Conference report written by Christian Schülke, Junior Research Fellow at Ifri"s Energy Program