Mario Draghi's doubts | EUROtoday

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Lhe sentence uttered by Mario Draghi on June 14, in Spain, whereas receiving the Charles V prize, appears innocuous. Truly, it's a bomb! Let’s open the quotes: “The rules of the market [européen de l’électricité, NDLR] do not fully decouple the price of renewable and nuclear energy from the higher and more volatile prices of fossil fuels, preventing industries and households from passing on the full benefits of clean energy in their bills. In addition, overtime energy taxation has become an important source of budget revenue, which contributes to the increase in retail prices. » Mario Draghi is right on this last point: taxation weighs a third of the price paid by consumers.

This questioning of market rules is at the heart of the concerns of the former President of the Italian Council, whose report on European competitiveness – 400 pages announced – will be published at the end of July. The price of energy is at the root of Europe's disconnect with the United States. The price of electricity is “two to three times higher” on the Old Continent than throughout the Atlantic. Mario Draghi factors out the trigger: Europe has no pure sources and is behind within the set up of unpolluted vitality capacities (wind, photo voltaic and others). The identical applies to the interconnectivity of networks, which is insufficiently developed.

Exploding electrical wants with synthetic intelligence

So a lot in order that, even when sure European international locations produce extra vitality, European international locations can’t profit from it. Europe is “the largest buyer of natural gas in the world”, he emphasizes, however its capability for collective negotiation with suppliers is restricted attributable to its fragmentation. It thus deprives itself of highly effective negotiating leverage to decrease costs.

As a outcome, 60% of European firms, strangled by vitality payments, are delaying mandatory investments. As all the things is linked, this vitality value hampers the power of Europeans to plan in the direction of the sector of the long run par excellence, which is synthetic intelligence. “Artificial intelligence is very energy intensive,” underlines Mario Draghi, “on purpose. The International Energy Agency predicts that electricity consumed by data centers will double worldwide by 2026 – that's two years from now. This roughly corresponds to Germany's entire electricity demand. » How could Europeans be at the top in this area if their electricity production capacities are already limited?

A “true European electricity market”

This is why Mario Draghi posits the precept that rising productiveness (of which AI is a key issue) depends upon “the establishment of a true European energy market”. Without saying it, Mario Draghi calls into query the precept of advantage order which is the main working rule of the present electrical energy market.

We should recall the basic parts to know the difficulty. According to advantage order, electrical energy producers provide their manufacturing at a sure value. These provides are ranked from the most cost effective to the costliest. Electricity demand is met beginning with the least costly supply after which progressively shifting as much as dearer sources till all demand is roofed. In this method, low marginal price vitality sources (like renewables) are sometimes referred to as in first, adopted by nuclear, then gasoline or coal crops relying on gasoline costs.

Marcel Boiteux, the inventor of advantage order

This marginal price pricing system was invented by a French economist and mathematician, Marcel Boiteux, who was common director after which president of EDF from 1967 to 1987. His theoretical contributions developed within the Fifties and Sixties had been essential. What does Mario Draghi suggest as a alternative?

In his speech of June 14, he goes no additional. But, in response to Brussels sources, the concept can be to determine an electrical energy market by vitality supply: due to this fact a marketplace for renewables, nuclear energy, gasoline and coal. We are flirting with the concept brandished by Jordan Bardella of a French nuclear value. Except that Mario Draghi thinks, for his half, on a European scale. He shouldn’t be asking for an “exception to the European market”, he needs to switch the market guidelines, which is way more bold. And dangerous.

When Bruno Le Maire railed towards advantage order

Indeed, the defenders of advantage order additionally deploy heavy arguments. The electrical system doesn’t differentiate between the origin of the electrons. He can't do it. The system balances primarily based on provide and demand. However, a European marketplace for electrical energy produced by renewables couldn’t steadiness itself. With all of the investments launched on this space, renewables will more and more impose destructive costs. Which is already the case when there may be overproduction in comparison with demand! Renewable vitality producers could also be prepared to pay for his or her electrical energy to be consumed somewhat than lose their subsidies or cease manufacturing. This leads to destructive costs out there.

Let us do not forget that Mario Draghi shouldn’t be the primary to query the precept of advantage order. Bruno Le Maire, firstly of the vitality disaster, went face to face. “From an economic point of view, it is absurd and, from an ecological point of view, it is incoherent,” he thundered in October 2021. And then, lastly, the negotiation of a modification of the principles of the European market has preserved the precept of advantage order by Marc Boiteux by including regulatory guidelines, with longer-term contracts, which defend shoppers from value peaks and which additionally present the mandatory margins for vitality firms as a way to put money into infrastructure.

Why an Iberian exception was attainable

Moreover, Jordan Bardella himself, candidate of the National Rally for Matignon, not speaks of leaving the European electrical energy market however solely of asking for “an exception to establish a French price for nuclear power”. It is uncertain whether or not this concept can obtain the approval of the European Commission.

Spain and Portugal benefited from a brief exception from the Commission as a result of the Iberian Peninsula is barely weakly related to the European market. So a lot in order that the Commission judged that an Iberian exception wouldn’t disrupt the European market an excessive amount of. This shouldn’t be the case for France, which is, quite the opposite, a necessary crossroads of the European electrical energy community with 37 interconnections and 20 cross-border connections to produce buyer accounts overseas. This locations EDF as a significant participant in Europe. France additionally broke its information for electrical energy exports in 2023 with 18,680 megawatts on December 23.