The European context also determines the scale of that risk:
- The “Fit for 55” climate package, published by the European Commission on 14 July 2021, is one of the flagship schemes of the newly-reconstituted European Commission. In particular, it includes an increase in all targets to achieve -55% net GHG by 2030 compared with 1990, and carbon neutrality by 2050. The main policy thrusts relate to:
- the revision of the EU Emissions Trading Scheme (EU-ETS) within the EU, including its extension to other sectors;
- various legislative proposals (energy efficiency, renewable energies, energy taxation), including proposals aimed at regulating the development of hydrogen (with a definition of low-carbon electrolytic hydrogen compatible with the French electricity mix);
- a revision of the Guidelines on French State aid for environmental protection and energy (EEAG) adopted on 21 December 2021, applicable from January 2022, which constitute a framework for structuring future EDF group investments.
- The legal framework for the European Sustainable Finance Taxonomy. Amending delegated EU regulation 2022/1214 which incorporates the nuclear and gas activities into the taxonomy was adopted on 9 March 2022 and will enter into force as from 2023. An appeal was lodged by the Republic of Austria on 7 October 2022 (published in the OJEU on 23 January 2023) against the delegated Act by the Commission incorporating certain nuclear and gas activities in the taxonomy.
- In response to the energy crisis, the European Commission published on 18 May 2022 the RepowerEU plan aimed at increasing Europe’s independence from Russian fossil fuels, accelerating the energy transition and strengthening the resilience of the European energy system. This plan lays down a series of measures aimed at enhancing the ambit of several legislative instruments, particularly those pertaining to energy efficiency, renewable energies and the development of hydrogen.
- The European Commission has opened a public consultation on reforming the electricity market design (the consultation is open from 24 January to 13 February 2023). The Commission wishes to submit draft legislation to the European Council at its meeting on 23 and 24 March.
b) Main risks
- General risks related to the existing ARENH scheme
- Regardless of the corresponding exceptional situation due to the announcements of 13 January 2022, as long as the ARENH scheme exists, it exposes EDF to the following risks:
- since the ARENH mechanism is globally optional and free of charge, it gives suppliers opportunities for trade-offs between the ARENH mechanism and the market price, to the detriment of EDF, and exposes EDF to major uncertainties that have a negative impact on the effectiveness of its energy market risk management. As a result, EDF is highly exposed to falls in wholesale electricity market prices when their total level (energy + capacity) is below the ARENH price (currently €42/MWh) for the year of delivery in question. Conversely, the positive impact of wholesale electricity market price increases is limited when their total level (energy + capacity) is above the ARENH price;
- beyond this, there is a risk of ARENH volume increasing, while this increase fails to correspond to a sufficient increase in price;
- the implementation of this measure has given rise to disputes described in note 17.3 to the consolidated financial statements for the fiscal year ended 31 December 2022. Some of these disputes, which relate to the application of force majeure in the context of the Covid-19 health crisis, exemplify the trade-offs performed by certain alternative suppliers when market prices become lower than the ARENH price, by suspending the performance of the ARENH contract between them and EDF in order to benefit from cheaper supplies on the markets;
- added to this is the risk arising from the practices of so-called “intermittent” suppliers to reduce their portfolio before the onset of winter (some suggest to their customers to return in the spring) to resell on the markets the ARENH volumes thereby becoming available.
