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LATEST: France to set maximum 15 percent gas and electricity price rises for 2023

France's Prime Minister on Wednesday announced the rise in gas and electricity bills that households can expect at the beginning of 2023, once the current prize freeze expires.

LATEST: France to set maximum 15 percent gas and electricity price rises for 2023
France's current price freeze expires at the end of 2022. Photo by PHILIPPE HUGUEN / AFP

French households are currently the best-protected in Europe from soaring energy prices, as gas prices are frozen at 2021 levels while electricity bills are capped at a four percent rise.

However the current freeze – known in French as the bouclier tarifaire (tariff shield) – comes to an end at the end of this year.

Prime Minister Elisabeth Borne, speaking during a press conference on Wednesday, announced that from the beginning of 2023 both gas and electricity prices will rise – by a maximum of 15 percent.

“Very early on, we took strong measures to protect the French public. But everyone knows, and we have to say it transparently: These measures come at a cost to our public finances,” Borne said in justification of the less generous caps.

EXPLAINED Why are energy prices capped in France?

Gas providers will be able to increase their bills by a maximum of 15 percent from January, while electricity providers can raise theirs by 15 percent from February for households, shared housing and small businesses.

For the average user this will result in an extra €20-25 per month on their energy bills – as opposed to an extra €180-€200 per month without the price shield in place. 

Borne also announced a chèque energie (a cash grant) for low-income households, which will be paid at the end of 2022 at a rate of between €100 and €200 depending on income level – this will apply to around 12 million households (around four in 10). 

She told the press conference that the price of electricity on the open market was 10 times higher than in 2021, while has prices are five times higher. In total maintaining the price shield – even at the reduced rate – will cost the French state €16 billion. 

“In 2022, France will spend 2.2 percent of its GDP to protect our compatriots and its businesses” added Finance minister Bruno Le Maire. 

As well as spiralling prices, countries around Europe are also facing the possibility of energy rationing this winter, but Borne said that France has no risk of shortages under normal winter conditions – thanks to having 95 percent of its gas stocks filled and extra imports and methane gas storage. 

She added, however, that there could still be a risk of shortages during a normal winter if France doesn’t succeed in its goal of cutting energy usage by 10 percent and if deals with other European countries to import energy fall through.

If it is an exceptionally harsh winter with very low temperatures, however, there remains the risk of energy rationing in France, although the risk was described as “low”. 

“Only cutting energy usage and European solidarity will allow us to avoid blackouts in the worst scenarios,” she added. 

OPINION France cannot afford to keep shielding consumers from energy price rises

The French government is currently working on a major plan to cut the country’s energy usage by 10 percent, compared to 2021, full details of which will be revealed at the beginning of October. 

The plan will include measures that are compulsory for government offices and agreed through a voluntary code for businesses, but will be simply advisory for households.

However there will be, starting in mid-October, a publicity campaign entitled chaque geste count – every action counts – encouraging households to limit their usage.

An online tool named Ecowatt will also be launched, showing people in real time the energy usage situation in France using a traffic light system – green means consumption is normal, orange means the system is under strain and red means that blackouts are inevitable if current usage continues. 

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ENERGY

Reader Question: Why has the price of fuel for log-burners doubled in France?

The cost for one tonne of the wood pellets used to power wood-burners or stoves has doubled since the beginning of 2021.

Reader Question: Why has the price of fuel for log-burners doubled in France?

Question: We have a poêle in our home in south west France and we have noticed that the price of the wood pellets has rocked in recent months – is this an issue all over France? And why?

Although French consumers are largely shielded from the rocketing prices of gas and electricity seen in many European countries, there is one heating method that has not escaped rising costs – wood-burners.

Many French homes have either open fires or log-burners known as poêles, and the most efficient thing to burn in these are specially created wood pellets known as either pellets or granulés de bois

How much do they cost?

On September 20th, Eric Vial, the director of Propellet, the national association of wood pellet heating professionals, told Actu France that the price has almost doubled since last summer.

“Today, a tonne can be bought for about €600. At the beginning of 2021, it would be €300, €350”, Vial told Actu France on September 20th.

The pellets are usually sold in either DIY stories, specialist outlets or hypermarkets and of course the retail prices vary, but in most cases stores have had no choice but to pass the cost increases on to customers.

Why the increase?

Wood pellets have increased in price for several reasons, namely increased demand and higher production costs.

First, demand for wood pellets increased significantly this year. It also came earlier than it normally does, as people began preparing for winter earlier. Many customers placed order before the start of production for 2022.

“The supply is restricted compared to the demand,” explained a spokesperson for Propellet to La Depeche.

The increased demand amid concerns of energy shortages this winter came alongside a general trend of more installations of pellet-burners in France, as installations are supported by the government in an effort to reduce pollution and dependence on fossil fuels. Households can benefit from State aids and subsidies to install new or refurbish old heating systems.

READ MORE: Heating homes: What are the rules on fires and log burners in France?

Between 2020 and 2021, sales of pellet stoves have increased by 41 percent and sales of pellet boilers by 120 percent.

Stores across the country have been forced to limit sales with demand outpacing supply. One such shop is the Weldom store in Fleurance, near Toulouse, who found themselves out of stock in late September. Store owners told La Depeche that they have “a lot of demand at the moment” and if the re-stock delivery “does not arrive, it will be a loss for the store.”

Prices are also rising is due to increased production costs.

According to Propellet, production expenses first increased during the pandemic when plastic and metal elements needed for the creation of pellets were more difficult to find. Currently, the issue facing the industry is the price of electricity. 

Vial explained Actu France that “To manufacture pellets, you need electricity. Because of what is happening in Ukraine, [the price of electricity] has increased a lot.”

According to Christian Lejeune, the manager of the sawmill in Grand-Est, several companies that supply wood pellets are more directly impacted by the war in Ukraine. “They imported their supplies from Ukraine or Belarus,” explained Lejeune to Republicain Lorrain.

Unlike electricity and gas, wood pellets have not fallen under a government price shield to protect consumers from price increases related to inflation. 

READ MORE: LATEST: France to set maximum 15 percent gas and electricity price rises for 2023

Some local politicians, such as the MP for the Ardennes area, Pierre Cordier, have begun pushing for wood pellets to be covered by a price shield, as well as for action to be taken to protect against possible shortages. 

The Minister of Environment, Agnès Pannier-Runacher, responded to Cordier’s requests on September 13th, saying that the government has “taken measures to promote the production of pellet and not be in a supply impasse.” 

The details of such measures were not yet communicated as of September 26th, but according to the Prime Minister’s press conference detailing the extension of the energy shield for electricity and gas, households that use wood-burners will also benefit from the cheque energie, depending on their level of income.

Is there concern about a shortage?

Propellet told La Depeche that “we are not yet in a situation of shortage” instead they are concerned about “temporary strains.”

The association of wood pellet heating professionals expects that the situation will have “smoothed over in the coming months” but this will depend largely on the weather. A colder winter would increase demand.

In the event of a harsh winter, France might need to import wood pellets from other countries, which could prove problematic, as the situation for many other countries is “similar” to France in that there is increased consumer interest in purchasing wood pellets, according to Vial. 

The sector hopes to double its production capacity by 2028, and to distribute an additional one million tonnes between 2021 and 2024. 

On September 22nd, TotalEnergies inaugurated a new pellet bagging and bulk centre.

The plant, which was set up in partnership with the organisation Sea Invest, is intended to boost supplies by increasing the site’s processing capacity from 25,000 metric tons to 50,000 metric tons within three years. Pellets produced will be distributed in a 200 km area around Rouen.

What about firewood?

Consumers have also found themselves paying more for firewood due to a rise in demand – prices have gone up 20 percent since June, according to BFMTV.

When asked about the rising price of wood, the prime minister said that her administration would “look carefully at why wood has a high cost” adding that she believes it “can be produced on our territory.”

“We have forests in France so it will also be interesting to look at whether some people are not taking advantage of the crisis to increase prices,” said Prime Minister Elisabeth Borne.

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