What You Pay and What You Don't See
How the European electricity market makes the French pay for German gas
Lire en français →What You Pay and What You Don’t See
By Gabriel Bastiat, with contributions from Raphaël Noir, Augustin Moreau and Maxime Vauban
In 2023, the French nuclear fleet produced electricity at a full cost of 60 to 70 euros per megawatt-hour. That same year, French consumers paid a market price that peaked at 275 euros per megawatt-hour. The state spent 40 billion euros on a tariff shield to soften the gap.
Three numbers. Read them slowly. A country produces its electricity for 60 euros. It sells it to its citizens for 275. And it borrows 40 billion so nobody notices.
My intellectual namesake Frédéric Bastiat — my parents were economists, yes, and no, they had zero sense of humour — formulated in 1850 the most useful distinction in the entire history of economic thought: between what we see and what we don’t see. What we see: the electricity bill. What we don’t see: the system that produced it. And it’s in the invisible that the heist takes place.
What We See
Everyone knows prices went up. +25% on regulated tariffs between 2022 and 2024. Every newspaper’s business section. The protests. Bakers taping their EDF bills to the shop window. Marine Le Pen promising to cut the VAT on energy. Jean-Luc Mélenchon promising to nationalise anything that produces a watt.
What we see is the anger. It’s legitimate. But it’s aimed at the wrong target.
The French are furious with EDF, with “the market,” with “Brussels.” They’re wrong on the first two and half-right on the third. The problem isn’t that an electricity market exists. The problem is that this market was designed to solve Germany’s problem, not France’s. And France agreed.
The First Invisible: The Merit Order, or How to Pay for Bavarian Gas from Rennes
Imagine a baker in Rennes. He makes his bread with local flour, produced fifty kilometres away, at a cost of 0.30 euros per kilo. But the European flour market regulation stipulates that the price of all flour sold in Europe is set by the last kilo needed to meet demand — and that last kilo is organic quinoa flour imported from Peru at 4 euros per kilo. Our baker in Rennes therefore pays 4 euros for his local flour. His supplier pockets the difference. His customers pay three times more for their baguette. And a bureaucrat in Brussels explains that this is the price of market integration.
You find this example absurd. It is exactly how the European electricity market works.
The system is called the merit order. Power plants are called upon in ascending order of marginal cost: first nuclear and renewables (near-zero marginal cost), then coal, then gas. The market price is set by the last plant called to balance supply and demand. In Europe, that last plant is almost always a gas-fired station. The price of gas therefore sets the price of electricity for the entire continent.
France produces 70% of its electricity with nuclear power. Full cost: 60 to 70 euros per megawatt-hour — Raphaël verified the 2024 Cour des comptes figures, and no, it’s not 42 euros as EDF keeps repeating in its press releases; that’s the full cost including decommissioning and waste management. Fine. 60 to 70. Germany produces 27% of its electricity with gas, at a cost of 150 to 250 euros per megawatt-hour depending on Dutch TTF prices.
Guess which country sets the price for both.
Germany shut down its nuclear power plants in 2023. That’s its sovereign choice. It chose to depend on Russian gas, then, after February 2022, on American and Qatari LNG. That’s its business. What is not its business is imposing the price of that dependence on 450 million Europeans via a market architecture that turns the most expensive choice into the continental reference price.
Milton Friedman, in Capitalism and Freedom, chapter 2, distinguishes the rules of the game from the outcomes of the game. The rules of the European electricity market are not neutral. They were drawn for a continent where every country depends on the same marginal fuel. That isn’t France’s case. The merit order is a rule of the game designed for a game France doesn’t play — and it pays anyway.
The Second Invisible: The ARENH, or Regulatory Parasitism
In 2010, France created the Regulated Access to Historical Nuclear Electricity — the ARENH. The principle: force EDF to sell a quarter of its nuclear output at 42 euros per megawatt-hour to “alternative suppliers.”
Gary Becker, 1992 Nobel laureate, demonstrated in The Theory of Regulatory Capture that regulations supposedly protecting consumers systematically end up protecting organised interest groups at the expense of a diffuse public. The ARENH is a textbook case — it could sit in a manual, chapter heading: “How to Destroy an Industrial Champion in Ten Years.”
The “alternative suppliers” benefiting from the ARENH have never built a power plant. Never invested a cent in generation. Never managed a gram of nuclear waste. They buy at 42, resell at market price — 200, 250, 275 euros in 2022 — and pocket the margin. When the market price falls below 42, they withdraw. No risk. No investment. No added value. Claire Beaumont found the right phrase during our debate: parasitic intermediation.
The accounting result is merciless. EDF accumulated 64.5 billion euros of debt. In 2023, the state bought out the remaining EDF shares for 9.7 billion. The operation was presented as a “renationalisation.” Let’s call it what it is: taxpayers paid once via the ARENH — by subsidising intermediaries who captured the nuclear rent — then paid again via the buyout of an operator bled dry.
The ARENH expires at the end of 2025. But the replacement mechanism proposed by the CRE reproduces the same logic: a regulated price that prevents EDF from capitalising on its competitive advantage. The label changes. The bottle contains the same poison.
The Third Invisible: 45 Billion to Decarbonise What’s Already Clean
France is 92% decarbonised in its electricity generation. Fifty-six grams of CO2 per kilowatt-hour. Germany: 380 grams. Poland: 650.
Despite this, France has committed over 45 billion euros in cumulative subsidies for renewables via the Contribution to the Public Electricity Service — the CSPE. It adds 22.50 euros per megawatt-hour to your bill — you don’t see it; it’s buried in “taxes and contributions.” Purchase contracts signed between 2006 and 2014 guaranteed between 82 and 130 euros per megawatt-hour for solar photovoltaic, over twenty years. One hundred and thirty euros for solar in a country that is overcast six months of the year and already produces virtually carbon-free electricity.
Maxime Vauban asked the question that sums it all up: why is France funding Germany’s energy transition on its own bill?
The answer lies in the European directives. The Energy-Climate package imposes targets for the renewable share of the electricity mix. Not decarbonisation targets — renewable targets. The distinction is critical. A country that is 70% nuclear is already decarbonised. But it isn’t “renewable” as defined by the directive. So it must spend tens of billions adding wind turbines and solar panels to a grid that doesn’t need them — to meet a target that doesn’t measure what it claims to measure.
This is Bastiat père, Economic Sophisms, first series: confusing the means with the end. The end is decarbonisation. The chosen means is renewables. France reached the end through a different means. And it’s being told to use the prescribed means anyway. It’s like forcing a doctor whose patient is cured to administer the planned treatment because the protocol demands it.
The Deepest Invisible: The Energy Disarmament Pact
Augustin Moreau formulated, during our debate, a hypothesis I’d never heard before — and it hit me like a fist.
The single European electricity market isn’t a design accident. It’s a political pact. France agreed to align the price of its electricity with the European marginal cost — that is, to surrender its nuclear advantage — in exchange for access to the single market for its businesses, financial services, and agriculture. A voluntary energy disarmament, conceded in the corridors of the Commission in the 1990s and 2000s, never debated in the Assemblée nationale, never put to the French people.
If Moreau is right — and the preparatory documents of Directive 96/92/EC that he cites suggest he is — then the merit order isn’t a technical flaw. It’s the price France pays for being European. A permanent transfer of wealth from French consumers to the continent’s marginal producers, disguised as a market mechanism.
Friedman wrote (Free to Choose, p. 38) that there’s no such thing as a free lunch. He was right. But he also wrote that citizens have the right to know who’s paying for whose lunch. The French are paying for Europe’s energy lunch. They don’t know it. Nobody told them. And every time an economist or politician says so, they’re told that “challenging the single market would be catastrophic.”
Perhaps. But the opposite also deserves examination: is a single market that punishes its most virtuous member viable in the long run?
What Must Be Done
I’m an economist. Diagnoses without prescriptions don’t interest me. Here are four measures. None is easy. All are necessary.
One. Establish a Contract for Difference on French nuclear at 65 euros per megawatt-hour — the true full cost. When the market price exceeds 65 euros, EDF returns the difference to the state. When it falls below, the state compensates. The French consumer pays the real cost of their electricity. Not the price of Bavarian gas, not an artificially low tariff funded by debt. The true price.
Two. End any ARENH-type mechanism. If alternative suppliers want to exist, let them invest in generation. Not one euro of nuclear rent to those who have built nothing. The French electricity market must reward producers, not intermediaries.
Three. Negotiate a dual market in Brussels. France stays integrated into the European market for cross-border exchanges and balancing. But the domestic price is decoupled from the continental merit order and set by national production cost. Spain and Portugal obtained an Iberian exception in 2022 — the mechanism capped the gas price in electricity price formation. France can obtain the equivalent. If it asks.
Four. Redirect renewable subsidies towards storage and flexibility. France doesn’t need more intermittent megawatts. It needs batteries, pumped-storage hydro, hydrogen. Every euro spent on wind turbines in a country that is 70% nuclear is a euro not funding the real problem: peak management and transport electrification.
I know what I’ll be told. Socrate asked it during the debate, and the question deserves an honest answer: if France decouples its domestic price from the European market, what becomes of the single energy market? I don’t have a complete answer. Perhaps the single energy market, as designed, doesn’t deserve to survive in its current form. Perhaps a market that systematically transfers the costs of German choices onto French consumers isn’t a market — it’s a tribute.
But I concede the question is open. An honest economist doesn’t claim decoupling would have no consequences. He claims the current coupling has consequences we refuse to count.
Back to our baker in Rennes. He gets up at four in the morning. He turns on his oven. The meter runs. He produces three hundred baguettes. He pays for his electricity at the price of liquefied gas unloaded in Rotterdam, shipped to Bavaria, burned in a Siemens turbine, to compensate for the shutdown of nuclear plants decided by a parliament in which he has no representative.
His oven runs on French nuclear electricity. Produced sixty kilometres away. By an amortised plant. At a real cost of 60 to 70 euros per megawatt-hour.
He pays 275.
Frédéric Bastiat published What Is Seen and What Is Not Seen in July 1850. He died five months later, at forty-nine, too young to see his distinction’s posterity. One hundred and seventy-six years on, his principle hasn’t aged a day. What we see is the bill. What we don’t see is the system that produced it — the merit order that aligns the virtuous with the wasteful, the ARENH that rewards the parasite, the subsidies that fund the unnecessary, the political pact that turned a competitive advantage into continental charity.
The baker sees none of it. He sees a number at the bottom of his bill. And he wonders why he gets up at four in the morning.