The CSPE or the 3 CSPEs

The CSPE or the 3 CSPEs 

Jean Pierre Riou 

English translation Bernard Durand 

Avertissement : cette série d'articles en anglais reprend des articles du Mont Champot en français afin d'étayer une publication ultérieure.

Cet avertissement explicatif sera rapidement supprimé.

Analysis of the financing of Renewable electric Energies (ReEn) and of the costs induced by their production.

Tomorrow we shave for free

 The professional representatives of renewable energies had answered before theSenate in 2007 that the additional cost of renewable energies would weigh only a few years on the consumer, through the "Contribution to the public service of electricity" (CSPE) by affirming: " By counting on a regular price increase of 5%, the contribution to the CSPE is positive until 2015. Consumers will therefore be forced to pay more for the development of wind power. Then the contribution becomes negative. The wind producers will then generate a rent for the community ”

 We now know that the reality is quite different. However, after a spectacular surge, the CSPE has now stabilized for 3 years at the same level of € 22.5 / MWh.

Deciphering

Each year in July, the Commission for Energy Regulation(CRE) deliberates  on the provisional assessment, for the following year, of the levies (CSPE) on electricity, as due for the so-called public electricity service. For the year 2019, these levies are estimated at € 7.7 billion. With 5.3 billion euros, the additional cost linked to the obligation made to Electricité de France (EDF) to purchase renewable electrical energy (ReEn), which is essentially windpower and photovoltaics, represents 68% of these levies, as the infographics of the latest CRE deliberation shows.

This additional cost represents the difference between the evaluation of the remuneration by feed-in-tariffs of these ReEn with what the same amount of electricity would have cost at market price.

CRE also specifies the average price for these purchases, for each sector, in Annex 1 to each deliberation.

The surge in levies and the substitution of the CSPE

This is how the rapid development of renewable energies resulted in an increase of the CSPE from 4.5 € / MWh in 2010 to 22.5 € / MWh in 2016. Nevertheless this increase, which was limited by law, was not sufficient to compensate the entire additional cost for EDF, towards which the State's debt was therefore increasing each year, reaching 5.7 billion euros at the endof 2015.

Finally, it should be noted that this CSPE tax is itself taxed by a 20% VAT, which brings the amount for the consumer to € 27 incl. Tax / MWh.

At the same time, the amendment to the finance act No. 2015-1786 of December 29, 2015 replaced this method of financing - which was beyond the control of parliament and did not comply with European Directive 2003/96 on the taxation of energy – by  the “Energy transition special account (CAS TE)”

This special account is also intended to clear the State debt to EDF by 2020. Initiated in 2016, this repayment represented 1.9 billion euros for 2019, as decided by the deliberation of the CRE already mentioned.

This is therefore added to the 5.3 billion 2019 expenses linked to ReEn, making a total of 7.2 billion €.

When a CSPE replaces another

On the other hand, the CSPE disappeared on January 1, 2016, by being absorbed by the Internal Tax on the final consumption ofelectricity (TICFE), collected on behalf of Customs, then integrated into the State budget.

But, at the same time, this TICFE saw itself renamed CSPE, which could not fail to maintain lasting confusion and suggest that the increase in levies of the public electricity service (CSPE) linked to renewable energies finally stopped since the contribution to this public service (CSPE) has not increased for 3 years on electricity bills, after having quintupled in 6 years.

The supply of CAS TE

The Court of Auditors notes, however, that for its first year of operation, in 2016, this special account remained mainly suppliedby taxes on electricity (TICFE, renamed CSPE).

But confirms however that "as of financial year 2017, the financing of the CAS has been profoundly modified since it would be the TICPE which would take over, essentially through  a climate-energy contribution (CCE)" . That is to say, the carbon tax.

The Court confirmed "an almost exclusive supply of the CAS with TICPE in 2017" (formerly tax on petroleum products), "the rest of the resources coming from TICC (tax on coal) up to 1 M €".

Electricity bills are therefore no longer affected by this funding.

To continue to understand

The benchmark estimate for the additional budget due to purchasing ReEn, remains that of the public energy service charges (CSPE) appearing in each CRE annual deliberation. To anticipate their evolution, the Court of Auditors estimates in its report ofApril 2018 that there remain 121 billion euros to be paid for the only contracts already committed before 2018. It distributes the annual forecast of these charges until 2044 in the table below, and separates, in blue, the charges to  be paid before 2011. It then stigmatizes the poor appreciation of the financial consequences of these ReEn support mechanisms.

Thus, the commitments made until the end of 2017 will represent 121 billion euros - in current euros - between 2018 and the expiration of these contracts, the latest being in 2046. The annual burden of commitments made before 2018 will only decrease significantly after 2030, when the weight of commitments prior to 2011 will fade (see graph n ° 3)

Graph n ° 9:

forecast of future expenditure for commitments made up to the end of 2017 (support for ReEn and injected biomethane)

Subsidies and social justice.

 This financing of renewable energies by a « carbon » tax  feeding an account of the national budget  is contrary to the principles of efficiencyand social justice of  a carbon tax as defined by economists. Economists indeed agree on the need to fully use of the strength of its price signal by  the redistribution of all of its product to households in order to avoid its punitive effects on purchasing power and their harmful consequences on the  economy. 3,589 American economists, including 27 Nobel Prize winners, signed a declaration considered the widest in the history of economics to recall the basic principles of an effective carbon tax. The 5th principle states: « To maximize the fairness and political viability of a rising carbon tax, all the revenue should be returned directly to U.S. citizens through equal lump-sum rebates. The majority of American families, including the most vulnerable, will benefit financially by receiving more in “carbon dividends” than they pay in increased energy prices. This is why the majority of economists agree, more explicitly, "that an effective tax is also characterized by:" ... (3) the prohibition on subsidizing alternative energy sources, including renewable sources such as than wind and solar power. "

By funding renewable energies through a carbon tax feeding a budgetary account, and  by the CSPE as well, the french Government is not raising public money for its energy policy by an egalitarian tax controlled by Parliament, but by a tax which  flouts this principles at the expense of social justice. The Yellow Vests are the consequence of this lack of social justice. Subsidizing with this tax wind and solar power flouts these principles as well.

Moreover, claiming, as does the french Government, that wind and solar power will be very effective in decarbonizing the french electrical system, that has already been decarbonized for now ¼ century is a political swindle.

The unnamed tax.

There remains, however, a hidden tax which continues to place the burden of renewable energy on electricity bills: it is the tax linked to the necessary restructuring of the electricity network intended to enable it, not only to supply the consumer, but also to drive back local renewable electricity surpluses towards the main electricity transport system. New role which now requires the network to be dimensioned in all points to be able to manage each record of random production.

Although its name does not appear on most invoices, this TURPE (Tariff for the Use of Public Electricity Networks) is included in the subscription and paid for by the consumer.

Epilogue

Intermittent renewable electricity (wind power and photovoltaics) financing mechanisms represent only the visible part of the additional costs they generate with respect to other sources of electricity.

Indeed, the impossibility of storing their production on a large scale at a cost acceptable to the community, prevents them fromparticipating in the sizing of the electrical system by replacing any installed dispatchable power whatsoever.

However, these dispatchable power units, responsible for compensating for windless or sunless periods, must be curtailed as soon as the weather conditions become favorable.

And the reduction in production thus imposed onnuclear power plants at each good performance of the wind turbines represents a considerable shortfall compared to the approximately 10 euros / MWh of fuel saved.

In one way or another, this loss of profitability can only be billed to taxpayers / consumers since EDF belongs to the State, for 83.7% (as of December 31, 2018).

Obviously, there is little hope that wind power and photovoltaics will soon become economical !