The situation of the French energy market within the European Union: Case study

Résumé du document

Since its conception, the EU has been aware of the importance of energy issues. The European Coal and Steel Community (ECSC), formally established in 1951 by the Treaty of Paris, served as the European Atomic Energy Community (EURATOM) as the foundation for the modern-day European Union. EU aims to be a zone which provides free movement of goods, freedom to provide services and freedom of establishment. This can only be achieved with an open market where EU citizens can choose their energy suppliers freely and energy suppliers freely deliver to their customers. Achieving such a system means the creation of an internal Energy market, EU has adopted many directives. These rules has been establish to ensure efficiency gains, price reductions, higher standards of service and increased competitiveness. This study, which will be more analytical than descriptive, aims to show how the EU regulations, policies and institutions has affected and may affect the French energy market.
First we will examine the impact of the EU (1) and then dissect the competitive environment for new entrant.

Extraits

[...] According to LH2, only of the customers have decided to change their energy provider. The analysis we made with Porter 5 forces and customers knowledge's about the new competitive framework show a complex environment Key success factors in the industry To fit with the customers' demand and sustain the competition in this industry, a firm need to: Lead an offensive communication and marketing strategy based on: o Prices, because consumers are price sensitive o Consumers' environmental aspirations, due to their increasing awareness on environmental issues. [...]

[...] According to Eurostat, the French energy market is the most concentrated of Europe. In addition, according to LH2 there is very good relation between French and their “historical energy providers” (EDF and GDF).This make more complex the new entrants tasks because they are not well known and they have to convince satisfied filled consumers. Hence one can remain doubtful concerning the future of the news energy providers. The experience of the telecom market shows that in liberalizations processes only the fittest survive. [...]

[...] EDF hold more than 80% of the market EDF produce the totality of nuclear energy. This is important because according to Eurostat the electric power sector is based mainly on nuclear power, which accounted for 54% of installed capacity and 78% of production in 2004. There is high exit barrier in the industry. The new entrant can't all survive because the markets shares reachable are limited. Table The main competitors in the French energy market.[5] Source: Diane and CRE The table below shows us the difference in term of financial power (sales) between the historical providers and the new entrants. [...]

[...] However, one the main problem for the new entrant is the weakness of their marketing and communication strategy. According to LH2's survey of the French household has never been contacted by a new energy provider. As a result they are insufficiently informed, and don't really know the news providers. Table The notoriety of the new entrants on French energy market (in Source: LH The graph below shows us that new entrants are not well-known by households. In addition, the low percentage of litigations does not motivate customers to change their energy provider. [...]

[...] The most important for a consumer is to get enough energy for its consumption. One can also say that customers bargaining power is quite high because: Their switching costs are relatively low. Beside the French government allows to consumers who want to switch from the public supplier (EDF) to a new comer (POWEO, DIRECT ENERGY ) the right to come back; Consumers are not enough concentrated. As the customers are price sensitive and their bargaining power is quite high one can say that their power is relatively high Suppliers' Bargaining Power One can say that firms as POWEO, EDF are price sensitive because: Costs of supplied products as oil, gas, uranium is high relative to total industry costs. [...]