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EU investigation could derail UK’s nuclear plans

06 January 2014

In mid-December the European Commission will open an investigation into planned UK support for a new nuclear power plant at Hinkley Point in Somerset. This could be a precedent-setting case for the funding of  future nuclear power stations across the EU.

Artist's impression of Hinkley Point C
Artist's impression of Hinkley Point C

The UK government has offered EDF a price guarantee lasting 35 years on power from the plant, Hinkley Point C, which the French utility plans to build. The deal, signed in October  set the strike price for electricity from the plant at £92.50/MWh – falling to £89.50/MWh if EDF decided to go ahead with a second nuclear plant at Sizewell in Suffolk. This is around twice the current rate paid for electricity in the UK.

EU competition commissioner Joaquín Almunia will look into whether the deal agreed between the two parties involves illegal state aid, the length of the contract, the agreed minimum electricity price, insurance against a meltdown  and a government loan guarantee. The EU can demand changes be made to state policies that in its view distorts competition illegally.

Another possibility is the directorate could call for modification of the government's planned support, involving the guaranteed price or the contract's length.

Almunia said:  “If national authorities eventually decide to support nuclear energy, it will be our responsibility to assess the compatibility of their subsidies under EU competition law on a case-by-case basis and directly under the provisions of the Treaty.”

Earlier this year EU Energy Commissioner Gunther Oettinger described Britain’s plans for long-term nuclear contracts as “Soviet” in an off-the-record conversation with an energy campaigner.

If the investigation finds against the deal, there must be serious doubt over whether the £16bn Hinkley C project will go ahead. This would be a serious blow to the UK Government’s future energy plans, and could also derail a planned deal with Hitachi and Horizon for a new nuclear plant at Wylfa in Anglesey, which is also using the so-called ‘contract for difference’ mechanism to support renewable energy projects.

EDF has previously said that until the deal receives clearance from the EU the group cannot make a final investment decision or bring in co-investors - two state-owned Chinese companies interested in taking a stake - which could delay the project and cast doubt over the entire contract for difference scheme.

Almunia’s team are expected to issue an initial verdict in January, paving the way for a broader inquiry. Any decision requires backing by the College of EU commissioners.
There are no formal deadlines for an investigation, but UK officials told the Financial Times the EU realises Hinkley is a priority for the country and is "putting in the resources" to complete the process by next summer.

The UK government has consistently argued the strike price does not qualify as State Aid and, even if the EU finds it does, the programme is consistent with EU treaties. The UK government can appeal any negative decision at the European Court, but such a move could leave the project delayed for a long time, and derail longer term plans for a large-scale nuclear investment programme.

In a submission to a consultation on underground waste disposal, theUK Government’s  Committee on Radioactive Waste Management (CoRWM) said that an upper limit of 75 gigawatts of nuclear power is “being examined” by the Department of Energy and Climate Change (DECC) in London.

This equates to over 50 new large-scale modern reactors. The current programme announced by ministers is to build 12 reactors to supply 16 gigawatts at five sites, starting with Hinkley Point C.

CoRWM was commenting on the number of disposal facilities might be required for the waste that will be produced by new nuclear power stations. The 16 gigawatt programme was only the “first tranche”, it said, and was “substantially below the 75GWe upper limit being examined in DECC”.

Britain is the first European member state to request approval for government support for nuclear power. The Commission's verdict is expected to determine how other states regulate nuclear support in future.

The Czech Republic is also debating whether to guarantee a minimum power price for state-owned utility CEZ to help it expand its Temelin nuclear plant.

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