Plans & Construction
8 Oct (NucNet): The European Commission (EC) has approved a modified state aid package for the proposed Hinkley Point C nuclear power station in Somerset, paving the way for construction to begin on the first nuclear reactors in the UK in almost 25 years.
The EC said revised UK plans to subsidise the construction and operation by EDF Energy of two 1,600 megawatt EPR units at Hinkley Point were “in line with EU state aid rules”.
Brussels had initially raised serious doubts about the deal, saying it extended up to £17.6 billion of potentially wasteful and illegal public subsidies to a project that would in all probability be profitable without them.
But the EC said today that the UK authorities had demonstrated that the support would address “a genuine market failure”, dispelling the EC’s initial doubts. In particular, the promoters of the project would not be able to obtain the necessary financing due to its unprecedented nature and scale, the EC said.
Commission vice-president Joaquín Almunia, in charge of competition policy, said the UK measures in favour of Hinkley Point nuclear power station have been significantly modified, limiting any distortions of competition in the single market. He said: “These modifications will also achieve significant savings for UK taxpayers. On this basis and after a thorough investigation, the Commission can now conclude that the support is compatible with EU state aid rules.”
The EC found that a state guarantee fee which EDF Energy would have paid to the UK Treasury was too low. The fee was increased to reduce the subsidy by more than £1 billion and leave the UK Treasury with an equivalent gain.
The EC also said that under the revised package, gains generated by the project will be better shared with UK consumers. This “gain-share mechanism” will be in place not only for the 35-year support duration, but for the entire 60-year lifetime of the project. If the construction costs turn out to be lower than expected, the gains will also be shared.
Under EU Treaty rules, member states are free to determine their energy mix, but when public money is spent to support companies, the EC has the duty to verify that this is done in line with EU state aid rules.
One of the main aspects of the deal investigated by the EC was the guarantee from the UK government to EDF Energy on the price of electricity to be produced by the planned reactors.
The so-called “strike price” remains unchanged. It was set at £92.50 per megawatt-hour, about double the current wholesale price of electricity in the UK. This price will be guaranteed for 35 years after the proposed reactors begin operation and will increase in line with inflation. However, it would be reduced to £89.50 if EDF committed to go ahead with construction of a second nuclear station at Sizewell C in Suffolk.
The EC launched the investigation into state aid for Hinkley Point C in December 2013. The investigation could set a precedent for future state aid cases involving state financial support for nuclear power plants because no such case has yet been examined by the EC.
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