18 Dec (NucNet): The European Commission (EC) has launched an “in-depth” investigation to examine whether UK plans to subsidise the construction and operation of a new nuclear power station at Hinkley Point in Somerset are in line with EU state aid rules, EU competition commissioner Joaquín Almunia has announced.
The EC said in a statement that it particularly has doubts that the project “suffers from a genuine market failure”.
The EC was notified of the UK’s plans for state support for the project in October 2013 and began a preliminary investigation. As mandated by EU treaties, the EC has to investigate all state support and decide a number of issues including whether it distorts competition within the EU.
One of the main aspects of the deal the EC will investigate is the guarantee from the UK government to French utility EDF on the price of electricity to be produced by the two planned EPR reactor units at Hinkley Point C.
The so-called “strike price” was set at 92.50 pounds (GBP) (about 151 US dollars, 110 euros) 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 GBP 89.50 if EDF committed to go ahead with construction of a second nuclear station at Sizewell C in Suffolk.
The EC’s main concern is that EDF will receive a steady income for electricity produced by the station without taking into account the volatility of electricity prices, Mr Almunia said. One of the principles the EC uses in state aid cases is to check whether the aid has been kept to a necessary minimum and is not excessive.
“We have reasonable doubts about the details of the deal,” Mr Almunia said.
The EC will also investigate the GBP 10 billion UK government guarantee for the Hinkley Point C project to see whether it distorts competition.
Mr Almunia said the investigation will be carried out “directly under treaty rules” because there are no specific guidelines for the nuclear energy sector.
The launching of a full investigation will also 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.
A full investigation has no formal deadline, but UK officials have been quoted as saying that the EC understands the importance of the case and will try to reach a decision by the summer of 2014.
Mr Almunia said the duration of the investigation depends on how willing the UK government is to cooperate.
EDF said today’s announcement by the EC shows that the inquiry is proceeding as expected and in time for a decision in the summer of 2014.
The company said the strike price for Hinkley Point C will be “the first example of a new kind of agreement” to unlock the investment needed for low-carbon energy at the best possible price for consumers.
