A British plan to guarantee the price of power from its first new nuclear project in decades won European Union backing in a landmark ruling on Wednesday (8 October) that threatens to trigger legal challenges.
Seen as market-distorting state aid by opponents, the price guarantee was approved in a 16-to-5 vote with one abstention in a tense meeting of the College of Commissioners, according to EU sources. Not all 28 members were present.
— vickyford MEP (@vickyford) October 8, 2014
The project at Hinkley Point, in southwest England, is part of the Cameron government’s strategy to replace a fifth of the UK’s ageing nuclear power and coal plants, and a major export contract for France.
UK agrees to lower subsidy
The ruling, announced on Wednesday, clears the way for the 16-billion-pound (€20.3bn) Hinkley Point nuclear power station in southwest England to be built and operated by French utility EDF.
The British government helped to secure the deal by agreeing to a lower subsidy and a smaller share of windfall profits for EDF, the European Commission said.
Britain pressed hard for approval, arguing that replacing its ageing nuclear reactors was vital to meeting its environmental goals.
The case could serve as a precedent for countries such as the Czech Republic, Lithuania and Poland that have sought guidance on the level of state aid allowed. The Commission, the EU executive, has never before approved state aid for a new nuclear plant.
“We have concluded that a market failure exists. Without support, this investment would not take place,” Competition Commissioner Joaquín Almunia told reporters.
The decision can be challenged in European courts, however, and Austria has already threatened legal action, arguing that the British deal amounts to a subsidy for nuclear power.
— Greenpeace EU (@GreenpeaceEU) October 8, 2014
The Green Party said it would work with all “forces in Europe willing to annul this decision by an EU court decision”.
Claude Turmes, Luxembourg Green Member of the European Parliament, deemed the decision “the most outrageous EU Commission decision of the last 15 years. It is economic nonsense.”
EDF will receive a guaranteed power price of 92.50 pounds (€117.5) per megawatt-hour for 35 years, more than twice the current market rate, once the plant begins operations in 2023.
The Commission said British authorities had agreed to cut the subsidy by more than 1 billion pounds (€1.2bn) and that Britain’s share of any windfall profits over the plant’s lifetime would amount to billions of pounds.
Britain relies on nuclear power for around a fifth of its yearly electricity output but needs to replace ageing reactors.
“Today’s announcement will be welcomed not only by those involved in the Hinkley Point C project but also by the many other companies that are looking to invest in nuclear energy in the UK and more broadly in Europe,” said Jonathan Cobb, senior adviser at the World Nuclear Association.
Analysts called it a boost for an industry in the doldrums since the 2011 Fukushima nuclear disaster in Japan and for France’s Areva, which will deliver two 1,600-megawatt EPR pressurised water reactors for the plant.
Horizon Nuclear Power, a subsidiary of Japan’s Hitachi Ltd which plans to build a nuclear plant at Wylfa in Wales, also welcomed the decision. That project will also face an EU review once terms are agreed with the British government.
Czech firm CEZ has also watched the British deal with interest as it looks to expand its own Temelin nuclear power station.
“One argument was that it would never go through because it is public support. Now, though, Brussels approved it for the British. It is always good when someone big clears the way for you,” CEZ Chief Executive Daniel Benes told the Hospodarske Noviny newspaper last month after the EU gave initial backing to the plan.
Echoing the stance of Green Party politicians, environmental campaigners also voiced opposition to the decision.
“There is absolutely no legal, moral or environmental justification for turning taxes into guaranteed profits for a nuclear power company whose only legacy will be a pile of radioactive waste. This is a bad plan for everyone except EDF,” said Greenpeace EU legal adviser Andrea Carta.
European Green Party Co-Chair Reinhard Bütikofer commented in negative terms. “This is an extremely unfortunate decision, and goes in the face of the Commission's own guidelines on state aid to energy companies. Nuclear should be considered a so-called mature technology, that should be excluded from state aid. While the Commission is more and more hesitant or outright adversarial towards renewable energies, it is now opening a new door for lavish nuclear subsidies. That is an about-face and a major setback for the European energy transition that we need.”
UK Green MEP and economics spokesperson Molly Scott Cato said: "In waving through the massively problematic Hinkley C deal, the outgoing Barroso-led EU Commission is giving a cynical boost to nuclear power. There can be no doubt that the generous terms being offered by the UK government to EDF on Hinkley C amounts to illegal state aid under EU rules. It is a scandal that one of the final acts of the Barroso Commission is to turn a blind eye to the illegality of the Hinkley deal as some kind of quid pro quo for Germany's renewable energy support scheme. The tragic irony is that this deal, and the precedent it creates, is a massive setback for renewable energy in the UK, with small producers unable to compete on these terms."
Greens/EFA co-president and nuclear spokesperson Rebecca Harms stated: "This precedent would have potentially massive implications for the EU energy market and the goal to boost the share of clean, safe and home-grown renewable energies. Today's decision by the Commission cannot be the last word. A number of affected actors have indicated they will initiate legal challenges and our group will fully support these challenges in any way possible. The Austrian government has also stated it will challenge the decision; any EU governments that are serious about phasing-out nuclear power must support this and, as such, this is the moment of truth for the German government and its phase out. The European Commission cannot be allowed to clear the path for further exorbitant public spending on this dated and dangerous technology, when we should be promoting a safe and sustainable energy future for Europe."
Claude Turmes, Member of the Green Group in the European Parliament said: "The state aid decision in favour of Hinkley Point C, nuclear power plant in the UK, is the most outrageous EU Commission decision of the last 15 years. It is economic nonsense, completely ignores polluters pays principle enshrined in EU Treaties, breaches existing EU internal market legislation and has been rushed through deliberately. It was only possible due to "political corruption" at the highest level of certain French companies, the British government and outgoing EU Commission President Barroso and Commissioners Almunia and Oettinger. The Greens will work with all those forces in Europe willing to annul this decision by a EU Court decision and with Transparency International and other organisations to bring light to this 5 years secret organisation which started already before Mr. Cameron was elected prime minister in the UK."
Greenpeace EU legal adviser Andrea Carta said: “This is a world record sell-out to the nuclear industry at the expense of taxpayers and the environment. It’s such a distortion of competition rules that the Commission has left itself exposed to legal challenges. There is absolutely no legal, moral or environmental justification in turning taxes into guaranteed profits for a nuclear power company whose only legacy will be a pile of radioactive waste. This is a bad plan for everyone except EDF.”
EU antitrust regulators opened a formal investigation last year into Britain's state guarantees to help finance a nuclear plant by France's EDF.
The European Commission had expressed scepticism that the Hinkley Point C scheme could satisfy the EU’s stringent state aid criteria after the UK government agreed to underwrite the project with a loan guarantee and a commitment on the price of the electricity generated by the power station.
Britain signed a deal with EDF in October 2013 to build a nuclear plant at Hinkley Point in southwest England and became the first European country to offer a guaranteed power price over 35 years for a new nuclear project.
- Press release: State aid: Commission concludes modified UK measures for Hinkley Point nuclear power plant are compatible with EU rules (8 Oct. 2014) | DE