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.