As some of you may know, the UK government plans to finance a huge new nuclear power plant, Hinkley Point C, and it should be build by EDF. However, in signing the deal, EDF demanded substantial financial aids. These financial aids are currently subject to vivid discussions, as they do not conform to EU competition laws and destroy incentives for investments in e.g. alternative energy production.
There are now some news from various places that the EU is likely to rule that the UK state aid for Hinkley Point C is illegal. A rejection like this will also again tilt the scale against further developments of nuclear energy in Europe, since the new nuclear power plants cannot anymore be built without precisely those large state aids that are illegal from the EU perspective.
The European Commission will almost certainly find that EDF Energy’s funding mechanism for the construction of the Hinkley Point C nuclear unit in the UK is illegal state aid, an Austrian law professor told Platts. Franz Leidenmuhler, who specializes in EU state aid cases and European competition law, said in an email that he believed “a rejection is nearly unavoidable. The Statement of the Commission in its first findings of December 18, 2013 is too clear. I do not think that some conditions could change that clear result.” The new Hinkley unit will be built based on a funding model in which the UK government guarantees a floor price for future power sales. This floor price, known as a “strike price,” is the reference price below which EDF would receive UK government financial support and above which EDF would pay back money, effectively a guaranteed price for the power. Leidenmuhler indicated he believed EDF’s funding mechanism for Hinkley Point C did not meet these criteria to be granted an exemption for state aid. However, George Borovas, an energy lawyer at Shearman and Sterling in Tokyo, said in an email to Platts that he believed some form of negotiation was likely take place before the EC formally rejected EDF’s proposals. “While the Commission has expressed substantial criticisms and concerns, it would be unusual for a project of this nature to be prohibited outright on State aid grounds,” he said. Borovas said that “instead, there will likely be a negotiation between the UK and the EU, resulting in a settlement of some sort, on issues such as the period of the CfD and the level of the strike price.” The issue of a potential precedent being set was a point emphasized indirectly by Leidenmuhler in his presentation, when he cited the recent decision by the Czech government not to offer aid guarantees for the construction of a new nuclear unit at Temelin that would be similar to the guarantees offered by the UK government for Hinkley Point C.
According to the Westminster-based think tank, CentreForum, the private financing behind the project will cost British consumers £12.4bn more over 35 years than government backed procurement. The think tank said the lack of government investment will result in an additional bill of at least £15 a year per UK household “for a generation, while the taxpayer underwrites double digit returns to French and Chinese nationalised industry”. The report made eight recommendations, which included, setting a new nuclear strike price by auction and building long-term infrastructure to support nuclear growth such as laboratories and research centres.
(Thanks to Paul Dorfman for these news.)