EC scrutinises UK nuke terms

Brussels has opened an “in-depth” investigation into UK’s nuclear subsidy deal with an EDF-led consortium, in a long-awaited case with huge implications for future low-carbon energy across the EU.

In launching the investigation, the European Commission noted that it “has doubts” that the 3.2GW Hinkley Point C project in southwestern England “suffers from a genuine market failure”.

Even if the Hinkley Point C deal were ultimately given the nod by Brussels, the investigation may drag so long that EDF is unable to take a final investment decision in July 2014 as expected.

While the UK government has suggested that the Commission understands the importance of a speedy resolution and will prioritise the investigation accordingly, other observers remain doubtful.

The UK government has been steeling itself for the EC’s investigation, arguing that the deal does not constitute state aid.

In response to today’s announcement, UK Energy Minister Ed Davey confidently called the investigation “standard for large investment projects”.

“We will use this period to demonstrate how the project meet state aid rules and provides good value for consumers.”

In October the UK confirmed it will pay £92.50 ($151) per MWh for electricity generated at Hinkley Point C over a period of 35 years, or £89.50 per MWh if EDF proceeds with its Sizewell C project – comprising another two European Pressurized Reactors.

The 35-year arrangement goes into effect in 2023 at the latest, whether or not Hinkley Point C is up and running by then.

Five years earlier than that – in 2018/19 – the UK will be offering £100/MWh for large-scale PV and £90/MWh for onshore wind. Those offers are good for just 15 years.

The European Wind Energy Association (EWEA) welcomed the probe, claiming that the 35-year subsidy proposed for the nuclear plant would "wreck efforts for a single European electricity market".

Many experts have opined that the Hinkley deal is a clear violation of EU state aid rules.

Unlike most renewables, nuclear energy is considered a “mature” industry – and therefore should not be in need of public subsidy, a fact the coalition government has publicly agreed with.

Nuclear power has been generated on a commercial basis in the UK since the 1950s, and the country’s oldest nuclear plant which is still operational – Wylfa, in North Wales – began generating in 1971.