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Mat Hope

Mat Hope

03.02.2014 | 3:00pm
NuclearIn brief: Why the UK’s new nuclear deal may fall foul of EU law
NUCLEAR | February 3. 2014. 15:00
In brief: Why the UK’s new nuclear deal may fall foul of EU law

The UK’s plan to build a new nuclear plant has hit a fresh stumbling block after the European Commission sent the government a letter questioning the deal’s legality on Friday. We summarise the commission’s “damning critique” of the UK’s new nuclear deal.

In October, the government signed a deal with energy company EDF to build a new nuclear power plant – the UK’s first in 20 years. But the commission is stalling over the deal as it is unconvinced the plan is fair, or that the new nuclear plant will help the EU meet its broader goals.

The deal

If built, the new power station at Hinkley Point in Somerset could generate about three gigawatts of nuclear power – enough to power around five million homes, according to EDF. The government says the deal is central to its plans to decarbonise the UK’s energy sector, while providing a reliable source of electricity.

As such, it agreed to:

(See this blog for much more detail on the deal).

The deal means the public will effectively subsidise the new plant through a levy on their energy bills. That’s not a particularly unusual way of getting energy projects built. For instance, the renewable energy industry currently gets a similar deal in the UK and across Europe.

But there’s a problem: The EU has strict criteria for when a government is allowed to subsidise an industry – known as state aid. The rules are meant to prevent governments giving some industries an unfair advantage, and the commission isn’t convinced the Hinkley Point deal fits the bill.

Objections

The commission allows governments to subsidise industries if they help the EU meet its broader economic and environmental goals.

The commission will exempt projects from the state aid rules if:

(We’ve gone into much more detail about state aid exemptions in this blog).

The UK sent a letter to the commission asking it to exempt the Hinkley Point deal on each of those grounds. The pleas seem to have fallen on deaf ears, however, as the commission last Friday said it disagreed with many of the UK’s arguments.

Environmental goals

The commission disagrees with the UK’s claim that the new nuclear plant is needed to help the EU hit its emissions reduction target.

In particular, the commission has two objections:

Security of supply

The commission also objects to the claim that the Hinkley Point plant is needed to secure the EU’s energy supply.

The commission believes that the more countries invest in a range of energy technologies, the better protected the EU’s economy becomes from fossil fuel price hikes. As such, it will sometimes allow governments to subsidise energy projects that secure the EU’s energy supply.

The UK government argues that the new nuclear plant would do just that – as nuclear is a reliable energy source, which is not dependent on the volatile fossil fuel market.

The commission says the government’s logic is flawed, however:

Competition

Finally, the commission says the Hinkley Point deal could be giving an unfair commercial advantage to the nuclear industry.

The commission currently permits renewable energy subsidies as they help the EU hit its climate and renewable energy goals. It argues that without the subsidies, investors would be put off the renewable energy industry as it relies on newer – and therefore more expensive – technology, than its fossil fuelled competitors.

The commission says the same argument can’t be applied to nuclear energy, however, because:

Next steps

The fight is far from over.

The commission is currently consulting on whether to change the state aid rules. If it decides to relax the regulations, it could improve the chances of the nuclear deal getting approved.

Here’s what to expect in the coming months:

That leaves plenty of time for the UK government to lobby the commission and mobilise its allies – primarily France – in the continuing fight to get its new nuclear power plant built.

(Here’s all that info in a handy table).


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