As accurately predicted by Reuters and other news agencies a week in advance of the official announcement, the European Commission has approved the Hinkley Point C state aid case. It has waved through unaltered the deal between the UK government and state-owned French nuclear company EdF for the construction of the (ultimately) 3.2 GW nuclear power plant in Somerset, England. The latest estimate from EdF puts the project cost at £24.5 billion.
Approval of the State Aid case included the proposed Contract for Difference, which provides the developer with an increased price certainty for the electricity generated by the plant, and the proposed UK Guarantee for the project, which will help unlock debt finance. In practice this means an estimated £17 billion of state subsidy in the form of a guaranteed ‘strike price’ of £92.5/MHh (nearly twice the wholesale price in the UK which hovers around £50) as well as $10 billion in loan guarantees.
The UK’s Department of Energy & Climate Change welcomed the decision, saying that it would create 25000 jobs during construction, and benefit UK companies, which could expect to get more than 50% of the work. It would also benefit the UK economy to the tune of the thousands of jobs that are expected to go to local people.
It reiterated that last October’s agreement in principle with EdF remains in place, and there has been further agreement to strengthen arrangements for benefits to be shared with consumers if the project comes in under budget, or if the project’s return exceeds a certain level. This, says DECC,is to ensure that consumers won’t pay more than they have to whilst providing a reasonable return for the investors.
Prospect, the largest trade union for nuclear industry employees, also welcomed ‘a positive decision’ by the European Commission. Prospect deputy general secretary Garry Graham said: "This is fantastic for jobs, consumers and the UK economy. Nuclear new build is a key component in providing the UK with low-carbon energy generation for the future."
John Cridland, CBI director-general of the Confederation of British Industry, said: "The European Commission’s green light for Hinkley Point is a significant milestone in the United Kingdom’s energy future. Hinkley should set the ball rolling for the UK’s nuclear new build programme, putting us on the right path to achieving a secure and sustainable energy mix."
Greenpeace was less enthusiastic, condemning the deal as the first ever Commission approval for a plan "for taxpayers to heavily subsidise the construction of a nuclear power plant in the EU … [it] … will receive up to £17 billion in subsidies, making Hinkley one of the most expensive power plants in the world."
Reacting to the decision, 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."
The Austrian government has signalled it intends to challenge the Commission decision at the European Court of Justice.
