According to a leaked document the EU has agreed to render multi billion pound state support for new UK nuclear plant construction as legal.
Whilst that news has been met with celebration for some, suggesting the first new nuclear plant to be built in 20 years at a time when the balance of supply is at its most stretched for a generation, others have been less than enthused, not least, somewhat bizarrely, the Austrians.
EDF Energy owned Hinkley Point in Somerset will be the recipient of the public funding once the deal is officially ratified by the EU before the end of the year.
An unofficial EU comment suggested:
“We reached an agreement with UK authorities on Hinkley. On this basis vice-president [Joaquín] Almunia will propose a positive decision to the college of commissioners. In principle a decision should be taken within this mandate.”
With Hinkley point marked to provide 7% of the UK’s electricity needs amid a barrage of end of life disposals of generating plant and a move away from fossil fuels, whilst renewable alternatives cannot provide the base load needed to keep the lights on all year round due to their inherently intermittent behaviours, the development is most certainly needed.
Yet already the state support has been strongly criticised with concerns over whether the promised £17.6bn is money well spent.
Under the new Contract for Differences (CfD) scheme EDF Energy had been offered a strike price for the electricity it generates in the new plant of £92.50 per MWH. To put this into some sort of context Summer 2015 electricity prices are currently trading at less than £50. In addition the government is offering £10bn of loan guarantees to support the project.
The strike price premium is designed to guarantee a return for EDF Energy and mitigate the financial risk of the investment not being able to make a return due to low energy prices. Similarly the loan guarantees are designed to reduce the cost burden of EDF and their partners’ investment.
However even though the EU has apparently authorised the deal it is understood to have also exerted pressure to potentially amend the strike price so as to render the deal more cost efficient and prevent excessive profits for the French owned energy company.
EDF Energy welcomed the news of the EU decision saying it was “another positive step forward for this vital project” and reassured commentators that the deal under CfD was “fair and balanced for consumers and investors alike”.
But with EU Energy Commissioner German Energy Commissioner, Günther Oettinger describing the 35-year term of the deal as “Soviet” and Greenpeace decrying the decisions, all is not calm.
Rebecca Harms, President of the Green Parliamentary Group in Brussels, criticised the EU’s decision saying:
“It is unbelievable that Commissioner Almunia wants to wave through this obviously illegal state aid to finance Hinkley Point.
“It is like the bursting of a dam – other countries will want to follow. The financing of such out-dated, dirty and highly risky technology should be averted by all means.”
However official word from the government played down any foregone conclusion with Aled Williams, a UK government spokesman in Brussels, saying:
“We are continuing to engage with the commission as it progresses its assessment of the Hinkley Point C state aid case and are confident of a decision under the mandate of this commission.”
Despite this cautious approach, some countries have well and truly made their feelings clear in advance of any official announcement. Once such is Austria who are not at all happy and are threatening to launch a legal challenge if the European Commission does, as expected, approve the deal.
Andra Rupprechter, Austria’s Minister for Agriculture, Forestry, Environment and Water Management, exclaimed:
“This scandal has to be fought by all legal means possible,”
Whilst Austrian Green MEP Michel Reimon added that:
“[Almunia had shown] genuflection to the nuclear lobby.
“It is incredible that Commissioner Almunia will make an exception for the nuclear industry by simply waving [through] this illegal aid.”
Austria, who do not operate nuclear plant, are unhappy at what they see as bias towards nuclear investment. This though is not entirely fair.
Given the overwhelming focus of subsidy has been on renewable energy such as wind and solar and that the proposed payment by UK energy consumers of £17.6bn in subsidies over a 35-year period is just part of a £110bn investment in UK energy somewhat detracts from their argument.
Undoubtedly though the UK has agreed to pay over the odds to get EDF Energy and their partners to the negotiating table but the EU and the UK are not silly, they know that without this investment an energy starved Great Britain will be placing new demands on continental Europe to provide energy at a time when they themselves have no capacity to do so.
Sometimes you have to swallow deeply and accept there is only one way. This is one of those occasions.