Brussels, 18 December 2013
State aid: Commission opens in-depth investigation into UK measures supporting nuclear energy
The European Commission has opened an in-depth investigation to examine whether UK plans to subsidise the construction and operation of a new nuclear power plant at Hinkley Point in Somerset are in line with EU state aid rules. In particular, the Commission has doubts that the project suffers from a genuine market failure. The opening of an in-depth inquiry gives interested third parties an opportunity to comment on the measure. It does not prejudge the outcome of the investigation.
Commission Vice-President Joaquín Almunia, in charge of competition policy, said: "The UK has notified a mechanism which is explicitly aimed at attracting investment in nuclear energy. It is a complex measure of an unprecedented nature and scale. The Commission therefore needs to investigate thoroughly its impact on the UK and the EU internal energy markets, and is requesting all interested parties to submit their observations."
The UK has notified plans to establish a feed-in tariff ensuring that the operator of the Hinkley Point nuclear plant will receive a stable revenue for a period of 35 years despite the volatility of the wholesale electricity price. When the market price at which the electricity is sold is lower than the strike price, the Government will pay the difference between the strike price and the market price. Conversely, when the market price is higher than the strike price, the operator will be obliged to pay the difference to the Government (under the so-called "contract for difference"). In either case, the nuclear plant operator will ultimately receive a fixed level of revenues and will therefore not be exposed to market risks for the duration of the scheme. The operator will also benefit from a State guarantee covering any debt which the operator will seek to obtain on financial markets to fund the construction of the plant.
Member States are free to determine their energy mix but when public money is spent to support companies, the Commission has the duty to verify that this is done in line with the EU state aid rules which aim to preserve competition in the Single Market. The Commission will assess whether the construction of a nuclear power station could not be achieved by market forces alone, without state intervention. The Commission will examine the "contract for difference", the credit guarantee as well as the planned level of public support, which is based on many assumptions about the future market situation, and may reach up to GBP 17 billion depending on future electricity prices and the operator’s actual capital cost.
During the in-depth inquiry, the Commission will analyse whether the measure involves state aid in the meaning of the EU rules and, in the affirmative, whether it is compatible with common EU rules that authorise state aid for certain objectives of common interest.
Public interventions in favour of companies can be considered free of state aid within the meaning of EU rules when they are made on terms that a private operator would have accepted under market conditions (the market economy investor principle – MEIP). If the MEIP is not respected, the public interventions involve state aid within the meaning of EU rules (Article 107 of the Treaty on the Functioning of the European Union – TFEU), because they confer an economic advantage on the beneficiary that its competitors do not have. The Commission then proceeds to assess whether such aid can be found compatible with the common EU rules that allow certain categories of aid. Without these common rules, competition within the EU's Single Market would be distorted by a 'subsidy race' between Member States to the benefit of particular undertakings.
The non-confidential version of today's decision will be made available under case number SA.34947 in the State Aid Register on the DG Competition website once any confidentiality issues have been resolved. The electronic newsletter State Aid Weekly e-News lists the most recent decisions on state aid published in the Official Journal and on the website.