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Vice President of the European Commission responsible for Competition Policy
Commission concludes modified UK State aid measures for Hinkley Point nuclear power plant are compatible with EU rules
Brussels, 8 October 2014
Today the Commission has decided that the State aid included in the UK modified proposal to subsidise the construction and operation of a new nuclear power plant at Hinkley Point is compatible with State Aid rules.
This decision is the outcome of an in-depth investigation into this project started in December last year. After the modifications that UK authorities have agreed to introduce in the original proposal, the Commission has found that the state aid granted will not lead to undue distortions of competition in the Single Market and is therefore compatible with EU state aid rules.
Since the opening of the investigation, we have carried out a very wide consultation of interested parties; we have analysed in detail the issues raised; and we have held negotiations with the UK authorities.
The choice to promote nuclear energy is a choice by the UK. This choice lies within its national competence. Indeed, under article 194 of the Treaty, Member States are free to determine their energy mix. We cannot replace Member States when it comes to choosing a particular energy mix.
However, when public money is spent to support companies, the Commission must verify that this is done in line with the EU's rules on state aid.
Our purpose when enforcing State Aid rules is to ensure that public support measures do not endanger competition in the Single Market. And, when it comes to investments in nuclear energy we have to assess each specific case directly under the Treaty rules.
There are no specific guidelines specifying how the Commission is to assess state aid measures in favour of nuclear energy investment projects. As you may remember, we decided not to include this matter in our guidelines on state aid for energy and the environment which were adopted last April.
The Hinkley Point nuclear power station is a very large project in terms of financing and output. Its total costs will amount to 34 billion of pounds, including 24.4 billion for building the plant. The construction is foreseen to last almost 10 years. The plant will be operational for 60 years and it will produce 3.3 GW of electricity, corresponding to 7% of UK capacity.
The Commission assessed the state aid granted to the project, consisting of two components:
During the investigation, the UK authorities have convincingly demonstrated to us that the construction of this nuclear power station could not be achieved by market forces alone. There is a market failure here, in particular because the project would not raise the necessary financing on the market due to its unprecedented nature and scale.
Our assessment then focused on whether the state aid foreseen by UK authorities was proportionate to achieving the desired objective. We were worried that, as initially notified, the public support measures would generate undue distortions of competition.
Following our discussions, the UK agreed to modify the support measures. The changes include the following:
Two so-called "gain-share" mechanisms were put in place:
For example, an increase in the profit rate of one percentage point would generate savings of more than 1.2 billion pounds (about €1.5 billion) to UK consumers. The Commission made sure that this mechanism would apply during the entire lifetime of the project, namely 60 years, instead of the 35 years originally foreseen.
In summary, our decision makes sure that the aid remains limited to what is necessary to carry out the project minimising the distortive effects of the public support and reaching a better deal for consumers and taxpayers.
On this basis, we are in a position to conclude today that the aid measures foreseen by the UK are in line with EU state aid rules.
Finally, I can assure you that this decision will not create any kind of precedents. Possible new cases regarding nuclear energy investments will be assessed on their own merits.
And let me add one last remark.
Neither me nor my colleagues discussed today about our personal and political preferences regarding any source of energy. Our duty today was to enforce State Aid rules in an objective way, and I think we managed to do it.