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08.10.14

Hinckley Point nuclear plant receives EU approval

The EU has approved a new £16bn nuclear power station at Hinckley Point in Somerset, allowing the coalition government to commit to 35 years of financial support for the controversial infrastructure project.

EDF Energy is due to build the plant after the European Commission gave formal state aid approval, on the condition of some minimal revisions. The approval came after a divisive debate that saw EU Commissioners from at least five countries voice objections to the plan. In total 16 commissioners voted in favour of the project, just ahead of the 15 votes needed for approval.

The Commission had been investigating whether funding for the plant had broken state aid rules. It initially objected to £17.6bn of potentially wasteful and illegal public subsidies to the project.

However, it said the changes agreed by the British authorities would cut the subsidy by more than £1bn, meaning that state aid would remain "proportionate to the objective pursued, avoiding any undue distortions of competition".

The government had already agreed that EDF will be paid a ‘strike price’ of £92.50 for every megawatt hour of energy Hinkley C generates. This rate is almost twice the current wholesale cost of electricity, but was intended to compensate for the high cost of building the plant.

However, the Commission said that if EDF's overall profits exceeded the rate estimated at the time it was awarded the contract, any gains would be shared with the public.

Over the life of the project, expected to be around 60 years, any profit beyond a 13.5% return would be 60% returned to the taxpayer. This differs from earlier proposals first agreed between the UK and EDF, which proposed a 50-50 profit share after the project started making a 15% return.

Commission Vice-President Joaquin Almunia said: "These modifications will also achieve significant savings for UK taxpayers. On this basis and after a thorough investigation, the Commission can now conclude that the support is compatible with EU state aid rules.”

Energy and climate change secretary Ed Davey MP said: “This is an important next step on the road to Britain’s first new nuclear power station in a generation. While there is much work still to do before a final contract can be signed, today’s announcement is a boost to our efforts to ensure Britain has secure, affordable low carbon electricity in the 2020s.

“After a thorough, detailed and independent analysis of our proposed project with EDF, this decision shows the European Commission agrees that this is a good deal for consumers and enables us now to proceed to the next stage.”

The decision was controversial and has many critics who believe the government should have offered subsidies to renewable energy sources.

Austria, which is a big supporter of green energy, has threatened legal action and is preparing to take the European Commission to the European Court of Justice over the decision.

Andrea Carta, Greenpeace’s EU legal adviser, 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. This is a bad plan for everyone except EDF.”

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