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UK’s DECC, EC discussing claim of nuclear subsidies: official

Platts, Nucleonics Week, 2012-12-06

The UK’s Department of Energy and Climate Change, DECC, has said it is in discussions with the European Commission over allegations made by anti-nuclear advocate group Energy Fair that the UK’s proposed energy bill would provide illegal subsidies for nuclear energy.

Speaking at a November 29 press conference in London to accompany the publication of the energy bill — now under discussion in Parliament — Director General of Energy Markets and Infrastructure at DECC Simon Virley said talks between the EC and DECC were “under way.” Virley declined comment on the expected outcome but said discussions between the EC and DECC were “ongoing and constructive.”

Secretary of State for Energy and Climate Change Ed Davey said at the same press conference that DECC was “not going to provide details of the discussions on a blow-by-blow basis.”

The EC is studying UK legislation set out in the energy bill to see if it is in line with EU state aid rules, European Energy Commissioner Guenther Oettinger told a European Parliament meeting in Brussels November 29.

The UK’s energy bill, if approved by Parliament, would provide support for low-carbon forms of energy generation, including nuclear energy, through financial instruments such as feed-in-tariffs and contracts-for-difference, which would allow a generator to effectively receive a guaranteed fixed price, known as a strike price, for the energy it produces.

Energy Fair claims the system of FiTs and CfDs would constitute a subsidy for nuclear power generation and could be in breach of EC competition laws. EU state aid rules allow governments to support renewable power through FiTs in order to help them meet EU renewables and emissions targets but the same principle does not apply to nuclear energy, for which there are no set targets.

Energy Fair submitted two complaints to the EC in 2011 alleging illegal state support for nuclear energy through subsidies in the UK (NW, 2 Feb., 7). EU regulations do not forbid state aid altogether, but set strict limits. The European Commission’s Competition Directorate studies individual cases to judge whether they involve state aid and if so, whether or not it can be allowed.

In its coalition statement in 2010, the UK government said there would be no subsidy for nuclear energy. DECC has repeatedly confirmed this position. Davey told the November 29 press conference that the strike price for nuclear energy would be set on a “project-by-project” basis and that DECC is in discussion with EDF Energy over a strike price for its Hinkley Point project. EDF Energy, through its subsidiary NNB Generation Co., plans to build a two-unit new nuclear power plant at Hinkely Point C in Somerset.

Davey declined to say what the strike price for nuclear energy could be, or say when negotiations with EDF Energy were likely to be concluded. At the same press conference, DECC Director of Energy Strategy and Futures Jonathan Brearley said the estimated levelized cost for nuclear energy in the UK would be around GBP80/megawatt-hour ($128/MWh) by 2020 but said that this was “not related ultimately to the strike price.”