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European Commission decides revised plans for Hinkley Point nuclear power plant are compatible with EU State aid rules

The European Commission today announced that it has found revised plans to subsidise the construction and operation of the new nuclear power plant proposed for Hinkley Point to accord with EU State aid rules (case number SA.34947).

Commission Vice-President Joaquín Almunia explained that: "After the Commission's intervention, the UK measures in favour of Hinkley Point nuclear power station have been significantly modified, limiting any distortions of competition in the Single Market. 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."

The plans propose a “price support” which will ensure that EDF Energy, the operator of the plant, receives stable revenues for 35 years. EDF Energy will also benefit from a State guarantee covering any debt which it seeks to obtain on financial markets to fund the construction of the plant.

The Commission initially doubted whether the aid would address a genuine market failure but has been persuaded that, owing to the “unprecedented nature and scale” of the project (the plant is expected to provide 7% of the UK’s electricity generation), its promoters would be unable to obtain the requisite financing.

In view of the risk profile of the project the Commission has required EDF Energy to pay an extra £1 billion by way of guarantee fee. For the benefit of UK consumers the Commission has also required the “gain-share mechanism” to remain in place for the entire 60 year lifetime of the project, rather than only for the duration of the aid (as previously proposed).