The European Commission has concluded that UK support for the conversion of one unit of the Drax power station from coal to biomass complies with EU state aid rules. The Commission’s press release of 19 Dec 2016 states in part:
“The Commission opened an in-depth investigation in January 2016 to check that the aid would not lead to overcompensation and undue distortions of competition in the biomass market. A detailed analysis of the project business case was carried out, taking into account the comments received from interested third parties, as well as further information submitted by the UK,. On the basis of this analysis, the Commission has now concluded that the planned premium will not result in overcompensation.
Moreover, the Commission’s investigation into the wood pellet and wood fibre markets found that the increased demand for wood pellets to fuel the power plant could be fulfilled by the market without undue negative side-effects. The Commission concluded that the support will not lead to undue distortions of competition in the market for wood-based products.
On the basis of this analysis the Commission concluded that the project’s contribution to increasing the share of renewable energy produced in the UK outweighs any potential distortions of competition that could be triggered by the government support.”
As a member of the EU, the UK is currently subject to state aid rules. This has been part of UK law since 1973 and is now in Articles 107 & 108 of TFEU. The impact of Brexit on the current State Aid rules will depend largely upon the type of post-Brexit arrangements the UK negotiates with the EU.