State aid for Hinkley Point nuclear power plant: BBH to prepare a lawsuit against the EU Commission
In October last year, the European Commission approved the state aid scheme in favour of the British nuclear power plant project Hinkley Point C. The German electricity supply company Greenpeace Energy has now decided to take legal action against this decision with the help of the renowned German energy law firm Becker Büttner Held (BBH). A number of municipal energy utilities, such as Stadtwerke Schwäbisch Hall, are considering and, respectively, preparing to join the lawsuit.
According to plans by the British government, Hinkley Point nuclear power plant – which is to be constructed in the southwest of England – is to receive state support for no less than 35 years. The scheme was backed by the European Commission, which in October last year gave the green light for a state aid package of approximately €23 billion. This means that, starting from 2023, the nuclear power plant operators will be paid a guaranteed purchase price above the usual market price for the electricity produced.
Based on the so-called Contract for Difference (CfD) the British government pays a fixed feed-in tariff: The electricity produced by Hinkley Point C nuclear power plant is to be remunerated by 12.8 cents per kWh – plus compensation for inflation. On top of that, a number of additional, significant state subsidies are granted, including a guarantee in the event of a shutdown for political reasons. The scheme is completed by a loan guarantee given by the British government, a generous appraisal of the future decommissioning costs and the fact that no tendering procedure was carried out.
With a total capacity of 3,260 MW, about 7% of the highly subsidised electricity generated in Great Britain will then enter the EU's internal electricity market. As a consequence, the Hinkley Point model will affect the European electricity market. Furthermore, the Commission's decision provides a kind of blueprint for the specific interests of Germany’s neighbouring countries such as Poland and the Czech Republic, as well as those of Slovakia and Slovenia – also because the British government is already planning the construction of further nuclear power plants within the scope of the CfD mechanism. The potential locations of these future power plant can be seen on the website of the British Department of Energy and Climate Change (DECC).
BBH's client doubt that the state aid granted to Hinkley Point is in conformity with EU competition law. In contrast, they regard the Commission’s decision as the factual end of the internal electricity market. The Commission justified its approval of the subsidy by holding that the scheme addresses a market failure and promotes the execution of an important project of common European interest within the meaning of Article 107, subs. 3 lit. b of the Treaty on the Functioning of the European Union (TFEU). “Neither has the market failed nor is there a common interest involved”, explains Dr Dörte Fouquet, lead counsel for the case at BBH. “The European trend is clearly towards the expansion of renewable energies, away from nuclear power. The Commission has in many aspects incorrectly applied the provisions of Article 107, subs. 3 lit. b TFEU”, says Dr Fouquet. In particular, the statements made by several Member States in the course of the investigation procedure prior to the EU Commission’s decision and, above all, the clear and precise assessment by Austria that was submitted to the Commission along with an expert opinion by Dr Dörte Fouquet, partner at BBH, explicitly set out that state aid for the construction and operation of new nuclear power plants cannot be substantiated on the grounds of a common European interest.
In principle, state aid is supposed to correct, and not to bring about market failure. “Therefore, probably in May this year, we will file an action for annulment of the Commission's erroneous decision with the European Court as the only forum available for enforcing the particular interests of German companies operating on the European electricity market”, says Dr Fouquet.
It was only at the end of 2014 that the EU Commission completed its state aid investigation procedure against Germany’s renewable energy support system, stipulating specific requirements for the German legislator to comply with for future subsidies. These were implemented in the revised Renewable Energy Sources Act 2014 (Erneuerbare-Energien-Gesetz – EEG). However, as put by Dr Fouquet, the subsidy scheme for Hinkley Point cannot be compared to the support available under the EEG. The Renewable Energy Sources Act is aimed at helping promote a new technology and it is based on the EU’s Renewables Directive 2009/28/EC, which provides for clear and binding minimum expansion targets by 2020. There is no such support scheme for nuclear power. Nuclear power plants have been around since the 1960s. “If it is not possible to apply a 50-year-old technology in a profitable manner, this can only mean that there is no viable investment model for the technology in question”, states Dr Fouquet.
Becker Büttner Held is a leading provider of legal services for energy and infrastructure companies and their customers. Energy and supply companies, particularly public utilities, municipalities, local authorities, industrial companies and international groups are among its core clients. BBH advises these and many other companies and organisations in all legal matters and also assists them with business and strategic advice.
Dr Dörte Fouquet
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