Following is the text of my two-page briefing sent to the European Commissioners (28 private offices) yesterday. It is also available here in PDF.
At-a-glance: HINKLEY POINT C (HPC)
Mark Johnston, 28-IX-2014
Thirty-five years operating aid for two new 1600 megawatt nuclear units side-by-side at one location in Somerset, SW England. An index-linked fixed ‘strike’ price on all output at approximately double the current wholesale power price. Up to £17.6bn (€21.8bn) NPV total revenue to EDF spread across all UK customers. Loan/credit guarantee. Political shut-down guarantee. Options to vary & potentially increase operating aid levels after 15 and 25 yrs operation, without re-notification. HPC output = ~7% of UK power supply. Twelve-unit total programme around 35% of UK supply. In February 2013, VP Oettinger described the concept as “Soviet” (link).
No tendering process
Infringement of electricity common rules (Art 8(1) of Directive 2009/72; ‘3rd package’) and therefore unfair exclusion of all alternative providers of those capacity options that continue to be permitted by UK consents policy under same framework rules (Art. 7, Ibid.) This includes e.g. gas-fired generation, which continues to be consented thus also demonstrating no market failure in (interconnected) UK power or gas markets.
Incomplete state aid notification, two aspects
First, UK policy is to give aid for upto 12 reactors, not just the 2 units in this notification. This includes two more (same-size, same-type) EDF-planned stations at Sizewell C, Suffolk. Second, a foreseen UK-wide radioactive waste transfer scheme, whereby some long-term risks of managing used nuclear fuel would be covered by the state, has still to be notified to COMP. This extra measure will, in effect, provide additional aid to HPC over its life-time.
No net greenhouse gas (GHG) reductions (i.e. no climate benefit)
(Cost-effective) GHG reductions in electricity sector i.a. are already provided for at EU level by harmonised emissions cap and trade scheme, EU ETS. Today’s ETS ‘carbon price’ already benefits nuclear for its absence of GHG emissions. This market-based reward is and will grow over time, both for existing and for new plants. The EU ETS law is an open-ended instrument with its current cap reaching zero GHG emissions around 2070. Granting aid to new nuclear (a mature technology) will, in GHG terms, only increase ETS allowance supply everywhere else, thus reducing the costs of burning fossil fuels in large installations, weakening key incentives for EU-wide change, and making no net contribution to the EU’s total GHG pollution cuts.
Substantial negative legal precedent with long-lasting damage to single market
HPC is a critical test case for Europe realising a harmonised single market or not. Long-term operating aid for new investments in mature energy technologies – nuclear, coal and gas – are already frequently mooted in other member states based on the proposed UK model. The key principle is if, following the Hinkley precedent, an MS can arbitrarily buy any large [low[er]-emitting] energy project, there would no longer be a single market to speak of in electricity, gas or carbon reductions. National governments would have taken over the role normally played by companies in judging the latters overall commercial strategies to provide energy.
EU LAW ISSUES
“Consistency, effectiveness and continuity” of EU policy and action
The above are obligations on all Union institutions under Article 13 TFEU. Under Article 17 TFEU the EC in particular “shall ensure the application” of the EU Treaties, laws adopted thereunder, and ECJ judgements. In other words, EC shall be the ‘guardian of the Treaties’.
Shared competences and uses thereof
Energy, environment and internal market (‘approximation of laws’) are all shared competences (Art. 4 TFEU). National decisions on energy mix necessarily must be in accord with common rules adopted at EU level. (Art. 4 TEU), i.e. “energy mix” is not as such a national competence. Moreover, in shared competences, national authorities may only act to the extent the Union has not already done so (Art. 2 TFEU), in particular in this case with regard to the IEM provisions and GHG emission reductions described above.
Euratom is not ‘carte blanche’ for subsidies
Article 2 Euratom states its tasks shall be carry out “as provided in this Treaty”. Chapter 4, entitled “investment”, in fact only provides for the Commission to issue illustrative scenarios and to monitor activities. Where Euratom makes no provision, the Union acquis applies, i.e. all relevant TEU and TFEU provisions, legislation adopted thereunder, and ECJ judgements.
Please do not abandon Europe’s internal energy market rules for electricity,
gas and carbon to rescue one expensive failing technology.