Austrian case against Hinkley Point C aid rejected

Thursday, 12 July 2018

In October 2014, the European Commission (EC) approved aid which the UK government was planning to implement in favour of the construction of the Hinkley Point C project. That aid, for EDF Energy subsidiary NNB Generation, is made up of three parts. Firstly, a contract for difference, which seeks to ensure price stability for sales of electricity and to guarantee compensation in the event of an early shutdown of the plant. Secondly, an agreement between the investors of NNB Generation and the UK's Secretary of State for Energy and Climate Change which guarantees compensation in the event of an early shutdown on political grounds. Thirdly, a credit guarantee by the UK on bonds to be issued by NNB Generation is intended to ensure the timely payment of principal and interest of qualifying debt, up to a maximum level of GBP17.0 billion (USD22.5 billion). The EC concluded that the aid is compatible with the internal market.

Austria filed a lawsuit with the European Court on 6 July 2015 seeking annulment of the EC's decision. Announcing the filing, then Austrian Chancellor Werner Faymann said that nuclear power "is not an innovative technology and is therefore not worthy of subsidy". He added, "[State] aid is there to support new and modern technologies that are in the general interest of all EU countries. This is in no way true of nuclear power." Austria is opposed in particular to the EC's reasoning that state aid contributes to the promotion of an industry.

In the course of the proceedings, Luxembourg intervened in support of Austria, while the Czech Republic, France, Hungary, Poland, Romania, Slovakia and the UK intervened in support of the Commission.

In a ruling today, the General Court dismissed the action brought by Austria.

"The Commission did not err in taking the view that the UK was entitled to define the development of nuclear energy as being a public-interest objective, even though that objective is not shared by all of the Member States," the court said. It added that "the objective of promoting nuclear power, and, more specifically, of promoting the creation of new nuclear energy production capacities, is related to the Euratom Community's goal of facilitating investment in the nuclear field". It also said that each Member State has the right to choose from among the different energy sources those which it prefers.

The court also said that Austria had failed to invalidate the EC's findings that it was "unrealistic" to expect a comparable amount of wind generating capacity could be built over the same timeframe as constructing Hinkley Point C "given the intermittent nature of that source of renewable energy".

The General Court noted that an appeal may be brought before the European Court of Justice against its decision within the next two months.

Foratom, the European nuclear trade body, said the court's decision "can be perceived as good news for all the EU Member States which are considering nuclear new build projects as it sends a positive signal for future nuclear investments in the EU".

Under a deal agreed in October 2015, China General Nuclear will take a 33.5% stake in EDF Energy's project to construct Hinkley Point C, in Somerset, England. Consisting of two Areva-designed European Pressurised Reactors, it will be the first new nuclear power station to be built in the UK in almost 20 years and will provide about 7% of the country's electricity.

In February this year, Austria also launched a lawsuit against the EC for its approval of Hungarian state subsidies for the construction of two new reactors at the Paks nuclear power plant. Hungary, which neighbours Austria, received the go-ahead to start construction of new nuclear power units at Paks this year as planned, following the EC's approval last March of commitments the country had made to limit distortions in competition. The Commission concluded that Hungary's financial support for the Paks II project involves state aid, but it could approve this support under EU state aid rules on the basis of these commitments.