Britain won EU approval for a new nuclear power plant in Somerset on Wednesday, allowing the government to commit to 35 years of financial support for Europe’s biggest and most controversial infrastructure project.
Hinkley Point C will cost £24.5bn to build, EU officials revealed – a much higher figure than the £16bn disclosed last year by EDF, the French utility running the project.
The lower figure was in 2012 prices and excluded interest payments made during construction and other pre-building costs, said EDF.
Joaquín Almunia, the EU competition commissioner, said the project’s total costs would be about £34bn, including cash the developers had to show they could come up with in the event of problems during construction.
Formal state aid approval from the European Commission, on the condition of some minimal revisions, came after a deeply divided debate that led to four EU commissioners voting against the decision.
Mr Almunia said the final decision had been taken, despite initial doubts, because the UK had shown there was a “genuine market failure” which meant that “without public support this investment could not take place”.
“This decision will not create any kind of precedent,” he added, describing Hinkley Point as a project of “unprecedented nature and scale”.
However, Henri Proglio, the EDF chief executive, told reporters in London the green light given to the project gave important “visibility” to the market by showing it was possible to build big new energy projects in Europe.
EDF plans to take a final investment decision by the end of the year on the proposed plant, which aims to provide 7 per cent of the UK’s electricity once it is completed in 2023.
Brussels initially raised serious questions about the deal, saying it extended up to £17.6bn of potentially wasteful and illegal public subsidies to a project that would in all probability be profitable without them.
In response, Britain made some amendments to introduce tougher profit clawback clauses to the contract, which would limit excess upside for private investors throughout the plant’s lifespan of 60 years or more.
While this won over the EU’s competition authority, it has done little to assuage objections from critics of nuclear energy, who fear that the decision will clear the path for a new generation of heavily subsidised nuclear plants across Europe.
Ed Davey, the UK energy secretary, had agreed terms in September with Mr Almunia, but final approval was still needed from the full college of 28 EU commissioners.
At least five commissioners raised concerns before the college meeting on Wednesday, including Connie Hedegaard, the climate commissioner, and Janez Potocnik, who holds the environment brief.
Austria’s Johannes Hahn, the regional policy commissioner, expressed outright objections to the plan, and Vienna is preparing a legal suit against the project.
Mr Proglio brushed aside Vienna’s move, saying: “There is no real concern.”
Günther Oettinger, the current energy commissioner from Germany, was pivotal to the scheme winning approval. In line with German policy on nuclear energy, Mr Oettinger expressed reservations, but did not vote against the deal.
Crucially for EDF, there has been no change to the “strike price”, which guarantees a minimum revenue for low-carbon power generators.
The UK government has agreed to pay EDF £92.50 per megawatt hour for the electricity output from Hinkley Point C – roughly twice the current wholesale price of power. In nominal terms, this rises to £279 per mwh in 2058, the last year of the scheme.
The “gain-share mechanisms” required by the commission are designed to recoup any unexpectedly high profits from the building of the plant, or from any refinancing and equity sales.
For instance, over the life of the project, any profit beyond a 13.5 per cent return would be 60 per cent returned to the taxpayer. This kicks in at an earlier point than the mechanism first agreed between the UK and EDF, which proposed a 50-50 profit share after the project started making a 15 per cent return.
Campaigners attacked the decision. Andrea Carta, Greenpeace’s EU legal adviser, said: “This is a world record sellout to the nuclear industry at the expense of taxpayers and the environment. It’s such a distortion of competition rules that the commission has left itself exposed to legal challenges. This is a bad plan for everyone except EDF.”
Pro-environmental MEPs also lined up to criticise the deal, with some arguing that it constituted illegal state aid. Molly Scott Cato, a UK MEP for the Greens, said: “There can be no doubt that the generous terms being offered by the UK government to EDF on Hinkley C amount to illegal state aid under EU rules.”
She added: “It is a scandal that one of the final acts of the Barroso commission is to turn a blind eye to the illegality of the Hinkley deal as some kind of quid pro quo for Germany’s renewable energy support scheme.”
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