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Released January 06, 2014 | GALWAY, IRELAND
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Written by Martin Lynch, European News Editor for Industrial Info (Galway, Ireland) - The European Commission (E.C.) has officially confirmed that it will open an 'in-depth investigation' into the U.K. government's financial support scheme for the proposed £16 billion ($25.8 billion) Hinkley Point C nuclear power project.
Industrial Info reported on possible plans for a probe last month. For additional information, see December 19, 2013, article - EU to Probe U.K. Nuclear Support.
The E.C. said it will examine whether the U.K.'s plans to subsidize the construction and operation of a new nuclear power plant at Hinkley Point in Somerset are in line with European Union (E.U.) state aid rules.
"The U.K. has notified a mechanism which is explicitly aimed at attracting investment in nuclear energy," explained Commission Vice-President. Joaquín Almunia, who in charge of competition policy. "It is a complex measure of an unprecedented nature and scale. The Commission therefore needs to investigate thoroughly its impact on the U.K. and the E.U. internal energy markets, and is requesting all interested parties to submit their observations."
The investigation will focus on the U.K. government's offer to project owner, French energy giant Electricite de France (EPA:EDF) (Paris), of a guaranteed power price for a period of 35 years when the Hinkley Point C nuclear plant is constructed.
The commission said that the guaranteed price flies in the face of the "volatility of the wholesale electricity price."
It added: "When the market price at which the electricity is sold is lower than the strike price, the Government will pay the difference between the strike price and the market price. Conversely, when the market price is higher than the strike price, the operator will be obliged to pay the difference to the Government (under the so-called "contract for difference"). In either case, the nuclear plant operator will ultimately receive a fixed level of revenues and will therefore not be exposed to market risks for the duration of the scheme. The operator will also benefit from a State guarantee covering any debt which the operator will seek to obtain on financial markets to fund the construction of the plant".
U.K. Energy and Climate Change Secretary Edward Davey welcomed the probe and defended the new Contracts for Difference (CfDs).
"Investment contracts, such as those proposed for Hinkley, are in effect early CfDs and, like CfDs, they are a market-orientated instrument designed to incentivize investment in new low carbon generation whilst ensuring an appropriate allocation of risks between generators and consumers," Davey argued. "This investment is needed at scale if the UK is to play its part in meeting the EU's common security and diversity of supply and decarbonization objectives, all at least cost to the consumer."
View Project Report - 300009866
Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, three offices in North America and nine international offices, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities. To contact an office in your area, visit the Industrial Info "Contact Us" page.
Industrial Info reported on possible plans for a probe last month. For additional information, see December 19, 2013, article - EU to Probe U.K. Nuclear Support.
The E.C. said it will examine whether the U.K.'s plans to subsidize the construction and operation of a new nuclear power plant at Hinkley Point in Somerset are in line with European Union (E.U.) state aid rules.
"The U.K. has notified a mechanism which is explicitly aimed at attracting investment in nuclear energy," explained Commission Vice-President. Joaquín Almunia, who in charge of competition policy. "It is a complex measure of an unprecedented nature and scale. The Commission therefore needs to investigate thoroughly its impact on the U.K. and the E.U. internal energy markets, and is requesting all interested parties to submit their observations."
The investigation will focus on the U.K. government's offer to project owner, French energy giant Electricite de France (EPA:EDF) (Paris), of a guaranteed power price for a period of 35 years when the Hinkley Point C nuclear plant is constructed.
The commission said that the guaranteed price flies in the face of the "volatility of the wholesale electricity price."
It added: "When the market price at which the electricity is sold is lower than the strike price, the Government will pay the difference between the strike price and the market price. Conversely, when the market price is higher than the strike price, the operator will be obliged to pay the difference to the Government (under the so-called "contract for difference"). In either case, the nuclear plant operator will ultimately receive a fixed level of revenues and will therefore not be exposed to market risks for the duration of the scheme. The operator will also benefit from a State guarantee covering any debt which the operator will seek to obtain on financial markets to fund the construction of the plant".
U.K. Energy and Climate Change Secretary Edward Davey welcomed the probe and defended the new Contracts for Difference (CfDs).
"Investment contracts, such as those proposed for Hinkley, are in effect early CfDs and, like CfDs, they are a market-orientated instrument designed to incentivize investment in new low carbon generation whilst ensuring an appropriate allocation of risks between generators and consumers," Davey argued. "This investment is needed at scale if the UK is to play its part in meeting the EU's common security and diversity of supply and decarbonization objectives, all at least cost to the consumer."
View Project Report - 300009866
Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, three offices in North America and nine international offices, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities. To contact an office in your area, visit the Industrial Info "Contact Us" page.
