Government nuclear subsidy plan will breach EU state aid rules

The Government, with their proposals for a 'levy control framework' cap on spending on 'low carbon' electricity sources, are heading for a breach of EU state aid rules. This is because the Treasury are likely to reserve a specific fund to pay subsidies to nuclear power rather than make it available to 'low carbon' sources in general. Otherwise they cannot possibly justify paying more money to nuclear power developers than will be paid to onshore wind developers.

The Treasury appear to be claiming that it is handing out subsidies, through the 'contract for difference' (CfD) framework being set up by the forthcoming Energy Bill, on a 'competitive' basis that is available to all low carbon sources. But if that is the case, then why are the Government proposing to give a higher strike price to nuclear power than onshore wind? Onshore wind is tipped to get no more than around £80 per MWh. The strike price being mooted in Government circles for nuclear power (close to £100 per MWh) is the same sort of level as the government is proposing to pay for large scale solar pv and offshore wind. Moreover nuclear power developers will get this stream of money for a much longer period (25 or 30 years) than renewable developers that, it seems, will be limited to 15 year contracts. So there will be no consumer savings if nuclear power is substituted for renewables. Quite the contrary. In fact the consumer will be out of pocket if nuclear is funded rather than renewables.

The nuclear subsidy scheme has been sold to consumers on the basis that it is a cheaper way of achieving low  carbon objectives compared to renewable energy. Yet that is palpably not the case,  if, as seems now very likely, nuclear power is given more subsidies than onshore wind. In addition, public opinion surveys report renewable energy as being much more popular than nuclear power. So, with the proposed nuclear subsidy scheme, the consumer will simultaneously get both short-changed and given an energy source it least prefers.

The only way that the Government can, and it seems will, avoid this logic (of giving nuclear no more subsidies than are given to onshore wind) is by 'ring fencing' a pot of money under the 'levy control framework' to spend on nuclear. Then it will be privileging spending on nuclear rather than renewables. Yet, if it does this then it is also going to be in breach of its own pitch to the European Union, and also what it has told the British public, that the 'low carbon subsidies' are equally available to all energy sources. They clearly are not going to be available to all low carbon sources. A specific chunk is being reserved to pay nuclear power. A bundle of money has, in effect, been labelled 'to be given to EDF'. EU rules allow an exemption to its 'no state aid' rules when it comes to renewable energy. There is certainly no exemption that allows giving state handouts that are, in effect specifically labelled for EDF!