Wednesday, 9 April 2014

Will Hinkley C be approved by the European Commission?

Stories of desperate lobbying by Department of Energy and Climate Change (DECC) Minister Michael Fallon are emerging as he struggles to justify the Hinkley C deal to the European Commission. In recent times Michael Fallon has variously been reported annoying both renewable energy interest groups by asking them to support the application to the EU Commission for state-aid to Hinkley C and annoying the Scottish Government. See and also Indeed Alex Salmond has written to David Cameron to complain about being leant on by his Government. See file:///C:/Users/User/Downloads/Letter%20from%20FM%20to%20PM%20re%20Hinkley%20Point.pdf

Both sets of interests (renewables and the Scottish Government) have reason to fear the Hinkley C deal as it would plainly greatly reduce incentives available to renewable energy after 2020 given that the Treasury employs a formula called the 'Levy Control Framework' to reign in low carbon support payments. The Scottish Government fears that the Hinkley C deal would allow nuclear power to compete unfairly with renewables. Given that Hinkley C involves contract lengths that are more than twice as long as those to be offered to renewable energy and involve loan guarantees that will hardly, if at all, be available to renewable energy schemes, such arguments are very plausible to many observers.

Then again, Conservative policy (with the Liberal Democrats being carried a long way with them), seems to be turning green politics-as-we-know-it in the rest of the world on its head. Nuclear power is now 'green' according to Britain, whereas, according to the Conservative Party onshore windfarms 'are no longer environmentally friendly'. See

Incentives for onshore windfarms will be scrapped just as they start for Hinkley C in the early 2020s (if all goes well for the constructors), according to Conservative Party policy.  Conservatives claim that onshore windfarms are 'unpopular' - although opinion polls have suggested they are still more popular than either new nuclear power or fracking which the Conservatives support, and the Hinkley C deal was hardly received by public opinion as a major triumph. Conservatives seem open to promoting offshore windfarms in theory, although there is great doubt whether they will provide sufficient incentives to get many (or any) more built after 2020. Similarly they are supportive of solar panels on rooftops, but not so much on the cheaper ground based solar farms. Tory policy is vulnerable to the charge that it stops cheaper renewable schemes on the grounds that they are 'unsightly', yet greatly limits offshore and rooftop systems because they are too expensive, and yet again the 'economic' objection does not extend to new nuclear power stations.

Meanwhile metaphorical trench warfare has erupted around the efforts by the UK Government to get the Hinkley C deal approved by Brussels. Among the objections sent in by British groups are the 'Nuclear Consulting Group' (to which I am a signatory) and also Friends of the Earth. See

A commentary in 'Nuclear Energy Insider' gives a detailed account of some of the issues in the negotiations. See

Meanwhile renewable energy interests are held hostage to the application since the Government decided to submit the applications for the Hinkley state aid application and the renewable energy state aid application concurrently. The renewable energy application would not be subject to such delays if it was submitted separately.

What is the likely outcome? Certainly it is obvious that Michael Fallon is sufficiently uncertain about the outcome that he is pulling out all of the stops to get the Hinkley C state aid application approved. Certainly it has always seemed apparent that the Hinkley C application would take a long time to be resolved by the Commission. Personally, my own impression is that the usual horse-trading in Brussels would see the UK Government get the deal in exchange for a concession on another issue, although the somewhat strained public relations between the Commission and the UK Government may, superficially, at least, make this look problematic. A complete rejection of the Hinkley C state aid application seems unlikely. What still may be possible is that, initially at least, the Commission could ask the UK Government to think again about the length of the (35 year) contract. That would indeed be a deal-breaker, but for that reason, if no other, even this is less likely to stick. I suspect that Michael Fallon has a slightly easier wicket to play on than one infers from his 'desperate' efforts. The depth of  concern in DECC may be much to do with efforts to impress other parts of the UK Government to smooth the path towards acceptance and also in terms of 'expectation management' to bolster the department's claim to brilliant statecraft skills in the event of the likely approval of Hinkley C.

But we continue to live in hope that the deal will fall apart and that renewables funding will benefit as a result. However hope, in terms of what green groups wish for in British energy policy, is now in relatively short supply.

No comments:

Post a Comment