Clark's plan to underwrite losses on Wylfa nuclear project will likely lead to an embarrassing state-aid plea to the EU Commission

Now that it seems, short of an extended 'no-deal' Brexit scenario, the UK will remain within EU state-aid rules for a long time to come, Greg Clark will have to oversee an embarrassing state aid case in support of his proposals to underwrite the (almost certain) losses from building the Hitachi-led Wylfa nuclear power plant.

I have already discussed how the taxpayer (and/or electricity consumer) is exposed to almost certain multi-billion losses as a result of the plan that Clark is touting here and in Japan. See my previous post at https://realfeed-intariffs.blogspot.com/2018/11/how-greg-clarks-hitachi-deal-could-lead.html

The last time that the UK applied for what amounted to an exemption from EU state aid rules for nuclear power was in late 2013 when Ed Davey led the plea for the Hinkley C deal. The state aid was granted in October 2014 after the Commission ruled that the Hinkley C deal was a reasonable way to avoid 'market failure'. Any application for state aid for Wylfa would be a tougher challenge. Indeed the very proposal whereby the state will take at least a half equity share in the project and take responsibility for cost overruns is an action that in itself creates market failure if curbing carbon emissions is the objective!

The Government's cover story  in 2013 was that support for Hinkley C was on the same level available for renewable energy since renewable energy schemes were also being offered CfDs (as well as very extensive loan guarantees that most renewable energy schemes could not get from the Government of course). The European Commission seemed to buy into this line stating 'The aid would not have a negative impact on other low-carbon sources, given that they are also supported by the UK, and there is no discrimination against renewable technologies'

See para 284 in the Commission decision https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=uriserv:OJ.L_.2015.109.01.0044.01.ENG&toc=OJ:L:2015:109:FULL

But this time the type of support available for Wylfa (Govt equity support plus underwriting potential losses) is certainly not on offer to renewable energy schemes. Indeed nowadays onshore wind and solar are not eligible for even CfDs.

It will be interesting to see what happens with this (Wylfa) state aid application. No doubt we'll get Brexiteers complaining about the role of the Commission (who might save the UK from the harm the project does to the country!). The voting will be rather less favourable to the British application than last time, where only 4 out of 28 Commissioners objected to the granting of state aid for Hinkley C. The UK will have less (no?) insider influence, and there will be much less sympathy for Hitachi as a developer compared to EDF, the (French, state owned) developer of Hinkley C.

No doubt we'll hear lots of stories about how Hinkley C is important for carbon reduction - despite the fact that the Government is not even asking the Crown Estates to look for any more offshore wind sites off the English and Welsh coasts - and stories about the need for firm capacity - despite the fact that small peaking gas plant would be at least 20 times cheaper (again see last post).

Greg Clark seems to have set his store, in terms of ministerial role  as being a 'consolidator' as opposed to an innovator in his role at BEIS. Well, he'll need to be pretty innovatory to get the Wylfa proposal approved in an EU state aid case!