Friday, 15 March 2013

Pressure builds on government to deny EDF demands

Perhaps EDF's latest media offensive in favour of their 35 year contract for nearly £100 per MWh is a sign of desperation rather than strength. Certainly the Government is under great pressure not to give into EDF. As discussed in the Guardian, the Government faces a choice about whether it wants to face a long wait for approval from the EU Commission to be given 'state aid' approval for the nuclear subsidies or whether it will achieve a quick decision.

Of course it is easy to point out how the UK Government has got EU state aid approval in the past - eg to complete the construction of Sizewell B in 1990, and to bail out British Energy in 2001. However this latest instance is distinct because the UK's case for state aid approval is based on a claim that its 'low carbon subisdies' are equally available to other energy generators. Or at least, that is how it will be seen in Brussels. The Government might get away with things more easily if there were no objections from other actors in the generation business. But renewable energy generators, let alone anyone else, are not going to receive 35 year contracts (no more than 20 years), so the Government case looks very shaky if wants to obtain state aid under EDF's preferred terms.

The UK Government will have to wait until the Energy Bill becomes law before it can make its state aid request for permission. State aid requests are considered by the Competition Directorate and the rules give an exemption for environmental purposes, including renewable energy. However nuclear power is not recognised as 'environmental' by the EU rules. So the UK Government has a dilemma here, which is compounded by the fact that major competitors of the EDF do not see why it should be given such favourable treatment.See the statement from Npower in the 'Daily Mirror':

Of course EDF also wants its investment to be 'underwritten' by the British state, which, if granted, would make state aid consent even more problemmatic. But then the Government have said they will not underwrite investments in Hinkley C. Is there anything other than megaphone diplomacy from EDF that will persuade the Treasury to give into EDF? In fact, not very much. Carbon dioxide emissions will be more cheaply reduced by increasing spending on energy efficiency and renewables energy - for which there is not nearly enough funding available from Governemnt policies anyway. And the National Grid dismisses notions that there is a generation capacity crisis. Interestingly the National Grid also say that wind power is easier to manage than nuclear power.   You do not hear much about this in the press, which is eager to report EDF's version of the facts. See

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