British nuclear support plans flout EU rules - lawyers

BRUSSELS/LONDON Thu Mar 21, 2013 5:25pm GMT

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BRUSSELS/LONDON (Reuters) - Britain's plans to reward nuclear plant operators through fixed prices for low-carbon energy are illegal under existing EU rules and efforts to adapt them are likely to draw opposition from other member states, EU and legal sources said.

Britain plans to reform its electricity market to fix a minimum price for nuclear, wind and solar-generated power, which is carbon free.

The proposals are being assessed by the British parliament but the subsidy instruments, named contracts-for-difference (CfDs), will also require approval from the European Commission, the EU executive, under state aid rules.

"Neither under the current (...) nor under possible future frameworks could the CfD scheme for nuclear generators be declared compatible with European state aid rules," said Doerte Fouquet, a lawyer specialised in EU law at Becker Buettner Held in Brussels.

The British government is already in talks with France's EDF about a CfD for the company's Hinkley point C nuclear project in south-west England, Britain's first nuclear plant since 1995, which is expected to start operating around the turn of the decade.

The European Commission said it had not yet received a formal notification from Britain, but added that, in general, state aid is only authorised when the benefits of aid outweigh the distortion of competition brought about.

A spokesman for Britain's Department of Energy and Climate Change said Britain was talking to the EU executive.

"We are working with the European Commission to ensure mechanisms and institutional arrangements within Electricity Market Reform are consistent with EU state aid rules," he said.

To make changes to state aid rules, the Commission would have to go through a lengthy consultation process with member states and other parties that could take between one-and-a-half and two years, Fouquet of Becker Buettner Held said.

Others question whether Britain could drum up enough support for legal changes to be made to extend state aid rules to nuclear power.

"This raises the question if governments opposed to nuclear energy, and they are in the majority, will allow such a legal act to be drafted and decided by the EU Commission," said Claude Turmes, vice president of the Green party in the European Parliament.

The European Union has 27 member states.

Twelve of them issued a joint statement two weeks ago saying their countries were supportive of nuclear power playing a role in the future European energy mix.

Signatories included France, the Netherlands, Britain and Poland. In contrast, dominant EU member state Germany has said it will phase out nuclear power.

(Editing by William Hardy)

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