Plans to build Britain’s first new nuclear plant in a generation at Hinkley Point in Somerset are likely to gain EU state aid approval within weeks, according to reports.
The European Commission has been examining the proposed £16bn project since December amid concerns the UK has offered developer EDF Energy excessively generous subsidies.
UK energy consumers could pay the French company and its partners as much as £17.6bn in subsidies over a 30-year period, under the terms of the Government’s deal, the EC said in January. It warned this could be unnecessary and may constitute illegal state aid.
But after months of deliberation regulators are now set to approve the project, Reuters reported, citing several unnamed sources.
An approval would come in the context of heightened fears over Europe’s energy security in the wake of the Ukraine crisis and Russian threats to cut off gas supplies to Europe.
“We can expect some resolution (approval) in the next couple of weeks. The intention is to move forward,” said one of the sources.
Joaquin Almunia, the outgoing EU Competition Commissioner, is expected to make a recommendation to his colleagues ahead of a formal decision.
However, Reuters also reported sources saying that while the recommendation would be positive, it would come with “a number of conditions”, and that regulators were still awaiting further information from the UK before taking their decision.
EDF and the Government have been locked in talks to try to thrash out key details of the funding arrangements in time for Mr Almunia to take a ruling before he steps down at the end of October.
Headline subsidy terms were agreed to much fanfare last October but EDF and the Treasury remained in negotiations over the summer over the details of a £10bn loan guarantee.
An investment decision on the project, once targeted for December 2012, has been repeatedly delayed.
Failure to gain state aid approval from Mr Almunia would see approval further delayed until well into next year when a new Commission is in place.
If the details are resolved and state aid approval is granted, EDF will still need to finalise deals with Chinese state-backed nuclear firms who are expected to take significant stakes in the project, before taking a final investment decision.
Under the subsidy deal, EDF and its partners in the project will be guaranteed a price of £92.50 – twice the current market price of electricity – for each megawatt-hour of power that the reactors generate over a 35-year period.
The UK argues that the project would not take place without the subsidies and fears that if Hinkley does not go ahead it will destroy investor confidence, resulting in “a complete lack of investment in new nuclear plants”.