By Stanley Reed, The New York Times, October 8, 2014
EDF Energy will build the new nuclear plant at Hinkley Point. Photo: Warrick Page for The New York Times
LONDON — The European authorities on Wednesday approved construction of Britain’s first nuclear power station since the mid-1990s, in a ruling that could clear the way for other European countries to plan nuclear plants as part of their energy future.
The decision, by the European Union’s competition regulator, removes one of the final obstacles for the plant, at Hinkley Point in southwest England, which would produce about 7 percent of Britain’s current power supply but would not start operating before 2023.
Although the British government had already approved the power station, Brussels needed to sign off to make sure the financing plan did not constitute unfair state aid.
The plant would be built by EDF Energy, the British subsidiary of the French state-controlled utility, which already operates nearly all the nuclear power plants in Britain.
EDF has spent more than 1 billion pounds on design work and preparation for the site, which overlooks the Severn Estuary. Under the arrangement, government-guaranteed rates for the power eventually generated from the plant is guaranteed to give EDF a return on its investment.
Policy makers and energy executives elsewhere are closely watching Hinkley Point as a test case of whether new nuclear plants can be built in the West given the high costs and the environmental risks.
While valued by proponents as a cleaner-energy alternative to carbon-fueled power plants, the radioactive risks of nuclear power were vividly illustrated by the Fukushima disaster in Japan in 2011, an event that helped prompt Germany’s decision to abandon all future plans for nuclear power stations.
The Hinkley Point project is running years behind schedule, with mounting costs. Centrica, a British utility, walked away last year from its 20 percent share in the project, citing frustration over delays and costs.
To share in the costs, EDF has said it wants to bring in two Chinese state-backed companies, the China General Nuclear Corporation and the China National Nuclear Corporation, and, potentially, other investors.
The British government is nonetheless pressing on with the project, as it worries about future sources of energy. Britain’s current nuclear plants, which generate around 20 percent of the country’s electricity, are approaching the ends of their lives. Meanwhile, the country’s North Sea oil and natural gas reserves are dwindling, and coal-fired plants are being retired to reduce carbon emissions.
Britain’s determination to go ahead with a new nuclear power station at a large cost accentuates the divisions that are opening among European countries over nuclear power. The government wants to build not only Hinkley Point but also several more plants to replace its aging collection of nuclear reactors.
Meanwhile, Germany is easing out of the nuclear power business, forcing utilities to rely more on highly polluting coal to generate the kind of steady flows of electricity that cannot yet be supplied by renewable energy sources like solar and wind.
Despite the problems, other nuclear providers from around the world are eyeing Britain as a potential market. Toshiba and Hitachi of Japan have been studying British projects, while EDF is also contemplating building another plant on Britain’s east coast at Sizewell. But how many new plants will be built in Britain or other European countries now considering such a move — including Hungary, Lithuania and Poland — remains a big question.
A few countries voted against the decision. That includes Austria, which opposes the use of nuclear power and is threatening to go to court to try to block Hinkley Point.
Of the main European economies, only France has long remained committed to nuclear power.
"You will have a lot of discussion about how expensive these projects are,” said Roland Vetter, an analyst at CF Partners, an energy trading firm in London. “I don’t know how many more companies will want to build more nuclear plants in Britain.”
The specter of future power outages and the pressures to meet climate change goals have pushed the British government to intervene once again in a power sector that was privatized decades ago. The government, which also built all of Britain’s nuclear plants in the past, is now getting actively involved in the energy business, offering generous subsidies not only for nuclear power but also for renewable energy installations like giant offshore wind farms and even projects using tidal power.
Joaquín Almunia, the European official in charge of competition policy, who announced Wednesday’s decision, had been investigating since last year whether Hinkley Point violated European Union rules against state aid.
Those subsidies would take two main forms. The government had proposed a guaranteed wholesale price of 92.50 pounds a megawatt hour for the electricity the new plant will generate. That is about double current electricity rates in Britain. In a second form of subsidy, the British government also agreed to provide financial guarantees for the projects estimated at 17 billion pounds in financing.
Brussels’ state-aid concern would focus on whether Britain was giving unfair advantages to EDF over other industry players — or whether the government subsidies would distort energy markets.But Mr. Alumunia said his office had been persuaded by Britain’s argument that the Hinkley project could not proceed without the government’s subsidies and so had agreed not to oppose it after London agreed to some modest changes.
Analysts say that there was tremendous pressure on the European regulators to approve the deal because two big players in the 28 nation group, Britain and France, were behind it and because the British government portrayed the power station as necessary to keep the lights on — not to mention creating around 25,000 jobs during the decade-long construction phase.
“This is an important next step on the road to Britain’s first new nuclear power station in a generation,” Ed Davey, Britain’s energy and climate change minister, said in a statement on Wednesday.
Although Mr. Almunia said that the Hinkley Point approval did not necessarily create a precedent, analysts say the go-ahead given to the project should encourage other operators interested in building new nuclear facilities in Britain as well as in other European countries to think that they, too, might be able to use government financial support.
“Any other countries in the E.U. that want nuclear power will take heart from this decision,” said Antony Froggatt, a nuclear analyst at Chatham House, a London-based research organization.
Mark Johnston, a senior adviser to the European Policy Center, a research organization in Brussels, said the opposition to the Hinkley Point decision by a number of countries, which appeared to include Austria, Denmark, Slovenia and Luxembourg, showed that skepticism about the project had different strands.
“Austria is against nuclear power, full stop,” said Mr. Johnston. “But some of the others don’t like the idea that market disciplines are broken to fund nuclear construction, while others may worry that fewer emissions in Britain will just make coal cheaper for other parts of Europe like Poland, and do little to reduce greenhouse gases overall.”