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EU Court Backs Public Subsidies for UK Nuclear Station

Europe's highest court threw out a bid Tuesday by Austria to strip public financing for the construction of a nuclear power station on the coast of southwestern England.

(CN) — Europe's highest court threw out a bid Tuesday by Austria to strip public financing for the construction of a nuclear power station on the coast of southwestern England.

Set on the Somerset coast, the Hinkley nuclear power station is the first built in the U.K. since 1995. It has been called Europe's largest construction project, but it's also a controversial one due to its reliance on taxpayer funds, cost overruns and questions about the future of nuclear power. Critics also see it as a wasteful taxpayer-funded scheme to make sure Britain retains the nuclear engineering capacity it needs to maintain its nuclear submarine weapons program.

After the European Commission approved state aid for the nuclear station in 2014, Austria objected, saying the project was against the common interests of the EU and violates rules governing fair competition. Austria has opposed nuclear power for decades. Luxembourg joined Austria in its fight against the nuclear plant.

In tossing out Austria's challenge, the Luxembourg-based Court of Justice determined that the commission did not violate EU competition rules when it approved public financing to build two nuclear reactors at Hinkley Point C.

Despite the United Kingdom’s pending departure from the EU at the end of the year, the ruling is expected to be binding and it opens the way for more nuclear power development in Europe.

Tuesday’s ruling upholds one issued by the European General Court, which found in 2018 that state aid was appropriate for such a risky endeavor and that EU nations are free to decide if they want to use nuclear power. The General Court oversees disputes involving EU institutions.

The new nuclear plant is being constructed on a site where two previous nuclear plants were erected, Hinkley Point A and Hinkley Point B. Hinkley Point B is still in use but it's expected to be decommissioned by 2023.

Hinkley Point C was initially projected to cost about $23 billion, more than twice the London Olympics, and start generating electricity by 2025. It has run into construction problems, however, and its cost has ballooned to about $28.8 billion. It's expected to provide about 7% of the U.K.’s energy needs for 60 years, according to government estimates. The U.K. gets about 20% of its power from nuclear energy.

The taxpayer-funded project involves a complex financial arrangement between the British government and Électricité de France (EDF), an energy company owned in large part by the French government, and China General Nuclear Power Group (CGN), a state-run Chinese energy company.

Under the deal, the plant's operator is guaranteed a fixed price for its electricity; it will be compensated if the plant is shut down on political grounds; and the U.K. has promised to provide credit for bonds issued to build the power station.

The energy company building the nuclear station said in a statement that it expected a favorable ruling. 

“EDF believed that the state aid investigation by the European Commission was exhaustive, fair and robust,” the company said. “We were confident it would withstand legal challenge.” 

The company said nuclear power “has a vital role to play in providing reliable low carbon electricity for the future and help meet climate change targets.” 

EU law generally prevents governments from subsidizing national private companies, but in this case the commission found there was a “lack of market-based financial instruments and other contracts to hedge against the substantial investment risks in the project.”

In its ruling, the General Court said the bloc's founding treaties allow each member state to decide whether to use nuclear energy and that the EU commission has no obligation to make sure such a policy objective is shared by all other EU member states.

The General Court also said public financing should not be viewed as a distortion of the EU's internal free market if public financing is in the public interest. Additionally, it found that state aid for something as financially risky as a new nuclear power plant may be necessary.

The General Court likewise dismissed Austria's arguments that there was a conflict between the promotion of nuclear energy and the EU's principle of protecting the environment, what is known in legal terms as “the precautionary principle.”

In rejecting Austria's appeal, the Court of Justice largely agreed with the General Court's legal findings. A magistrate for the Court of Justice advised the court in May to uphold the lower court ruling as well.

“The principle of protection of the environment, the precautionary principle, the ‘polluter pays’ principle and the principle of sustainability cannot be regarded as precluding, in all circumstances, the grant of state aid for the construction or operation of a nuclear power plant,” Tuesday’s ruling states.

In granting its approval, the court also noted that the commission found the new nuclear station was needed for the U.K. to meet its energy needs as older nuclear plants and coal-fired ones are closed and while renewable sources are not capable of filling the gaps.

“The equivalent of the power to be supplied by Hinkley Point C corresponded to 14 gigawatts of onshore wind or 11 gigawatts of offshore wind capacity,” the ruling states. “It was unrealistic to expect such wind energy generation capacity to be built within the same time frame as that envisaged for the construction of Hinkley Point C.”

It added that the U.K. “is free to determine the composition of its own energy mix.” The court also dismissed Austria's contention that the nuclear subsidies are a “disproportionate discrimination against other technologies” because similar subsidies could be used to support other technologies.

The ruling comes ahead of the U.K.'s departure from the EU, which will take place at the end of the year unless a transition period is extended.

While on the drawing board for about 40 years, the new Hinkley plant wasn't formally proposed until 2010.

Tuesday's ruling was a setback for environmentalists and Austria, which has banned nuclear power plants and imports of electricity generated from nuclear energy.

Reinhard Uhrig, an anti-nuclear campaigner with the Austrian environmental organization GLOBAL 2000, said the ruling allows building “uncompetitive nuclear plants” supported “by limitless billions of taxpayer money.”

He called on Austria to demand other EU nations rewrite European laws to end public subsidies for nuclear power. He argues that nuclear power is unsafe and much more expensive than renewable energy sources, such as wind and solar. Besides the massive costs in building nuclear reactors, radioactive-waste disposal is very costly and environmentally damaging.

The Czech Republic, France, Hungary, Poland, Slovakia and the U.K. took the side of the commission in the legal proceedings. These are EU countries looking to build new nuclear reactors.

Hungary has received approval from the European Commission to use state subsidies for the construction of two reactors at the Paks nuclear power plant. That project is located about 125 miles from the Austrian border. Austria is challenging those subsidies too.

Courthouse News reporter Cain Burdeau is based in the European Union.

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