UK 'subsidising nuclear power unlawfully'

Sunday, January 22, 2012

Green energy campaigners are attempting to block new nuclear power stations in the UK by complaining to the European Commission that government plans contravene EU competition regulations.

They say financial rules for nuclear operators include subsidies that have not been approved by the commission.

These include capping of liability for accidents, which they say at least halves the cost of nuclear electricity.

The government says it is confident that policies do not provide subsidies.

The complaint, by the Energy Fair group, also says that the UK's carbon floor price and feed-in tarriffs amount to state aid for the nuclear industry.

State coffers would also have to meet cost overruns on nuclear waste disposal, they argue.

Dorte Fouquet of the German legal firm BBH, who drew up the complaint, said that EU energy policy was based on having an open market with a level playing field.

"The commission has repeatedly underlined that distortion of the market is to a large extent caused by subsidies to the incumbents in the energy sector," she said.

"This complaint aims to shed some light on the recent shift in the energy policy of the United Kingdom where strong signals point to yet another set of subsidies to the nuclear power plant operators."

Last year, a committee of UK MPs also said that the government was subsidising nuclear power, despite promises that it would not.

It sees the construction of about eight new reactors within a decade as essential for meeting climate change and energy security goals.

Although most of the complaint concerns the UK, some of its ingredients would apply to other EU nations as well, especially the capping of nuclear liability. Indian Point power station The US is another country contemplating a nuclear renaissance, with government support

Estimates prepared for Energy Fair suggest that if operators had to buy insurance at the market rate, that would add at least 14 euro cents (12p) to the price of one kilowatt-hour (kWh) of electricity - and potentially 20 times that figure.

With electricity in the UK retailing around 12p/kWh, that would mean at least a doubling of the price.

Campaigners have repeatedly said down the years that all nuclear programmes are in fact underwritten by the state whether they are government-owned or private, because the clean-up costs from major accidents are enormous and the companies involved are considered "too big to fail".

Current UK proposals call for the operator to be liable for the first £1bn of cost from any accident.

This is about a seven-fold increase on previous levels, but still a long way below the costs of a disaster such as the one that befell the Fukushima Daiichi plant in Japan last year.

That has left the plant's owners, the Tokyo Electric Power Company (Tepco), facing a bill of multiple billions of dollars and reliant on state support - and perhaps eventual state ownership - to survive.

From a uniquely UK perspective, Fair Energy is focussing on elements of the Electricity Market Reform package that the Department of Energy and Climate Change (Decc) released last year.

"The introduction of a carbon price floor is likely to result in huge windfall handouts of around £50m a year to existing nuclear generators," said Caroline Lucas MP, leader of the UK Green Party.

"Despite persistent denials by ministers, it's clear that this is a subsidy by another name, which makes a mockery of the Coalition pledge not to gift public money to this already established industry."

A Decc spokesman said the government's policy of no subsidies for nuclear, established in 2010, still stood.

"We are confident that our proposals to reform the electricity market to incentivise all low carbon generation are entirely consistent with that policy of no subsidy," he said.

The European Commission could take up to 18 months to consider the complaint. A finding in Fair Energy's favour could potentially derail the UK's nuclear expansion plans - and those of other countries.

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