The General Court of the European Union (GC) recently ruled that the United Kingdom is legally entitled to provide substantial State aid for the construction of the new Hinkley Point C nuclear power plant (Case T-356/15). The General Court has thus upheld the approval of the EU Commission from 2014 and dismissed Austria's action against it (more detailed information on this by Martin Geipel and Helge Heinrich, 2016 State Aid Law Yearbook). The decision is in the context of subsidies for other major high-risk energy projects.

State aid is compatible with the internal market as it facilitates a common interest

The United Kingdom had largely protected the future operator of the nuclear power plant from the cost risk of the construction, operation and early decommissioning of the power plant by means of a package of measures. In its decision, the General Court confirmed that these measures constitute State aid. It also agreed with the Commission's assessment that they are compatible with the internal market because they serve to facilitate the development of an economic activity, which is an objective in the common interest (Article 107(3)(c) TFEU).

The General Court held that it was not objectionable that the Commission had classified the creation of new capacity for the generation of nuclear energy as an objective in the common interest even though some Member States chose not to generate nuclear power, since it was up to each Member State to choose between different energy sources. At the heart of the decision is the finding that, in the absence of market-based financial instruments to cover the significant risk, investment in new capacity to produce nuclear energy would not have been made in time without UK aid. Therefore, the Commission's assessment that the aid was necessary to achieve the objective in a reasonable time could not be criticised either.

Context: State aid authorisation for major high-risk energy projects

The decision is in line with a consolidation of the Commission's practice on the assessment under State aid law of large-scale energy projects whose implementation is risky in a market economy. In 2017, for example, the Commission authorised the German government to release German nuclear power plant operators from the financing obligations for the disposal of the radioactive waste they generate in return for payment of billions. The Commission also considered this aid to be compatible with the internal market within the meaning of Article 107(3)(c) TFEU because it was intended to facilitate a common interest and was proportionate. In particular, the decisive factor at the time was that the aid measure should lead to the greatest possible reduction of the cost risk for the state.

In 2016, however, in line with the EU Commission the General Court had classified the German feed-in tariff for the generation of electricity from renewable energy sources as inadmissible aid under European law (judgment of 10 May 2016, Case T-47/15). The Court also criticised the far-reaching exemption of certain branches of industry from the allocation of feed-in tariff costs to all electricity consumers and dismissed the action brought against the Commission decision at first instance. While the German legislator has adapted the German Renewable Energies Act in line with the demands from Brussels, the proceedings against the Commission decision are pending in an appeal filed with the European Court of Justice.

The last word on Hinkley Point C has not yet been spoken either. Austria is considering a possible appeal to the ECJ.