State aid rules in the European Union (EU), designed to ensure that government interventions do not distort competition and trade inside the EU, must be considered when national energy policies are developed. With the UK poised to offer nuclear generators similar contracts for difference (CFD) incentives to those offered to renewable energy providers, some observers are concerned that the incentive violates state aid rules. Maria Kleis, EU liaison, identifies five criteria the European Commission will use to determine if the contracts for difference for nuclear are legal:

(1) Does the money come from public funds?
(2) Does it give the beneficiary a competitive advantage?
(3) Is the aid selective?
(4) Will the aid affect competition?
(5) Will the aid affect the European market?

It’s pretty clear CFDs will give nuclear an advantage in the UK market – this one is “very easily established,” Kleis says. Simply put, the government is giving nuclear – and EDF, as it’s the only company building new nuclear – a leg up. That’s the whole point of the CFDs.

Although renewable energy subsidies are clearly state aid, the Commission already exempts them through an environmental clause because they support the EU’s climate and renewable energy goals. Read A Review of Challenges in Implementing UK’s New Feed-in-Tariff: Relevance for “Market Premium” Discussions in Germany? for more information on the UK’s CFD for renewables.