State Aid: Commission opens in-depth investigation into Czech support for new nuclear power plant in Dukovany

(Source: European Commission)

The European Commission has opened an in-depth investigation to assess whether public support that Czechia plans to grant for the construction of a new nuclear power plant in Dukovany is in line with EU State aid rules.

The beneficiary of the measure would be the Elektrárna Dukovany II (‘EDU II’), a company set up to carry out the project, which is fully owned by the ČEZ Group (the main incumbent in Czechia with the Czech government holding about 70% of the shares).

The Commission’s investigation

In March 2022, Czechia notified the Commission of its plan to support the construction and operation of a new nuclear power plant in Dukovany, with an electricity generation capacity of up to 1200 MW. Dukovany is already the site of an existing nuclear power plant.

The new plant, which is scheduled to start operating in 2036, should increase the security of electricity supply for Czechia and for neighbouring countries, helping the decarbonisation of the energy sector and diversifying the Czech energy mix.

Czechia plans to support the construction of the new nuclear power plant through three measures: (i) a low-interest repayable State loan expected to cover 100% of the construction costs (approximately €7.5 billion); (ii) a power purchase agreement between EDU II and a State-owned company for the lifetime of the project (60 years) – according to the Czech authorities, this would lower the power purchase price and allow for price adaptations every 5 years; and (iii) a mechanism to protect the ČEZ Group and the State in case certain unforeseen events occur (e.g. if the Czech law changes and makes the realisation of the project impossible). The ČEZ Group contribution to the project will be approximately of €0.18 billion.

At this stage, based on its preliminary assessment, the Commission has found the project necessary and considers that the aid facilitates the development of an economic activity. Nevertheless, there are doubts on whether the measure is fully in line with EU State aid rules. For this reason, the Commission has decided to open an in-depth investigation in relation to:

  • The appropriateness and proportionality of the three components of the measure. Given there are three different aid channels that together can limit the risk for the beneficiary, it is important to ensure that overall no more aid than what is necessary is ultimately granted. In particular, whether the duration of the power purchase agreement is justified taking into account the other two measures;
  • The impact of the measures on competition in the market and whether this is kept to the minimum. In particular, the Commission has doubts on:
    • Whether there could have been other companies interested in acting as project promoter instead of CEZ.
    • The market impact of the decision to set up a specific State-owned company for the resale of the nuclear electricity, in particular considering that it is unclear if this future entity will aim at maximising its profit.

The Commission will now investigate further to determine whether its initial concerns are confirmed. The opening of an in-depth inquiry also gives Czechia and interested third parties an opportunity to submit comments. It does not prejudge the outcome of the investigation.

Background

The Court of Justice has clarified that, in line with Article 194(2) TFEU, Member States may determine the conditions for exploiting their energy resources, their choice between different energy sources and the general structure of their energy supply, which does not preclude that choice from being nuclear energy.

Under EU State aid rules, the Commission analyses the compatibility of the measure under Article 107(3)(c) of the Treaty on the Functioning of the European Union (‘TFEU’), which enables Member States to support the development of certain economic activities under certain conditions. The support should remain necessary and proportionate and not adversely affect trading conditions to an extent contrary to the common interest.

The non-confidential version of the decision will be made available under the case number SA.58207 in the State Aid Register on the DG Competition website once any confidentiality issues have been resolved. New publications of state aid decisions on the internet and in the Official Journal are listed in the State Aid Weekly e-News.

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