After conducting an in-depth investigation, the European Commission has approved the Belgian aid measure for extending the lifetime of the nuclear reactors Doel 4 and Tihange 3 under EU State aid rules.
The Belgian Measure
According to the 2003 Belgian nuclear phase-out law, all seven nuclear reactors in Belgium were to be closed by 2025. However, in March 2022, due to concerns about energy security and the Russian aggression against Ukraine, the Belgian federal government decided to keep the two newest nuclear power plants, Doel 4 and Tihange 3, open for an additional 10 years.
In June 2024, Belgium notified the Commission of its plan to support the lifetime extension of these two nuclear reactors, with an electricity generation capacity of up to 2000 MW.
On July 22, 2024, the Commission initiated an in-depth investigation to assess the necessity, appropriateness, and proportionality of the measure. The Commission had concerns regarding the contract-for-difference (CfD) design and the proportionality of the financial arrangements, which might have relieved the beneficiaries of too much risk, as well as the proportionality of the transferred nuclear waste liabilities.
The beneficiaries of the measure are Electrabel, a subsidiary of Engie S.A., and Luminus, a subsidiary of EDF S.A., as well as BE-NUC, the newly created 50-50 joint venture between the Belgian State and Electrabel. Following the measure, both reactors will be co-owned by BE-NUC with an 89.8% share and Luminus with a 10.2% share.
The support includes the following components, which constitute a single intervention:
- Financial and structural arrangements: (i) the creation of BE-NUC to cover the necessary capital expenditure; (ii) a contract-for-difference, ensuring stable revenues for a period of 10 years and limiting excess remuneration; (iii) further financial protective mechanisms, such as a loan and an operating cashflow guarantee.
- Transfer of liabilities from Electrabel to the Belgian State concerning nuclear waste and spent fuel, against the payment of a lump sum of €15 billion; and
- Risk-sharing and legal protections in the event of future legislative changes, specifically concerning nuclear operators in Belgium or Electrabels nuclear activities.
The Commissions Assessment
The Commission assessed the measure under EU State aid rules, in particular Article 107(3)(c) of the Treaty on the Functioning of the EU (TFEU) which allows Member States to support the development of certain economic activities under certain conditions, and Regulation 2019/943 (as amended by Regulation 2024/1747) on the Unions electricity market design.
To address the Commissions concerns, Belgium modified the terms of the projects public support package, where possible, given the design of the nuclear reactors. During the in-depth investigation, Belgium clarified that the nuclear reactors are based on an old technology whereby it is not safe nor technically feasible to frequently ramp up and down the power (modulate). The number of modulations is therefore capped by the Belgian nuclear safety authority, which limits the flexibility of the reactors and the capacity of the nuclear operator to respond to market signals.
Regarding the necessity and appropriateness of the additional financial support mechanisms on top of the CfD, in particular the creation of BE-NUC, as well as the loans and the operating cashflow guarantee, Belgium clarified that these instruments are complementary, covering different risks related to the project, thus necessary to ensure its long-term financial viability.
To ensure that the CfD design is appropriate and there is no undue distortion of the functioning of the electricity market, Belgium:
- transferred the decision-making authority regarding economic modulations from BE-NUC to an independent energy manager, who will sell BE-NUCs share of the nuclear electricity on the market and who will have the appropriate financial incentives, which are subject to re-evaluation after 3.5 years, to guarantee an efficient use of the stock of modulations;
- ensured that the energy manager can trade freely BE-NUCs share of electricity on any market, and will act independently, organizing an open and competitive tender, including additional safeguards in case Engies trading entity would participate and/or win the tender.
To ensure that the measure is proportionate, Belgium:
- set the strike price of the CfD based on a discounted cash flow model ensuring that the total aid amount is limited to the funding gap of the project. The financial model ensures that BE-NUCs shareholders will get a market rate of return on their investment.
- intensified the Market Price Risk Adjustment mechanism, whereby the pain (or gain) of lower (or higher) than expected market prices is shared between the Belgian State and the beneficiaries;
- capped the operating cashflow guarantee to limit the exposure of the Belgian State to the high costs of unexpected outages;
- specified that, in relation to the transfer of liabilities: (i) the transferred volume is limited and there is a volume adjustment fee in case the pre-set waste volume is exceeded, (ii) there are strict criteria on the conditioning of the waste before its transfer to the Belgian State and (iii) a dedicated national body (Hedera) will manage and control the €15 billion funds.
Following the additional evidence and modifications of the measure, the Commission concluded that the aid is necessary and appropriate to achieve the objective pursued, as well as proportionate as it is limited to the minimum necessary, while competition distortions caused by the measure are minimized. On this basis, the Commission approved the Belgian measure under EU State aid rules.
Background
Under the TFEU, Member States are free to determine their energy mix, the conditions for exploiting their energy resources, and the general structure of their energy supply. The decision to promote nuclear energy is a national competence.
State aid for nuclear energy can be assessed and approved directly under Article 107(3)(c) 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.
Following the entry into force of the new electricity market design rules in July 2024, the Commission also assesses compliance with the CfD design principles set out in Regulation 2024/1747.
The non-confidential version of the decision will be made available under the case number SA.106107 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.