UK Prepares For EU Ruling On Energy State Aid
The Government is braced for a ruling from Brussels on Wednesday that will influence the fate of billions of pounds in investment in low-carbon energy policies.
Sky News understands that the European Commission (EC) is likely to announce its ruling after several months examining a form of subsidy guaranteeing long-term prices to companies for supplying renewable energy sources.
Known as contracts for difference (CFDs), these instruments are designed to reassure investors about the returns that such projects will generate, and have been an important element of the Coalition's energy policy.
The Government has developed a series of policies under the umbrella of Electricity Market Reform, which are intended to meet legally binding targets to reduce carbon emissions.
They also include the issue of the capacity market, which is designed to incentivise energy companies to commit to keeping the lights on, in exchange for penalties if they fail to do so.
The EU has previously signalled that projects which involve significant subsidies could be deemed to constitute unfair state support.
A senior energy sector source said an announcement was likely to be made on Wednesday but could be delayed.
A source close to the Department for Energy and Climate Change (DECC) said it was confident of securing Brussels' approval for UK policies on low-carbon energy.
They conceded that some material concessions or a more formal EU probe were possible, however.
"We have continued to engage [with Joaquin Almunia, the EU Competition Commissioner] on our EMR cases," a source said.
"These conversations remain constructive and we are making the strongest possible case for our policies, which we believe are consistent with the new energy and environmental state aid guidelines."
State aid for the UK nuclear sector will not be covered by Wednesday's announcement, according to insiders.
A separate ruling on that issue is expected later this year.
Launching its probe of the financial guarantees being provided to EDF, the French utility leading the construction of a new nuclear power plant at Hinkley Point, the Commission said last year that it had "doubts that the project suffers from a genuine market failure".
A Commission spokesman said on Tuesday that it "does not announce state aid decisions in advance, nor does it comment on possible future decisions".
A spokeswoman for DECC declined to comment.