Commission approves Belgian State aid measure to support lifetime extension of two nuclear reactors

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Following an in-depth investigation, the European Commission has approved, under EU State aid rules, a revised Belgian support measure for the lifetime extension of two nuclear reactors, Doel 4 and Tihange 3.

The Belgian measure

Under the Belgian nuclear phase-out law of 2003, all seven nuclear reactors in Belgium had to be closed by 2025. In March 2022, in light of concerns about security of supply in the context of the energy crisis and the Russian war of aggression against Ukraine, the Belgian federal government decided to keep the two newest Belgian 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 two nuclear reactors, with an electricity generation capacity of up to 2000 MW.

On 22 July 2024, the Commission opened an in-depth investigation to assess the need, appropriateness and proportionality of the measure. The Commission had doubts regarding the contract-for-difference (‘CfD’) design and the proportionality of the (combination of) the financial arrangements, which might have relieved the beneficiaries from a too big share of the risk, as well as regarding the proportionality of the amount 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 an 10.2% share.

The support includes the following components, which constitute one 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 lumpsum of €15 billion; and
• Risk-sharing and legal protections in the event of future legislative changes, specifically concerning nuclear operators in Belgium or Electrabel’s nuclear activities.

The Commission’s 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 enables 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 Union’s electricity market design.

To address the Commission’s concerns, Belgium modified the terms of the project’s public support package, where possible, given the design of the nuclear reactors. During the in-depth investigation, Belgium indeed clarified that the nuclear reactors are based on an old technology whereby it is not secure nor technically feasible to often 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-NUC’s 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-NUC’s share of electricity on any market, and will act independently, organising an open and competitive tender, including additional safeguards in case Engie’s trading entity would participate and/or win the tender.

To ensure that the measure is proportionate, Belgium:  

• set the strike price of the CfD on the basis of 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-NUC’s 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 in order 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 minimised. 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.