The European Commission has granted its approval to the Hungarian state’s providing a subsidy to the Paks nuclear power plant upgrade project, according to a statement issued by the EC on Monday.
“The European Commission has concluded that Hungary’s financial support for the construction of two new nuclear reactors in Paks (Paks II) involves state aid. It has approved this support under EU state aid rules on the basis of commitments made by Hungary to limit distortions of competition,” the statement said.
The EC said that according to the agreement to avoid overcompensation of the operator of Paks II, any potential profits earned by Paks II will either be used to pay back Hungary for its investment or to cover normal costs for the operation of Paks II. Profits cannot be used to reinvest in the construction or acquisition of additional generation capacity. To avoid market concentration, Paks II will be functionally and legally separated from the operator of the Paks nuclear power plant (the incumbent MVM Group) and any of its successors or other state-owned energy companies.
Hungary also agreed that to ensure market liquidity, Paks II will sell at least 30 percent of its total electricity output on the open power exchange. The rest of Paks II’s total electricity output will be sold by Paks II on objective, transparent and non-discriminatory terms by way of auctions. Based on these commitments the Commission said it approved the investment plan under EU state aid rules because the amount of aid is limited and proportionate to the objectives pursued, while the distortion of competition caused by the state support is minimised.
The two new reactors aim to replace the four reactors currently operating at Paks, which were constructed in the 1980s and currently account for approximately 50 percent of Hungary’s domestic electricity production. Construction work on the upgrade of Hungary’s sole nuclear power plant is due to start next year, with financing from Russia.