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EU Antitrust Laws May Block Chris Huhne’s Energy Bill

European antitrust rules may delay legislation on U.K. electricity market reform and put back investment in nuclear and wind power, according to a former government adviser.

The U.K. proposed a shift in British energy policy to rein back the market structure put in place over two decades ago to help replace about a quarter of Britain’s power stations that are preparing to close. Chris Huhne, energy secretary, recommended guaranteeing long-term prices for low-carbon energy such as nuclear and wind power, setting a minimum price for CO2 emissions and providing payments for back-up power stations.

The proposed changes may fall foul of European Union rules restricting state aid, Tom Burke, a co-founder of environmental lobby E3G, said in an interview in London. Burke has advised the U.K. on international climate change policy. The European Union can take up to 18 months to grant consent under state aid rules, he said. A spokesman for the U.K.’s department of energy and climate change, who declined to be identified citing government policy, didn’t immediately comment.

Britain’s power market shakeup is hoped to spur investment into atomic and renewable sources to help the nation meet a European target of getting 15 percent of its energy from green sources while also chasing a domestic ambition of slashing CO2 emissions to 80 percent below 1990 levels by 2050. The government is due to pass its electricity market reform legislation next May.

Unfair Subsidies

Policies that impact markets must be granted approval from the Brussels-based European Commission, the bloc’s regulatory arm, to ensure they don’t give unfair subsidies to certain technologies.

The legislation, which would fix returns through so-called contracts-for-difference, was criticized as disguised support for nuclear by Tim Yeo, chairman of the Parliamentary energy and climate change committee. Proposals are “skewed by the wish of the coalition to disguise support for nuclear,” Yeo, chair of the committee and a Conservative member of Parliament, said in a May 16 telephone interview in London. “If meeting targets involves giving nuclear some support, then it would be sensible for the government to just admit that.”

Bloomberg, 11 August 2011