Fallon discussed the deal struck with EDF Energy over the proposed nuclear plant with competition commissioner Joaquín Almunia last week, he told MPs on the Energy and Climate Change Committee.
In a 70-page letter published on Friday, the Commission expressed doubts that the subsidies proposed for Hinkley Point are compatible with state aid rules.
The power station is set to receive a “strike price” of £92.50/MWh for 35 years, nearly double the current wholesale power price, as well as construction guarantees.
The Commission said the deal could over-compensate EDF and distort competition. It questioned whether nuclear technology was immature enough to warrant state aid, noting similar power stations are being built in France and Finland without such support. It challenged the UK’s argument Hinkley Point C is needed to meet carbon reduction and security of supply goals, given it will not run until 2023 and there is time to develop other options.
As for affordability, the Commission said support for Hinkley Point would “most likely contribute to an increase in retail prices”.
The Commission is “fully entitled” to ask such questions, said Fallon. “I am confident when we have gone through that process and answered those questions, will gain clearance.”
Hinkley Point C is a test case not only for the UK but several other European countries interested in developing new nuclear fleets.