By Barbara Lewis
BRUSSELS (Reuters) - Britain's plans to use public money to subsidise a new generation of nuclear power suffered a setback on Tuesday when EU policy-makers decided to exclude atomic electricity from a list of funding guidelines.
An early draft raised expectations the Commission was preparing to sanction public support for nuclear power and whipped up a storm of protest, especially in the biggest EU economy Germany.
Germany is phasing out nuclear power and replacing it with renewable sources, such as wind and solar, whereas Britain wants to build new nuclear plants with the help of public funds.
Commission spokesman Antoine Colombani said EU Competition Commissioner Joaquin Almunia proposed that guidelines, expected to be published in November, should not include specific criteria on nuclear power. The other commissioners agreed with him at an internal meeting on Tuesday, he said.
Omitting nuclear energy from the guidelines does not necessarily mean that using taxpayers' money to help finance nuclear power would be illegal under EU law.
"This simply means that state aid notifications by member states will continue to be assessed directly under (EU) treaty rules and the standard in this field will be determined by the Commission's case practice," Colombani said.
In reality, any decision on the legitimacy of Britain's plans to use public money to help finance the Hinkley Point nuclear plant in southwest England is likely to set a legal precedent, EU sources said.
The level of public support for the new plant, to be built by French firm EDF, is seen as vital to its success.
Environment campaigners and Green politicians welcomed Tuesday's news.
"It is a major setback for the legal certainty of nuclear energy," said Claude Turmes, a member of the European Parliament representing the Green party.
The issue of whether the general public should subsidise nuclear as well as other forms of energy has been divisive within the European Commission, the EU executive, as well as at the level of national governments.
Internal documents seen by Reuters showed objections from within the Commission to an earlier draft version of the guidelines under review.
"The impression given in the draft is that the Commission opens up aid to fossil fuel energy and nuclear while becoming much stricter on aid to renewable energy," an internal document from the Commission's climate service said.
It also questioned why nuclear should need state aid, given that it is a mature technology. In principle, EU law says subsidies should be reserved for new technology, such as solar.
A separate document from the energy service says a proposed phase-out of renewable subsidies requires "a longer transition period".
EU sources said the Commission would continue to debate how to tackle "the distorting effect" of overly generous renewable subsidies.
State aid guidelines differ from other EU law in that they do not have to be approved through lengthy consultation with member states and parliament and the Commission has said they will be finalised early next year.
(Additional reporting by Tom Koerkemeier; editing by Foo Yun-Chee and William Hardy)