In March 2017, the European Commission approved the state aid package from the Hungarian government to invest in two new nuclear power reactors at Paks II. The Commission’s approval decision cited NERA’s empirical work on more than 20 occasions.

Working with a combined team of energy and competition specialists—led by George Anstey, Vakhtang Kvekvetsia, Grant Saggers, James Grayburn, and Sean Gammons—NERA supported external counsel, the investment bankers, and the Hungarian government through the process.  

Over a period of two years, the team conducted various modelling analyses of the affected electricity markets, engaging directly with the Commission via information request responses and expert reports.

The workstreams included:

• Market definition analysis to demonstrate the scope of the regional markets affected, including an analysis of market shares and a SSNIP test on how the market would be defined and work (on a per half-hour basis) once the reactors were active in the period 2030 to 2050. This required NERA’s market modelling tools, combined with competition economics techniques.  
• Competitive effects analysis to show how other sources of energy (such as gas) would be affected and how this would affect the merit order. This helped show the aid package would not distort competition.  
• Cost of capital analysis for the investment case and the assessment that the aid would be the strict minimum necessary.