The European Commission has opened an in-depth state-aid investigation into plans by the Czech Republic to back two new nuclear power units at the Dukovany site, scrutinising whether Prague’s proposed financing model complies with EU rules on public support and competition.
In a notice published on Monday, the Commission said it had “doubts” about the appropriateness and proportionality of the aid package, and questioned the impact on competition in the electricity market and compliance with other provisions of EU law.
The Czech scheme combines a large, low-interest state loan with long-term price stabilisation for the plant’s output. According to the Commission, Prague plans an initial repayable state loan of between €23 billion and €30 billion, alongside a two-way contract for difference intended to run for 40 years. A further “protection mechanism” is envisaged to shield the project company from adverse impacts linked to policy changes.
The beneficiary is EDU II, the Dukovany project vehicle in which the Czech state holds an 80 per cent stake, with the remainder linked to the country’s majority state-owned utility ČEZ. The Commission said the package appears designed to secure stable revenues for the operator while limiting financing costs during construction.
Opening an in-depth investigation does not pre-judge the outcome. Under EU procedure, the Commission now invites comments from interested parties while it assesses whether the measure is necessary, targeted and limited to what is required to deliver the project, and whether market distortions are contained.
The decision is being closely watched beyond Prague because it tests how far member states can go in using public balance sheets to underwrite large baseload generation in a power system increasingly dominated by variable renewables. Governments across the bloc have been reassessing energy security, system adequacy and industrial electricity prices, alongside decarbonisation targets.
Dukovany is already home to four operating reactors. The Czech government has long planned to add new capacity at Dukovany and potentially at Temelín, arguing that nuclear generation will remain central to the country’s long-term supply mix. The current plan covers two new large reactors at Dukovany, with construction timelines extending into the late 2030s.
The project also sits within a contested procurement and legal backdrop. South Korea’s Korea Hydro & Nuclear Power (KHNP) was selected in the Czech tender process ahead of France’s EDF. The Czech competition authority rejected EDF’s appeals in April, a step Prague said cleared the way for contract signing worth at least 400 billion Czech crowns, before inflation and additional project items. EDF has pursued further legal and regulatory avenues, including challenges in Czech courts.
The Commission previously asked the Czech Republic to delay signing with KHNP to allow time for an inquiry under the EU’s foreign subsidies regime, following allegations that non-EU support could distort the internal market. That process is distinct from state-aid scrutiny but adds complexity for a project intended to be the country’s largest single energy investment.
For Brussels, the Dukovany case arrives as state-backed nuclear financing becomes more common across Europe. In December, the Commission approved a Polish state-aid package for the country’s first nuclear power plant, a decision Poland presented as a prerequisite for moving from planning into construction. Earlier this year, the Commission also cleared Belgian support linked to extending the operation of Doel 4 and Tihange 3, after examining the structure of funding and the allocation of nuclear waste liabilities.
Other member states are preparing similar approaches. Sweden has proposed state loans and price guarantees to make new nuclear investment bankable, with applications for support opening from August 2025. France, meanwhile, has formally asked the Commission to approve a state-aid package to support EDF’s plan to build six new reactors, including a subsidised loan covering at least half of construction costs.
Within this emerging pattern, the Commission’s central questions typically focus on whether public support is proportionate to the risks being addressed, whether alternative market-based structures could deliver the same outcome with less distortion, and whether safeguards are in place to prevent overcompensation if electricity prices rise above the guaranteed level. Two-way contracts for difference are designed to pay the operator when market prices fall below an agreed strike price, while requiring repayments when prices rise above it.
In the Czech case, the Commission signalled concern that the guaranteed-price mechanism may not be fully aligned with state-aid rules as currently structured, and that the scale and duration of support could influence competition in wholesale and retail markets.
The Commission’s final decision will shape not only the Dukovany project’s financing and timetable, but also the broader European debate over how nuclear investment is funded in liberalised electricity markets.
