Maximum prices for the Belgian energy market

Yesterday the federal Chamber of Representatives refuses to adopt a proposal introduced by the social-democrats and the green parties aiming at giving the executive the powers, upon advice of the regulator, the CREG, to impose maximum prices on the wholesale market. The majority of liberal-democrats and Christian-democrats argued that such proposal would not distort competition in the market. Both parties agreed that Belgium needs more investments in new energy production.

Maximum prices for the Belgian energy market

IPCC, Climate and Energy

In its Summary for Policymakers of the AR4 Synthesis Report, the Intergovernmental Panel on Climate Change proposes "a wide variety of policies and instruments available to governments to create the incentives for mitigation action". With regard to Energy Supply, the Summary mentions:

Improved supply and distribution efficiency; fuel switching from coal to gas; nuclear power; renewable heat and power (hydropower, solar, wind, geothermal and bioenergy); combined heat and power; early applications of Carbon Dioxide Capture and Storage (CCS) (e.g. storage of removed CO2 from natural gas); CCS for gas, biomass and coal-fired electricity generating facilities; advanced nuclear power; advanced renewable energy, including tidal and wave energy, concentrating solar, and solar photovoltaic.

The following policies, measures and instruments show to be environmentally effective:

• Reduction of fossil fuel subsidies; Taxes or carbon charges on fossil Fuels; and
• Feed-in tariffs for renewable energy technologies; Renewable energy obligations; Producer subsidies

The Key Constraints for these policies are:

• Resistance by vested interests may make them difficult to implement; and
• May be appropriate to create markets for low emissions technologies

IPCC, Climate and Energy

Partial governmental agreement on energy and sustainable development

The would-be federal political majority has not yet finalised the coalition agreement for the formation of a new federal government. However, a partial agreement on Energy and Sustainable Development was reached at the end of October.

"The federal government endorses the climate change goals set by the European Union (20% less emission of greenhouse gases, 20% more energy efficiency, 20% more renewable energy production). A national climate change commission will elaborate a multi annual climate plan. The Belgian government will use its international influence to have all industrialised countries participating in a reduction of greenhouse gases with 30%.

The government makes sure that the dominant player will observe nothing less than the obligations entered into vis-à-vis the previous government.

The government will closely follow the evolution of the energy prices and will create the conditions to allow an adequate competition. To that end, several additional electricity producers must be present on the Belgian market each having the possibility to acquire a considerable market share. The government will contribute to that as follows:
– To incite the dominant player to swap assets with competitors abroad; and/or
– To put at the disposal or to sell to other players, under the supervision of the CREG and against reasonable market conditions, a considerable share of the capacity (in MW) of the depreciated power stations; and/or
– To offer to other players (trough actioning or exchange) a considerable production share (in MWh) of the dominant player, under the supervision of the CREG, against a price composed of the production costs including the maintenance and replacement investments and a fair profit margin; and/or
– To create the preconditions allowing and encouraging other players to develop additional production capacity in Belgium (inter alia sites and access to natural gas and electricity grids);
– To put in all efforts to realise as soon as possible interconnectivity at the borders in order to obtain true competitive natural gas and electricity markets on a European level.

Moreover, the government encourages companies wanting to construct alone or in consortium a production unit for electricity.

The competition on the wholesale market for electricity must improve considerably. The electricity exchange BELPEX must be offered more marketable volume increasing the available liquidity for the suppliers. By analogy with the electricity market, the wholesale market for natural gas must become competitive. This will be realised by creating a gas exchange (GASPEX), on the basis of what currently exists and with safeguards for sufficient transparency, that will dispose of sufficient marketable volumes.

The government will give the federal regulator CREG the necessary independence to act against and to supervise ex ante an actual competition on the production and supply market and to monitor the price evolutions closely. It will evaluate the functioning and the tasks of the CREG. The government will grant a clear and plain strategical mandate to develop a long term vision.

The federal government will give the CREG a mission to monitor the tariffs. Moreover, the CREG will be able to propose to the government every measure contributing to the improvement of the functioning of the regulated activities and the applicable tariffs.

The government resolutely opts for the independence of the system operators and for an independent operation of the transport systems by reducing gradually the share of producers/suppliers under 25% and with a substantial presence of the public sector. Energy companies can obtain shares but cannot, individually or collectively, have or use a blocking minority for example through a shareholders agreement or special share related (voting) rights, nor can they appoint independent directors.

The network system operators must have disposal of sufficient financial elbow room for carrying out replacements and new investments and to carry out the necessary maintenance to the grids, inter alia to allow Belgium to continue its development as junction of the European transit and transport grid. The system operators must fully independently allow equal access to the grids to all market players.

The government will invite the regions to tune the different systems of renewable energy certificates guaranteeing at the exchangeability, inter alia to promote the lowest price for the Belgian consumers. The government will improve the fiscal measures in favour of sustainable energy, inter alia by organising a system of take-along or of tax credits for investments that encourage energy efficiency and/or sustainable energy sources (...).

The government will take care that equal access conditions exist for competitors to import, store and transport natural gas. In order to guarantee the natural gas supply, the government will see over a tariff policy by the CREG (...) allowing the transport system operators to invest in natural gas storage capacity and in interconnections. The government continues the conversion of the Zeebrugge Hub enforcing its position as international spill for the natural gas supply. In general, the government take care that the policy of the CREG allows the system operators to guarantee an optimal quality of the networks without this leading to an excessive price increase of the distribution grid tariffs.

The government will discuss with the regions the consequences of a progressive replacement of L-gas by H-gas.

The government maintains the nuclear phase out of the existing nuclear facilities as set out in the Act of 31 January 2003. In order to comply with the goals of reducing greenhouse gases and to guarantee the affordability and security of supply, it will extend the operational term of some nuclear reactors for a limited time and in safe circumstances. In dialogue with all stakeholders, the government wants to obtain a national transversal multi annual alternative for fossil energy and nuclear energy, also translating the CO2 reduction goals. In the meantime, it will have carried out all necessary investments in the electricity power stations guaranteeing a safe exploitation and it will have modernised the existing very polluting power stations in order to reduce the pollution per MWh. The revenues of the taxes on the exceptional profits of the production of the depreciated nuclear and coal power plants will partially be used in a new fund “depreciated energy production” for the production and development of alternative energy sources and energy efficiency, the roll out of decentralised grids, the decrease of the federal contribution, the technique of carbon sequestration, the support of the MYHHRA-project, a social energy policy.

In the framework of the discussions about the prolongation of some nuclear installations, the government will have thought for the problem of the final price for the consumers."

Partial governmental agreement on energy and sustainable development