Belgium’s generation gap [NGW Magazine]
Belgium plans to close its last nuclear reactors at Electrabel’s Tihange plant near Liege and Engie’s Doel plant near Antwerp by 2025. The seven reactors in operation total 6 GW or almost half of the country’s electricity supply. Around 3.9 GW of new capacity will be needed to replace this, according to grid operator Elia, and natural gas and renewables are expected to fill the gap.
A number of new combined-cycle gas turbines (CCGTs) are at the planning stage, including EDF subsidiary Luminus’ 870-MW project in Seraing and Engie’s 870-MW project in Vilvoorde. However, these projects hinge on capacity payments in order to be built, as investors see betting on future gas and electricity prices – the spark spread alone – as too risky.
The Belgian government has designed a capacity remuneration mechanism (CRM) that would subsidise CCGTs through capacity contracts that last for up to 15 years. The first capacity auctions were expected to take place in November next year. However, the European Commission (EC) in September launched an investigation into the scheme as it might not align with European Union (EU) state aid rules.
The EC said it had concerns, in particular that the scheme could lead to over-compensation for investors and potential excess capacity.
“The EC's preliminary view is that Belgium has not so far sufficiently demonstrated, nor properly quantified, possible future issues of resource adequacy in the Belgian electricity market. This is essential to identify the actual need for public support and to determine whether the envisaged aid would be limited to what is necessary,” the EC said in a statement.
Belgium needs to act quickly to replace its nuclear reactors by 2025, and the EC investigation is holding back progress. On October 12, Belgium’s new energy minister Tinne Van der Straeten met EC executive vice-president and competition chief Margrethe Vestager, ostensibly in a move to fast-track the file.
"The investigation can last up to 18 months and everybody is conscious of that. Time is running out so if there are more delays then it will be difficult to get new power plants built in time. So it seems like the Belgian authorities are trying to accelerate the process,” Damien Verhoeven, a Brussels-based energy lawyer and partner at law firm Liedekerke Wolters Waelbroeck Kirkpatrick, told NGW.
A life-time extension for some of the remaining reactors at Tihange and Doel is a possibility. However, the reactors are aging and some were already granted 10-year extensions back in 2015 when their 40-year lifetime had expired. In July last year, the European Court of Justice ruled that the 10-year extensions for Doel 1 and 2 were unlawful, but the reactors were nevertheless allowed to operate until 2025. Another lawsuit against Tihange 2 was rejected by a Belgian court in September this year.
But even if some reactors are kept online beyond 2025, or in a reserve, new generation capacity will still be needed to avoid blackouts.
"Major stakeholders agree that we really need CRMs to phase out nuclear energy. And that we even need CRMs without a full nuclear phase-out. It seems to be either CRMs or lifetime extensions or both," said Verhoeven.
The EC has reluctantly approved a number of capacity markets in the past, including support schemes in Poland, France and the UK. It sees CRMs as a last resort to avoid plant closures and secure new investment in baseload capacity if needed. Capacity payments – which compensate operators for committing generation capacity into the future – are seen as controversial, as exemplified by Tempus Energy’s challenge against the UK scheme before the European Court of Justice. The EC eventually re-approved the British scheme last year after capacity auctions had been halted for over a year. That released the payments for the generators that had been held up.
If approved, the Belgian CRM will replace a strategic reserve that was approved by Brussels in 2018. The reserve means retired power plants are on stand-by in case of supply shortages.
Gas eyes market share
In 2019, gas-fired electricity had a share of around 27% in Belgium while wind and solar had 15% of generation, data from national energy regulator Creg shows. Nuclear produced around 50%. Belgium has also been a net exporter of electricity to Britain after the 1 GW Nemo link became operational in January last year.
Despite its short stretch of coastline, Belgium is betting big on offshore wind and has already become the world’s fourth largest producer with 1.77 GW of installed capacity. But there seem to be no alternatives to natural gas as a back-up for intermittent supply, at least not until new technologies such as hydrogen and electricity storage are rolled out on a meaningful scale.
Other CCGT projects, in addition to Seraing and Vilvorde, include Industrial Group Tessenderlo’s plans for a second plant in Tessenderlo. The company said in its H2 2020 financial results that it had started filing the relevant applications to participate in Belgian capacity auctions. This means the project is on hold until the EC investigation ends.
Belgium is well positioned to supply more CCGTs with gas, despite the 2022 permanent closure of the Groningen field in the neighbouring Netherlands. It has a well-developed pipeline network and interconnectors with the UK, France, Netherlands, Germany, Luxembourg as well as offshore pipelines with Norway.
The country also has access to LNG at the Zeebrugge regasification terminal, where Qatar has recently booked more long-term capacity in readiness for its upstream capacity boost. But with Groningen going, much of its short-term flexibility is limited to an underground storage capacity owned by Fluxys at Loenhout, which offers just 0.7bn m³/year.
Belgium’s natural gas consumption was around 17bn m³ in 2019, a bit more than in previous years, according to BP’s Statistical Review of World Energy. Belgium imported around 7bn m³ of LNG in 2019, according to BP, while the EC’s quarterly market report puts the figure closer to 9bn m³.
In any case, that was far more than in previous years.
Qatar is the main LNG supplier, but LNG imports from Russia are also growing. Qatar and Russia had a market share of 60% and 40% respectively of total LNG imports in 2020, according to BP data. In September 2019, Qatar Petroleum and FLuxys signed a long-term agreement for unloading slots at the Zeebrugge LNG terminal until 2044.