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Belgium prepares to subsidise new gas plants

GasPower

23 Jul 2018 15:00

Oslo

23 Jul 2018 15:00

(Montel) Belgium's government has agreed to subsidise new electricity capacity – including gas-fired power – to offset the country's nuclear phase-out in 2025, as wholesale prices in the market are too low for developers to make investments.

Ministers approved on Friday a capacity remuneration mechanism (CRM) proposed by the energy ministry, only months after it sealed a new energy pact which foresees the end of nuclear power in Belgium within seven years.

A two-tier system of auctions in place to ensure enough capacity once Doel and Tihange nuclear plants are permanently shut down.

The first auction under the new scheme is slated to take place in 2021 for delivery four years ahead, paving the way for new gas-fired power plants in Belgium.

The country’s grid operator Elia estimated in a 2017 report that Belgium would need 3.6 GW new thermal capacity to offset the closure of the country’s nuclear plants. Seven nuclear units have a total capacity of 5.9 GW, and account for around a half of Belgium’s electricity consumption.

"It takes at least four years to build a new plant, so we have to be ready by 2021 at the latest," energy minister Marie-Christine Marghem told the national newspaper L’Echo.

Investment costs for new baseload capacity in Belgium outstrip by far electricity prices in the market, so developers will be guaranteed a top-up between a market price and the strike price.  

Belgium currently has 5.8 GW of gas-fired capacity, according to TSO data.

Technology-neutral auctions
In addition, the government will organise yearly auctions to adjust fluctuating needs for capacity.

The decision takes inspiration from the UK’s and France’s efforts to subsidise capacity in a bid to guarantee security of supply.

Both new and existing plants will be able to participate in the scheme, the energy minister said.

“No technology is excluded, except nuclear power. Foreign capacity may also participate, but under well-defined conditions,” she said.

The new mechanism, which is slated to cost Belgian consumers an annual EUR 345m, will replace the current strategic reserve.

TSO Elia will calculate needed capacity as well as the criteria for the auctions.

New capacity will receive subsidies over a period of 15 years, while existing capacity that need retrofits could benefit between three and eight years, and others up to one year. Plants currently under other support schemes will be excluded from the capacity mechanism.

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