Belgium's Energy Market

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Content: Belgium's Energy Market
Belgium's Energy Market Page 1 of 14
Summary
Thomas Happel June 2009 ID:14266541
The Kingdom of Belgium is a federation of three Regions (Flanders, Wallonia and Brussels) with three national languages, of which Dutch and French are predominant. Flanders, in the north of the country, has many medieval art cities such as Antwerp, Bruges and Ghent, To the south, Wallonia's main cities are Liege, Namur, and Tournai, while the city of Brussels is one of the world's great cosmopolitan capitals and home to both the European Union and NATO, as well as a wealth of International Trade and finance companies. The country is densely populated and heavily industrialized. Roughly the area of Maryland, Belgium has a population of 10.5 million and a GDP (2008) of USD 450 billion. Belgium's economy has many small and medium enterprises, and is focused on the manufacturing and services sectors. This small European nation ranks as the 12th largest market for U.S. exported goods and services, but rises to 11th position if transit goods are included, showing the relevance of Belgium as a transit country. Trade between the United States and Belgium is fairly balanced, with Belgian exports to the United States representing USD 22.7 billion in 2007, and U.S. exports to Belgium amounted to USD 20.2 billion in the same year. There has also been a tremendous increase in Belgian direct investment into the United States, at USD 19.5 billion in 2007 making it the tenth largest investor in the nation. Many U.S. firms choose Belgium as the hub for their European distribution because of the access to a highly educated workforce and excellent transport infrastructure, including major port terminal facilities and a dense road network. In Flanders alone, 14% of all foreign firms are U.S. companies, mostly active in medium- to high technology sectors. Approximately 35,000 U.S. citizens have their residence in Belgium, and the country is host to 1,600 American companies employing 8% of the working population, that together are responsible for 6% of GDP, 14% of R&D expenditures and 15% of the country's exports. The cosmopolitan and international nature of Belgium and its position at the crossroads of different business cultures makes it an ideal European test market for American products and services. Additionally, it is at the geographical center of Western Europe, located within a 375-mile radius of 70 percent of the EU's purchasing power. The following provides an overview of the Belgian energy market. Currently, several shifting factors influence the rapidly changing Belgian energy market, among others the continuing EU-wide process of de-regulation and liberalization, the discussion on phasing or non-phasing out of nuclear energy, the incentives to develop renewable energy sources, the changing structure of the country's energy distribution and so forth. U.S. companies wanting to export to the Belgian energy market must be aware and take into account these uncertain or changing factors, which will determine the potential for exports of relevant goods and services to this market.
Market overview Except for coal and some renewable energy potential, Belgium has no natural energy sources. The coal mines that supported the country's industrial revolution in the 19th century have become unprofitable and the last mine was closed in 1994. The country now imports all its coal, natural gas and petroleum requirements for its energy needs that amount to almost 42,000 ktoe (kilo-ton oil equivalent, or about 489 TWh).
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Belgium's Energy Market Page 2 of 14 Of this total consumption, 31% is used for residential needs, 30% by the industry and 23% for transport purposes. Because of various policies (among others, energy security and environmental considerations) there has been a slight shift in energy sources. Between 2000 and 2007, solid combustibles dropped from 13.9% to 7.8%, petroleum dropped from 40.7% to 39.2% while natural gas grew (22.3% to 25.4%), as did nuclear energy and renewables (20.8% to 21.4% and 1.6% to 5.0%, respectively). Regarding electricity production, Belgium has an installed capacity of 104.600 GWh, but produces 88.800 GWh and imports a further 6.000 GWh. Of the national electricity production, 54% comes from nuclear energy, 39% from fossil fuel power plants, 5.4% from renewable energy sources and 1.5% from hydraulic pumping stations. On the national level, energy policies in Belgium are guided by strategic and socio-economic interests. As with most western countries, strategic interests concern the security of supply and source diversification, especially in view of recent disruptions of gas deliveries by Russia to the EU. Recently two new supplier countries have emerged in 2006, Qatar and Libya, on top of the traditional gas-producing countries delivering to Belgium. This issue has led to a national (still ongoing) debate on the possible overruling of the decision to abandon nuclear energy in the country. Economic interests are largely the result of breaking up former national monopolies on energy production, transit and delivery as enforced by EU legislation. Social interests include environmental considerations and EU directives stemming from the Kyoto Protocol, and job retention and creation. I. The liberalization of the Belgian energy market I. 1. Federal Government and regional government regulatory commissions The federal law of April 29, 1999 transposing the EU Directive 96/92 into Belgian law defined the first general framework for the opening of the Belgian electricity and gas market. This was put into effect in different phases through subsequent executive decrees on issues such as access conditions for third parties to the transmission network, and all regulatory aspects. The three regions of Flanders, Wallonia and Brussels have also transposed the European Directive for electricity and gas markets deregulation between 2000 and 2004. Under the special act of 8th August 1988, the federal government became responsible for "matters, which, owing to their technical and economic indivisibility, require equal treatment at national level". The new EU directives 2003/54/EG of June 26 2003 on general rules of the Internal Market for electricity and 2003/55/EG on general rules for the internal market for gas were transposed into Belgian federal law in the summer of 2005. A federal regulatory commission CREG (Committee for Regulation of Electricity and Gas) had been set up in 2000 in order to monitor the electricity and gas markets. It advises the Belgian authorities on the structure and operation of the liberalized electricity and gas markets and monitors the application and efficiency of relevant laws and regulations. A General Council, consisting of representatives of the federal and regional governments and major trade associations, and of producers, distributors and consumers, monitors the CREG's operation in its turn. In the federal laws of 2005, CREG's mission became somewhat reduced in favor of the Federal Ministry's Energy Administration. Each of the three regions has set up its respective regulatory commission, namely VREG in Flanders, CWAPE in Wallonia and BRUGEL in Brussels. In addition to supervising the operation of the electricity market, these institutions also play a central role in issuing supply licenses, authorizing cogeneration and power generating facilities, including renewable energy, and issuing and managing green power certificates. The Federal Government is responsible for the overall tariffs, including for using the transmission and distribution networks, the production and the transmission of electricity at a voltage level above 70 kV, and classic and nuclear production of electricity, as well as all matters pertaining to Belgium's offshore
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Belgium's Energy Market Page 3 of 14
exclusive economic zone. The regional legislatures of Flanders, Wallonia and Brussels have the competency to regulate distribution and local transmission of electricity over networks with a voltage level less than or equal to 70 kV. They establish the technical legislation regulating the distribution networks up to 70 kV and define the eligibility conditions for customers connected to this grid, mostly SMEs and households. They are also responsible for policies on renewable energy (except for offshore wind farms) and on the rational use of energy. All further information and most legal documents are available on the following websites: - Federal government http://mineco.fgov.be/ - Federal Regulator www.creg.be - Regulator of the Flemish region www.vreg.be - Regulator of the Walloon region www.cwape.be - Regulator of the Brussels region www.brugel.be/
I. 2. Electricity a) Production The production activity is now totally liberalized in Belgium. Nevertheless, the law of 29th April 1999 sets out an authorization procedure for new production units, adapted by the Law of 1 June 2005 where the Minister of Energy issues the final authorizations having taken advice from CREG. The phased liberalization of Belgium's electricity market from 1999 to 2005 has not yet triggered the expected competition between utilities and the arrival of new players capable of competing with the incumbent former monopolist, and also the anticipated investments in energy infrastructure have lagged. According to CREG, this is because the EU policies implementing the liberalization process were based on considerations assimilating the power industry with the telecoms market. However, many economic factors lead to differences between both sectors. Among others, the fact that electricity as a commodity is very inelastic in the short and medium terms. Also, the differentiation in implementation of liberalization between EU countries and the earmarking of the electricity production as a "national interest" in some Member States has lead to some large European utilities being capable of expanding into new markets while their own domestic markets were being shielded against competition. As such, foreign players now control the majority of Belgium's electricity production capability, as Belgium was one of the first member states to open up its market. These main foreign actors are France's GDF/Suez (owners of Electrabel and Electrabel Customer Solutions), Germany's RWE and E.ON, and Spain's Centrica (owners of 51% of SPE). One technical reason why the pan-European approach to liberalization has, for the moment, not attained its objectives is that the network infrastructure is still targeted at covering national territories, with insufficient transit capacity across borders. The resulting prospect of the difficulty of exporting excess electricity production may have deterred potential investors in this relatively small market. Finally, new investments are hampered indirectly by the particular position of the incumbent, former monopolistic utility Electrabel. Before the privatization of the firm, all investments in Belgian infrastructure have been written off under an accelerated scheme. While amortization is an important cost in price-setting for return on new investments, these costs do not have to be borne by Electrabel who, as a result, has the capacity to offer prices lower than newcomers could. The mere capacity of Electrabel to do so undermines the prospect of investments by new actors. Though no decision has been made on this yet, indications are that the federal government will "claw back" monies from Electrabel so to annul this advantage and level the playing field. The limited amount of producers has lead to the Belpex, Belgium's exchange for power and derivatives launched in November 2006 (more on this later), to have a sub-optimal operation whereas this institution should be the backbone supporting the liberalized trade in these commodities.
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Belgium's Energy Market Page 4 of 14 On the consumer side, a distinction can be made between private/residential consumers and industrial consumers. Residential consumers have had the freedom to choose their electricity provider since 20052006. But few have actually changed providers, the vast majority keeping their contracts with their traditional utilities. For private users and small businesses, only 10% have shown the willingness to revoke their existing contracts to engage with a different provider. The large industrial consumers have all renegotiated their contracts for electricity provisions on a bilateral, case-by-case basis. But this has not led to more competition and opportunities for newcomers, as only three industrial users connected directly to the national grid have actually changed suppliers. CREG remarks, in a document from January 2009, that "if the proportion of consumers changing their electricity providers is a measure for the success of liberalization, then it is really difficult to talk of a success". The following graph by CREG shows the electricity players on the Belgian market, representing a total of 78.15 TWh (2008).
Electricity companies cover the vast majority the domestic production. The most important producers are Electrabel and SPE, who together generate almost 86% of national production. Some smaller units in the cogeneration and renewables sector are owned by "distributors" or newly founded companies such as Aspiravi, Ecopower, Electrabel Green Projects Flanders or Electrawinds. The liberalization process has had the merit of opening up the production-side of the market, and while this did not lead to enough competition yet on the national level, it has allowed private actors to set up their own electricity production facilities on a smaller scale. Most notably SME's and private individuals are scrambling to install photovoltaic cells on the roofs of their buildings or windturbines on their land. Also larger firms have now the possibility to invest in electric power generation. So-called "Auto producers" generate electricity themselves to cover their own needs. They are mainly active in the chemical and metallurgic sector. For example, the major German chemical concern BASF is investing in a 400MW power plant on its site in the port of Antwerp to cover its own electricity needs and sell any excess capacity. Finally, "Autonomous generators" produce electricity as a complementary activity, for example in the framework of waste incineration for resale to a third party. Generators of renewable power and cogeneration facilities can obtain approval from the regulators and receive green power certificates that they can sell to suppliers (that in turn have an obligation to purchase those certificates at pre-established prices). Electricity production by means of co-generation and renewable energy benefits from tariff measures and priority access to the transmission and distribution networks. For more information on
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Belgium's Energy Market Page 5 of 14 renewable energies and support mechanisms in Belgium, please read the market report "Belgium's Renewable Energy market" of May 2008. b) Transmission System Operator Electricity is transmitted over the high-voltage grid from electricity generators to the distribution system operators and large industrial consumers. The law of April 29th 1999 defines the mission and general framework of the rules of access to the transmission network for customers in Belgium, and for the transit of electricity. The technical legislation regulating this access has been published by Royal decree of December 19th 2002. In the same year, the Belgian federal government appointed ELIA System Operator as the Transmission System Operator (TSO), authorizing Elia to retain a legal monopoly for 20 years. Let us help you export. export.gov Founded in June 2001, Elia has a license as national TSO at the federal level, maintaining and developing grid infrastructure and connecting electrical installations to the grid. Elia also has licenses as distribution system operator in Flanders for networks with a voltage of 70 to 30 kV and is a local/regional transmission system operator in the Walloon and Brussels regions. Elia must provide smooth and transparent access to the grid, supplying all services to enable the transmission of electricity, monitoring electricity flows on the grid to ensure effective operation and constantly managing the balance between electricity consumption and generation. As market facilitator, Elia can take initiatives to improve the operation of the electricity market. Elia owns all of Belgium's 150 to 380 kV grid infrastructure and almost 94% of its 30 to 70 kV grid infrastructure. Its grid forms a key connection between France, Europe's largest electricity exporter, and the markets of Northern Europe. In 2005, as response to the strong ties between Electrabel, SPE and Elia, Elia's former shareholders Electrabel and SPE reduced their stockholder participation from 70 % to 30 % of the shares. The cooperative company representing the Belgian municipalities Publi-T has taken a 30 % stake. 40% of the shares were listed on the stock exchange. c) Distribution Grid Operators The former distribution companies, mainly intermunicipal companies, have been appointed as operator of the distribution network for their respective territory. In other words, the distribution grid operators (DGO's) operate, maintain and develop lower-voltage networks - usually 15 kV and lower. The distribution system operators fall under the authority of Belgium's three regions. In order to comply with the regional legal requirements that prohibit combined interests in production / sale of electricity and its distribution, the DGO's have sold their production capacities to other stakeholders. For complete list of DGO's, visit the websites of VREG, CWAPE or BRUGEL (weblinks at the end of this report). d) Suppliers Four different supply licenses are available in Belgium since there are four different authorities governing relationships between supplier and consumer. The competent authority is determined by the location and voltage at which the customer is connected to the electricity grid. According to the Royal Decree of April 2, 2003, a license is required for trading electricity and supplying it to end-users connected to the transmission grid (TSO). The application must be submitted to the CREG, the federal regulator, and is granted by ministerial decision for a period of five years. A licensee is also required to supply electricity to end users connected to distribution networks (DGO). The regional regulators deliver these licenses: VREG in Flanders, CWAPE in Wallonia and Brugel in Brussels. The list of holders of a supply license in Wallonia, Flanders and Brussels is available on the website of the respective regulators. Suppliers are required to submit to the regulators a number of green power certificates in proportion to their sales according to predetermined quotas. These quotas are expected to gradually increase so as to guarantee purchase of the more expensive green electricity, thus promoting investments in renewable energy infrastructure. Consequently, these suppliers are the main buyers of green power certificates.
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Belgium's Energy Market Page 6 of 14
I. 3. Gas Belgium derives 191 TWH, or almost 40% of its energy needs, from natural gas, all of which is imported. Consumption of this gas is spread between use by residential and equivalent consumers (46%), electricity generation (29%) and the industry (25%). Gas consumption has increased about 30% between 1998 and 2008, and a large portion of this increase is due to a sharp rise in gas utilization for electricity generation purposes (some 50% increase in the same period). The country's import capacity has grown from about 3.45 million m3(n)/hour in 2004 to 3.84 million m3(n)/hour in 2008, mainly thanks to the expansion of the LNG terminal in the port of Zeebrugge. Three planned projects involving the installation of new compression modules and the expansion of the network connections with other countries will lead to an increased import capacity of 5.44 million m3(n)/hour by 2013. The European Gas Directive 98/30/CE introduced a higher degree of competition in the European gas market in the field of transportation, storage, distribution and sales activities, with gas production being excluded from the scope of the Directive. The liberalization of the Belgian natural gas market was implemented between 2004 and 2007 for industrial and private consumers alike. As of July 1, 2004, a freely chosen supplier could meet 91.5% of Belgian demand for natural gas, approximately 11 % gas liberalization increase compared with the end of 2003 according to CREG. As has been seen for the electricity market, as a consequence of the new regulation, gas companies were divided so to avoid conflicts of interests, separating transport and distribution activities from sales. a) Natural Gas Supply In general, gas is mainly imported from Norway (via the Netherlands), Algeria, and Russia, with the remainder coming from gas hubs from various sources around the world. b) Transport operator: Fluxys LNG terminal and storage Fluxys is the independent operator for natural gas transmission in Belgium. Its network transports gas under high pressure (over 14,7 bar / 210 psi). The underground gas pipes cross the entire country. Fluxys transport services cover delivery of natural gas at any consumption point in Belgium. Fluxys LNG offers from its LNG terminal in Zeebrugge the service of receiving and unloading LNG carriers, buffer storage of the unloaded LNG, regasification and dispatching of the natural gas into the Fluxys transmission grid. The Fluxys LNG terminal provides shippers with an import terminal that is a gateway to expanding markets across a major part of continental Europe and into the United Kingdom through the Bacton gas interconnector pipeline. The latter is of strategic importance to the so-called Zeebrugge hub as a major link between the U.K. and European gas transmission systems. According to an analysis of the contracts between Fluxys and Distrigaz, CREG has required Fluxys to commercialize direct Gas Transportation services between the Zeebrugge hub and neighboring terminals. All transportation costs including transit contracts which give access to the Zeebrugge hub, should now conform to the tariffs and main conditions approved by the federal institution CREG. The motivation is that all network users have access to the hub, according to transparent and non-discriminatory conditions, favoring liquidity and the future development of the Zeebrugge LNG hub. Belgium has 5 underground storage areas for gas: - in liquid form in Zeebrugge Peak Shaving Facility and Dudzele - in gas form in the Loenhout/Poederlee underground facility. Fluxys reached an agreement with Gazexport, a 100% subsidiary of Russia's Gazprom, in June 2006 to examine the technical and economic feasibility of increasing the capacities at this underground natural gas storage facility. Works have begun in 2007 to further increase underground storage capacity at the Loenhout facility by 15% to a workable volume of 700 million m3(n) to a total volume of 1,400 m3(n). The storage capacity will gradually be
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Belgium's Energy Market Page 7 of 14 increased over a 4-year period from 2008 to 2011. In addition, send-out capacity will be boosted from 500,000 to 625,000 m3(n)/hour and injection capacity is to be enhanced from 250,000 to 325,000 m3(n)/hour. - in gas form in the former coal mines of Anderlues en Pйronnes near Charleroi in the south of the country.. c) Distribution Transport of gas between the Fluxys-grid and the consumer under middle and low pressure travels via the pipelines of local distribution networks. Companies active in this area include Interelectra-Pligas, Intergas Netbeheer, IVEG, Sibelga, Iverlek, and WVEM among others. For a full list of local distributors, see CREG's website. d) Suppliers A license is also required to supply gas to end-users connected to distribution networks. The regional regulators deliver these licenses: VREG in Flanders, CWAPE in Wallonia and BRUGEL in Brussels. The Minister of Energy, on the basis of advice from CREG, issues these permits. There are currently 27 holders of supply licenses in Belgium, the most important ones being Distrigaz (72.4%), GDF/Suez (13%), WinGas GmbH (6.6%) and SPE (6%). BP Belgium retracted from the Belgian market in 2005. II. Phasing or non-phasing out of nuclear energy Belgium's nuclear industry has a long-standing history, with the country's first prototype reactor commissioned in 1962. Although reactors supply more than half of Belgium's electricity output, the future of the nuclear industry remains uncertain due to unclear policy considerations. In January 2003, an Act was passed barring the construction of any new nuclear plants in Belgium and establishing a limit of 40 years for the operating lives of Belgian reactors. The oldest reactors in Belgium (three units in Tihange) were completed in 1975, the newest (four reactors in Doel near the port of Antwerp) in 1985. The law anticipates the closure all operating reactors by 2015-2025. The closure schedule appears impractical and expensive to achieve. Nuclear Power now provides 54% of Belgium's electricity, thus a sizable share of generating capacity would need to be replaced during 2015-2025 under the law. None of this replacement is related to the condition or safety of the plants, but rather due to the perceived negative public opinion against nuclear plants. The closure law was elaborated during Green Party participation in a coalition with socialist party that no longer exists, at a time when oil prices were low. Other parties in Belgium have mixed views on nuclear power with some favoring nuclear power ­ such as the important liberal and the catholic parties. The law includes force majeure clauses that allow operation beyond the nominal closure dates. Two reactors are allowed to operate beyond 2025. No construction of new nuclear plants is yet projected, and the law of 2003 is still the formal stance of the government. Nevertheless, media information campaigns and other coverage seem to be aiming at preparing public opinion in favor of revoking that law, which would open the way to an extended operating life of the ageing reactors, and possibly the construction of new ones. The then Minister of Energy Marc Verwilghen (liberal party VLD) commissioned an intermediary report to review nuclear energy provision by 2030 called "Energy 2030". Its findings are favoring continuation of the nuclear power plants. According to socialist party (that does not want to annul the closure of the nuclear plants) and the Flemish Greens, the Energy 2030 Commission was strongly politically biased, as it consisted of people with strong ties to the nuclear energy sector. The Energy Institute of the KUL, the research institute of the Energy 2030 Commission President William D'Haeseleer, was indeed largely
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Belgium's Energy Market Page 8 of 14 financed by Electrabel, Tractebel Engineering and SPE, the main players in the nuclear energy sector in Belgium. Industry heads in Belgium see nuclear energy as the only solution that guarantees energy provision at a reasonable price, as well as an effective means to bring CO2-emissions down. It also appears that investments are being made in the maintenance and refurbishing of the existing plants that would not be justified were the reactors to be shut down definitely by 2015. III. Renewable energy As presented above, a collation of green and socialist parties passed a law enforcing the gradual phasing out of nuclear electricity production. Possibly the rationale for replacing the majority of electricity generation from this source was derived from expectations of immense growth in renewable energy sources. Many lucrative fiscal incentives have indeed been set in place to promote generating electricity from photovoltaic, wind and other renewable sources. Furthermore, the European Commission's Renewables Directive 2001/77/EC establishes an EU-wide target of producing 21% of all EU electricity from renewable energy sources by the year 2010. Under a "burden sharing agreement", this target differs among the various Member States, and for Belgium this target has been softened to a mere 6%. But despite these financial efforts and legislative obligations, Belgium only produced 3% of its electricity from renewable sources (including biomass) in 2006, and will probably face difficulties to meet its goals for 2010. Renewable energy still presents opportunities in Belgium and will continue to do so in the future, but it is clear that these green sources of energy will not replace the country's nuclear production capacity in the foreseeable future. Aware of this situation, a commission of experts called "Ampиre" concluded already in October 2000 that phasing out of nuclear energy should be balanced by a mixture of other sources, including the commissioning of gas plants, the maximum exploitation of wind energy (including offshore), biomass, cogeneration and a reduction of electricity consumption or higher efficiency of electricity production. Renewable energy sources therefore only play one part as the country is facing its future energy needs. On a large scale, a project called the Thornton Bank wind farm was launched by a consortium of private entities, with the installation of six windturbines of 5MW each on the Belgian continental shelf, while a further 54 units would follow in a second phase. The first six turbines have been successfully installed, but the second phase has been postponed, mainly due to the global economic recession strongly affecting one partner in the project (a Belgian dredging firm). Nevertheless, the federal government is pressing ahead with carving out offshore concessions, paving the way for the development of future windfarms. All renewable energy sources combined, a study has estimated that Belgium has a maximum potential for 10.800 MW on installed capacity, and about 3.500 GWh/yr from biomass conversion. Most investments and incentives are aimed at promoting solar and wind technologies. For more information on renewable energy opportunities in Belgium, please read the market report "Belgium's Renewable Energy market" of May 2008. IV. APX and the Belpex Power Exchange The introduction of a power exchange in Belgium was a direct response to the opening up of the European Electricity Markets. The 1996 and 2003 European Directives (1996/92/EC & 2003/54/EC), applied into the Belgian Law (29 April 1999 and 1 June 2005) have created an opportunity to launch an organized electricity market in Belgium, named Belpex. Belpex is a short term, physical power exchange for the delivery and off-take of electricity on the Belgian hub. Belpex facilitates anonymous, cleared trading in 3 different Market Segments, namely a day-ahead
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Belgium's Energy Market Page 9 of 14 market segment, a continuous day-ahead market segment and a continuous intraday market segment. Belpex' day-ahead market segment is coupled with its two neighbors, APX in the Netherlands and Powernext in France. Members at launch of the day-ahead market in November 2006 were Shell, Electrabel, Morgan Stanley, SPE (Luminus), CNR, EDF Trading, Anode, Essent, Nuon, EGL, Eneco, E.ON Benelux, and RWE Trading. Belpex' shareholders are the Belgian transmission system operator Elia, Dutch energy exchange APX, French energy exchange Powernext, the Dutch transmission system operator TenneT and the French transmission system operator RTE. Elia is the majority shareholder with a participation of 60%. APX, Powernext, TenneT and RTE hold each 10%. Both Electrabel and Distrigaz acted at first as the leading Belgian companies in the business, trading electricity and gas. Energy trading exchanges were created in London, Amsterdam, Frankfurt, Leipzig, Stockholm and Brussels. The APX Group launched a gas exchange at the Zeebrugge Hub in close cooperation with company Huberator, called APX Gas ZEE. APX Gas provides an integrated screen based trading platform as well as clearing, while Huberator facilitates the interfaces between the platform and the Huberator system for deliveries at the Zeebrugge Hub. In March 2009, Belpex started the Green Certificates Exchange. This market trades green certificates, combined heat and power certificates with or without guarantees of origin. Over 6.300 certificates were traded in this first month of operation. V. Best prospects As presented in the previous pages, several trends are still shaping the Belgian energy market, yielding opportunities for U.S. firms. 1) Electricity market a) Market liberalization: Deregulation has been set in place on a policy level, but this has not yet led to a satisfactory level of competition. The federal and regional governments will most likely continue to create incentives to improve the efficiency of market forces on the industry. While the various government bodies have persistently warned against a likely shortage of Belgian electricity production capacity, the industry itself seems reluctant to invest in relevant infrastructure at the moment. Key factors highlighted for this are the fear of a low electricity price in the long run (Belgium's electricity prices for residential and industrial users are on the EU-27 average, but relatively low for western-EU standards), limited cross-border network capacity impairing exports of excess production, and finally uncertainties with respect to environmental policies, the eventual re-instatement of the civil nuclear electricity program and the market behavior of the incumbent utility Electrabel. U.S. firms can therefore expect opportunities in those areas improving some of these bottlenecks. b) Production facilities: CREG has highlighted the need for investments in power generation infrastructure in Belgium because of a perceived future shortage of electricity production. It also notes that investments are taking place in other EU countries with similar energy pricing levels, including by GDF/Suez, owner of the dominant provider Electrabel. Therefore, the lack of investments in Belgium cannot be based solely on economic factors, and investments with associated opportunities for U.S. firms, equipment providers and subcontractors alike, could appear in the near future.
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Belgium's Energy Market Page 10 of 14 The deregulation and opening of the energy market has allowed companies with no specific tradition in electricity production to invest in their own electricity generation plants. An example mentioned earlier is BASF that has commissioned a 400 MW plant to feed its own production processes. c) Nuclear energy: The uncertainty around the abandonment of the nuclear energy industry in Belgium negatively affects the prospect of any investments in this sector. However, with 54% of Belgium's electricity coming from the seven ageing nuclear reactors, abandonment seems unlikely as no other source can easily replace that capacity before 2015, the date when the first decommissioning is due. One can therefore expect a decision on continuation of the nuclear energy program as this deadline approaches, with subsequent purchases of equipment and services for revamping and maintaining the country's nuclear reactors, if not the ordering of entirely new production plants. d) Emissions-controlling measures and renewable energies: Belgium is committed to lowering its CO2 output under the EU's adherence to the Kyoto Protocol. Several studies made specifically for the Belgian market have shown that a wide approach will be needed to attain the national emissions-reduction targets. These comprise a mixture of consumption reduction, green/ renewable technologies and investments in cleaner, more efficient production facilities. Many power plants in Belgium consume a mixture of coal and natural gas, and are highly polluting. Some parties suggest their replacement with more modern versions, which would serve the purpose of capacity expansion as well as lowering the country's output of CO2 and other pollutants. Possible indications of this trend may be found in the slow but steady progress of Belgium's thermal Power Stations, from 49.8% in 2001 to 50.4% in 2006. Retro-fitting these facilities with pollution-mitigating devices could also present opportunities for U.S. firms. In this context, CREG submitted a proposal for an indicative power generation program in 2005-2014, stating that the capacities to be invested in the period 2005-2014 that amount to 1,729 MW in renewable energy sources and 1,749 MW in qualitative co-generation. In this same proposal, by 2014, decisions are recommended on investments in eight units using combined steam and gas cycles (CCGT plants) of 400 MW and four gas turbines with open cycles (GT) of 80 MW. Further investments come from large industrial sites that focus on co-generation. For example, ExxonMobil has just commissioned co-generation facilities at its Antwerp refinery that generate 125 MW of power, reducing an estimated 200,000 tons of CO2. Given the importance of the (petro)chemical industry, the second industrial sector in Belgium with its many processing sites, similar investments can be expected from other companies. Finally, many smaller businesses are investing in renewable energies given the advantages of using electricity from their own sources (i.e. not subject to a volatile market) and the generous incentives proposed by the government, often allowing for very short return on investments. Distribution centers and other businesses with large Surface areas that allow the installation of windturbines and/or photovoltaic cells are driving this market. e) Maintenance and provision of spare parts: Despite the current economic crisis, maintenance and repairs to facilities are still needed, in particular in the secondary (transforming) sector that is well represented in Belgium. Opportunities for small equipment manufacturers specializing in process control and similar equipment can find a market in Belgium, especially when working through an effective, well established distributor.
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Belgium's Energy Market Page 11 of 14 2) Gas market Natural gas is seen as a key source in Belgium's future energy basket. First, because it is relatively clean. Second, because at least one key provider of gas in Belgium is a reliable partner (Norway), while new suppliers are appearing (Qatar and Libya), promoting the diversity of supply. Expansion of the country's import and transit capacities are therefore anticipated for the near future. The planned expansion of Belgium's import capacity from 3.84 million m3(n)/hour today to 5.44 million m3(n)/hour by 2013 can present opportunities for U.S. firms active in provision of hardware (among others measurement devices) as well as service providers (flow management systems etc.). Further expansion of LNG terminals is a clear possibility given the numerous LNG terminals being developed, or that have recently been commissioned in northwestern Europe. The CEO of GDF/Suez, owners of Belgium's largest utility Electrabel, has indicated that the group intends to create a European gas hub in Zeebrugge harbor. Furthermore, the owner of Zeebrugge's current LNG facilities Fluxys has issued a press release in April 2009 highlighting a cooperation agreement with Exmar to make a detailed assessment on the feasibility of a second LNG terminal jetty in the port of Zeebrugge, specifically aimed at allowing regasification ships to moor. This could provide opportunities for equipment providers and EPC contractors alike, as has been the case for a large U.S. firm for an LNG terminal in the United Kingdom. Market entry and barriers European companies face strong competition from local Belgian firms, especially the incumbent Electrabel, for the reasons mentioned earlier. U.S. companies will face similar competition in this market that is still growing towards openness and maturity. Some U.S. firms have taken a long-term approach and have opened, or plan to open, an office in Belgium. Alternatively, firms may avoid the costs of establishing a subsidiary or opening a branch office by considering potential local partners within Belgium's well-developed business infrastructure. In addition to developing business within the country, Belgium offers an excellent central geographic position and favorable fiscal and infrastructure environments for U.S. companies interested in taking an active role in the de-regulation of the broader EU energy markets. The anticipated central role that Belgium will play in the EU's future energy market as a transit zone between larger consumer markets and as an import hub for natural gas will only highlight the relevance of this country within Europe's energy market. Trade events PowerGen Europe (every year); this year in Cologne, Germany, 26-28 May 2009. The European regional equivalent of the PowerGen fair in the United States. See www.powergeneurope.com EMART Energy: this year in Barcelona, Spain, 18&19 November 2009. This is the leading energy trading sector forum for the in Europe, normally a two-day conference & exhibition, for European wholesale suppliers of electricity, gas and associated products. See http://www.emart-energy.com Resources and key contacts / associations CREG ­ Committee for Regulation of Gas and Electricity The CREG is an independent Belgian organization established in 1999, in order to organize the liberalization of the electricity and gas markets. The CREG is the federal regulator, which has four missions: counselor to the federal government, regulator, controller, and dispute settlement. CREG
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Belgium's Energy Market Page 12 of 14 carries out studies and conducts research, formulates recommendations and proposals for the attention of the Minister, evaluates the requests for authorization of production and transport, and monitors the protection of economic competition. Rue de l'Industrie, 26-38 B-1040 ­ Brussels Tel: +32 (0)2/289.76.11 Fax: +32 (0)2/289.76.09 Website: http://www.creg.be E-mail: [email protected] VREG - Flemish Regulation Authority for the Electricity and Gas Markets Flemish regional Regulation Authority, created in 2000 North Plaza B ­ Boulevard du Roi Albert II, 7 B-1210 ­ Brussels Tel: +32 (0)2/775.75.11 Fax: +32 (0)2/775.76.79 Website: http://www.ort.be/vreg/vreg/index.htm CWAPE - Wallonia Energy Commission Regional Regulation authority for Wallonia Avenue Gouverneur Bovesse, 103-106 B-5100 Jambes (Namur) Tel: +32 (0)81/33.08.10 Fax: +32 (0)81/33.08.11 E-mail: [email protected] Website: http://www.cwape.be BRUGEL ­ Brussels Region Commission for Gas and Electricity Gulledelle, 92 B-1200 Brussels Tel: +32 (0)800 97198 Website: www.brugel.be BERT - Brussels Energy Round Table The BERT is an informal group of companies, associations, governmental institutions and foreign representations interested in energy in Belgium. Presently, BERT's main activity is the organization of lunch conferences with speakers on key national and international energy issues. Attendance, which is broadly based, averages 30 to 100 persons. Electriciteitsstraat, 35/1404 B- 2800 ­ Mechelen Fax: +32 (0)1/520.48.57 FEBEG ­ Federation of Belgian Electricity and Gas companies FEBEG is the Belgian federation for electricity and gas companies has been created out of BFE and Figaz. BFE was the federation of electricity generators and distributors in Belgium (defends the interests of the electricity companies, as they relate to production, distribution and supply. They represent the sector in safety, standardization and regulation. Figaz was the Belgian Gas federation defending common interest of members in the gas market for import, transport, storage and distribution.
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Belgium's Energy Market Page 13 of 14 Ravensteingalerij 3 bus 9 1000 Brussel Tel.: +32 (0)2 500.85.85 Fax: +32 (0)2 500.85.86 Email: [email protected] Website: www.febeg.be Inter-Regies Inter-Regies is an association, which coordinates the electricity, gas and cable-distribution public sector. It represents the interests of its members and represents them before the regulation authorities. Rue Royale, 55 box10 B-1000 ­ Brussels Tel: +32 (0)2/217.81.17 Fax: +32 (0)2/219.20.56 Website: http://www.inter-regies.be E-Mail: [email protected] APERe (Association pour la Promotion des Energies Renouvelables) The purpose of APERe is to promote renewable energies and the thoughtful use of energy in the framework of sustainable development. APERe was created in 1991 as a non profit-making organization by several associations and research centers. Nowadays APERe exists with its own "effective members" and backed up by individuals, "sympathizers" and firms from the renewable sector, "associated members". Through its realizations, APERe has acquired a large expertise in the sector of renewable energies. It is now at the center of a substantial network of Belgian and European governmental agencies and firms. Rue de la Rйvolution, 7 B-1000 Brussels Tel: +32 (0)2/218 78 99 Fax: +32 (0)2/219 21 51 Web Site: http://www.apere.org E-mail: [email protected] Cogen Europe - The European Association for the Promotion of Cogeneration COGEN Europe was created in 1993. It is a not-for-profit organization and functions as the European Trade Association for the Promotion of cogeneration in Europe and worldwide for a sustainable energy in the future. To achieve this goal, COGEN Europe is working at the EU level and with Member States to develop sustainable energy policies and remove unnecessary barriers to its implementation. Its membership includes more than 160 power companies, power authorities and companies involved in cogeneration in 30 countries. It is a member of the World Alliance for Decentralized Energy (WADE). The COGEN Europe network covers the whole of the European Union, Central and Eastern Europe, and includes also Japan, Australia and the United States. Gulledelle, 98 B-1200 ­ Brussels Tel: +32 (0)2/772.82.90 Fax: +32 (0)2/772.50.44 Web Site: http://www.cogen.org E-Mail: [email protected] EPPSA ­ European Power Plant Suppliers Association EPPSA promotes the exchange of experience between the multipliers and the EU, leading to the establishment of European technical rules and standards and participation in their international
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Belgium's Energy Market Page 14 of 14 equivalents. Likewise EPPSA manages the exchange of information and handles queries related to these technologies. Avenue de l'Opale, 80 B-1030 Brussels Tel: +32 (0)2 743 2986 Fax: +32 (0)2 743 2990 Website: www.eppsa.eu FEBELIEC ­ Federation of the Belgian Large Industrial Energy Consumers Febeliec represents the interests of its members, which are large industrial energy consumers. Together, they represent 90% of the industrial electricity and gas consumption in Belgium. Febeliec is part of IFIECEurope (International Federation of Industrial energy consumption). Square Marie-Louise, 49 B-1000 ­ Brussels Tel: +32 (0)2/238.97.11 Fax: +32 (0)2/231.13.01 E-Mail: [email protected] For More Information The U.S. Commercial Service in Brussels, Belgium can be contacted via e-mail at [email protected]; Phone +32 (0)2 508 2450; Fax +32 (0)2 508 3644 or visit our website: www.buyusa.gov/your_office. The U.S. Commercial Service -- Your Global Business Partner With its network of offices across the United States and in more than 80 countries, the U.S. Commercial Service of the U.S. Department of Commerce utilizes its global presence and international marketing expertise to help U.S. companies sell their products and services worldwide. Locate the U.S. Commercial Service trade specialist in the U.S. nearest you by visiting http://www.export.gov/. Disclaimer: The information provided in this report is intended to be of assistance to U.S. exporters. While we make every effort to ensure its accuracy, neither the United States government nor any of its employees make any representation as to the accuracy or completeness of information in this or any other United States government document. Readers are advised to independently verify any information prior to reliance thereon. The information provided in this report does not constitute legal advice. International copyright, U.S. Department of Commerce, 2009. All rights reserved outside of the United States.
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