Q&A: electricity generation and transmission in Belgium

Q&A: electricity generation and transmission in Belgium

Regulation of electricity utilities – power generation

Authorisation to construct and operate generation facilities

What authorisations are required to construct and operate generation facilities?

A federal production licence must be issued by the federal Energy Minister, subject to a prior opinion from the federal Commission for the Regulation of Electricity and Gas (CREG), for each construction of a new generation facility, as well as the reconstruction or modification of an existing facility not subject to an individual licence resulting in an increase of the net capacity by more than 25MW.

Nuclear generation units and installations for the production of electricity from renewables and hydro storage that are the subject of an offshore concession are excluded from this requirement. The former can no longer be the subject of any permit or licence in Belgium (ie, subject to a change in law, no new nuclear generation units can be constructed in Belgium; although a major overhaul of the two youngest reactors will be possible following the agreement on their life extension). The latter installations are subject to specific procedures for obtaining the relevant offshore concessions and related permits and licences. A law change from 2019 has enabled the federal government to set up a competitive tender procedure for the issuance of new offshore concessions by the relevant ministers, for a maximum duration of 30 years (including construction, operation and decommissioning phase; the government very recently approved a bill to extend this duration to 40 years), for the production of electricity from renewable sources, on the lots that have been reserved for that purpose in the new marine spatial plan covering the period from 2020 to 2026. Although the first auctions for these concessions were initially anticipated to take place already in 2020, with concessions awarded in 2021 (on time for the new wind parks to be completed by 2025), the required implementing legislation has not been approved to date. Significant onshore network reinforcement is required as well to bring the additional power to land. The transmission system operator (TSO) Elia has indicated that, as things stand, this work is likely to be finished at the earliest in 2026 and possibly later (depending, among other things, on permitting trajectories, which are highly contested). This could further jeopardise the timing for these new wind parks to become operational.

The construction and operation of generation facilities on land is subject to regional land planning and environmental law and regulations and may, therefore, require a building or a (combined) environmental permit, or both, depending on the nature of the installations. For offshore constructions (including cables for connection to the onshore transmission system), additional permits and authorisations may be required under federal law.

Grid connection policies

What are the policies with respect to connection of generation to the transmission grid?

Under EU law, grid users (including generators) have a right to non-discriminatory grid access, subject to their compliance with the applicable (technical) requirements, payment of the applicable, pre-approved tariffs, and entering into industry-standard regulated contracts with the relevant network operators. A new technical regulation for the operation of and access to the transmission system entered into force on 27 April 2019, which replaced the previous one from 2002 (as amended from time to time).

Besides the tariffs and contractual framework, grid connection and access are covered by several grid codes at the national and EU level.

Priority grid access may apply in certain cases for certain types of (renewable) generation. Under EU legislation (the Clean Energy Package), the possibilities of priority grid access are reduced for new installations.

The network operators are required to keep commercially sensitive information obtained from grid users confidential.

A specific cable licence is required and compensation can be obtained for costs incurred for the connection of offshore (wind) generation units to the transmission grid. New offshore production installations must connect to the modular offshore grid (MOG), from where they will be connected to the onshore grid, at the connection point determined by the TSO and under the applicable technical requirements. The federal government will also establish the latest dates by which each required extension of the MOG must have entered into service and a compensation mechanism in the case of its delay or unavailability.

Specific rules also apply to private and direct lines, as well as closed industrial networks and closed distribution systems to which generators may connect, to ensure the viability of the public grid as well as the users’ right to grid access.

Grid connection and access can be refused by the network operators under the applicable network codes if technically unfeasible or economically unviable, or to ensure the secure operation and integrity of the grid.

Alternative energy sources

Does government policy or legislation encourage power generation based on alternative energy sources such as renewable energies or combined heat and power?

Except for power production and storage in the North Sea, renewable energy sources are a regional competence. Government policy and legislation encouraging the use of alternative energy sources are therefore decided on a federal (offshore) and a regional level and may differ between the three Belgian regions.

As a general rule, all three regions as well as the federal state (regarding offshore) have policies and a legal framework in place to support renewable energy generation. All of these include a system of guarantees of origin and green certificates (either federal or regional) that are issued for each kilowatt-hour of power produced, which can subsequently be sold either on the market (demand for certificates is driven by quota obligations for suppliers or grid users) or to the TSO or distribution system operator at a certain minimum price.

Offshore renewable generation is supported through the federal system of green certificates. Brussels promotes the use of renewable energy sources by assimilating the federal system of green certificates combined with a quota obligation, as well as through net-metering for small producers and investment aid for certain companies and projects. Flanders has its own system of green certificates and combined heat and power certificates combined with quota obligations in place, together with net-metering for small-scale generation and ecological premiums for environmentally friendly investments. Wallonia promotes renewable generation through various means, including the federal system of green certificates and quota obligations, investment aid and specific support schemes for certain technologies.

Climate change

What impact will government policy on climate change have on the types of resources that are used to meet electricity demand and on the cost and amount of power that is consumed?

Belgium is committed to the Paris climate agreement. In 2015, during the Paris negotiations, the different regions and the federal state reached a Belgian internal climate agreement, allocating the efforts to be made by each region and the federal state toward reaching Belgium’s overall climate targets. At the end of 2019, the Belgian federal and regional governments also agreed on a National Energy and Climate Plan for the period 2021-2030, which was submitted to the European Commission under Regulation (EU) No. 2018/1999.

Despite these commitments and in line with public opinion, energy policy has recently seen a shift towards reducing subsidies for renewable power generation (eg, cutting subsidies for biomass, photovoltaic generation and offshore wind). Moreover, security of supply and generation adequacy measures such as the already existing strategic reserve and the contemplated new capacity remuneration mechanism are likely to target mainly (new and existing) gas-fuelled power plants, both during a transitory period and after 2025, to compensate for the (partial) closure of nuclear power plants in Belgium. These policy options, as well as a changing geopolitical landscape (in particular, the war in Ukraine) may render the achievement of the Belgian climate targets more challenging.

Given the climate targets (in addition to the security of supply concerns), nuclear power will continue to play an important role in the Belgian energy mix until 2025 and beyond that, with the recently decided extension of the lifespan of the two youngest nuclear reactors by 10 years.

At the same time, climate targets are likely to push the different Belgian governments toward policies promoting energy efficiency measures, flexibility services, distributed generation, power2gas (hydrogen) and small-scale renewable production that require fewer subsidies (such as heat boilers, which have seen prices drop drastically over recent years and are heavily promoted by the European Commission; and small-scale biomass, in the form of combined heat and power installations).

Storage

Does the regulatory framework support electricity storage including research and development of storage solutions?

Electricity storage is subject to the opinion of CREG and the approval of the federal Energy Minister, and the Minister responsible for the North Sea to the extent relevant to the connection of offshore generation units.

Investments into the network by the TSO are compensated through the regulated tariffs under the applicable tariff methodology and proposal, as approved by CREG.

Following the Clean Energy Package, the possibilities for the TSO to develop storage solutions are further narrowed down to specific circumstances and under strict conditions (essentially when the market is unable to provide them).

Government policy

Does government policy encourage or discourage development of new nuclear power plants? How?

Under the current state of the legislation, no new nuclear power generation units can be constructed in Belgium.

In 2015, the federal government reached an agreement with the incumbent producer and owner of the nuclear park, Electrabel, and its mother company, ENGIE, to keep nuclear power in the Belgian energy mix at least until 2025, subject to heavy investment into the seven existing nuclear generation units.

In March 2022, the government decided on another extension by 10 years of the two youngest nuclear reactors (Doel 4 and Tihange 3). In July 2022, the federal government made a non-binding agreement of principle with ENGIE setting out the key principles of that extension, which will need to translate into a binding agreement by the end of the year. The agreement of principle, among other things, provides for (1) a 10-year extension as of November 2026 (leaving a one-year gap for upgrade and maintenance between end of 2025 and end of 2026; the capacity gap in this period will need to be filled mostly by gas-fired power plants receiving capacity remuneration mechanism subsidies, which are still to be constructed); (2) a split of the risk and cost for storing and monitoring the (future) nuclear waste; and (3) a 50/50 participation by the Belgian state in a financing vehicle that will fund the investments necessary for the extension and future operations.

Regulation of electricity utilities – transmission

Authorisations to construct and operate transmission networks

What authorisations are required to construct and operate transmission networks?

Belgium has a single transmission system operator (TSO) to operate the entire public transmission system, which is appointed for a 20-year period by the federal Energy Minister following consultation with the Council of Ministers and prior advice from the federal Commission for the Regulation of Electricity and Gas (CREG), on the proposal of one or more network owners that, jointly or separately, own a part of the transmission system covering at least 75 per cent of the national territory and at least two-thirds of the territory of each region. In addition to the national transmission grid (high and very high voltage), the TSO also operates the local grids with a transmission function (ie, with a nominal voltage level equal to or below 70kV).

Elia System Operator was initially appointed as the single TSO for a 20-year period on 13 September 2002. On 6 May 2019, Elia’s TSO designation was renewed for an additional 20-year period, with effect from 17 September 2022. Following a strategic reorganisation of the Elia group (to accommodate its investments abroad without impacting Belgian consumers), newly incorporated Elia Transmission Belgium was appointed the single TSO in replacement of its mother company, renamed Elia Group, for a 20-year period with effect from 31 December 2019. The network assets are owned by its wholly owned subsidiary, Elia Asset. Under EU unbundling rules, Elia System Operator was certified by CREG as a fully ownership unbundled TSO on 6 December 2012. This certification was passed onto Elia Transmission Belgium on 31 December 2019.

Subject to certain conditions, third parties may obtain an individual licence from the federal Energy Minister to construct a direct line or may be authorised by the federal Energy Minister to operate a closed industrial network.

Much the same as for generation facilities, the construction and operation of transmission (and distribution) systems on and offshore require certain permits and authorisations under regional and federal law, depending on the nature and the location of the installations. Public utility easements may be granted to the TSO for infrastructures crossing private land and, in certain instances, the TSO may be entitled to expropriate the property of private owners in the public interest.

Eligibility to obtain transmission services

Who is eligible to obtain transmission services and what requirements must be met to obtain access?

In principle, all grid users connected to the transmission system on 1 July 2004 or who are otherwise eligible (ie, under the laws of another EU member state) have a right of access to the grid on the following non-discriminatory conditions: subject to their compliance with the applicable (technical) requirements, payment of the applicable, pre-approved tariffs, and entering into industry standard regulated contracts with the relevant network operators. A new technical regulation for the operation of and access to the transmission system entered into force on 27 April 2019, which replaced the previous one from 2002 (as amended from time to time).

The TSO can refuse access only if it does not have sufficient capacity available (under the applicable rules on capacity allocation and congestion management) or if the access would prevent its proper execution of a public service obligation in the general economic interest, and without breaching the rules on the exchange of energy flows in a way that would harm the European interest.

Government transmission policy

Are there any government measures to encourage or otherwise require the expansion of the transmission grid?

The TSO is required to draw up and update (every four years) a 10-year network development plan, taking into account the EU-wide 10-year network development plan determined by the European Network of TSOs for Electricity. The 10-year network development plan is subject to the advice of CREG and the approval of the federal Energy Minister, and the minister responsible for the North Sea to the extent relevant to the connection of offshore generation units.

Investments into the network by the TSO are compensated through the regulated tariffs under the applicable tariff methodology and proposal, as approved by CREG.

Rates and terms for transmission services

Who determines the rates and terms for the provision of transmission services and what legal standard does that entity apply?

Grid connection, access and balancing services are subject to regulated tariffs, which are pre-approved by CREG for a four-year regulatory period, based on a proposal by the TSO. The proposal must be based on a tariff methodology established in advance by CREG, which in turn takes into account the specific tariff guidelines set out in the law. The current tariff period runs from 1 January 2020 until 31 December 2023. On 4 July 2022, CREG approved the tariff methodology for the next tariff period 2024-2027, which is largely consistent with the methodology for the current tariff period and follows the same overarching principles (ie, a fair remuneration mechanism, combined with incentive components for certain expenses and revenues of the TSO). Once approved, the tariffs in principle remain unchanged during the entire tariff period, subject to revision that can be requested by the TSO or initiated by CREG if they are no longer proportionate owing to changed circumstances.

In addition to the regulated tariffs, transmission services are governed by industry-standard regulated contracts, which are also pre-approved by CREG. For electricity transmission, the main regulated contracts are the connection contract, the access contract and the balance responsible party contract.

The tariffs and regulated contracts are non-negotiable between the TSO and individual grid users. Any amendments are subject to prior CREG approval and are applied to all grid users simultaneously.

Entities responsible for grid reliability

Which entities are responsible for the reliability of the transmission grid and what are their powers and responsibilities?

The TSO is responsible for the secure and reliable operation of the grid under the law and all the applicable (national and European) grid codes. Its various tasks and roles are detailed in the law. The federal regulator, CREG, as well as the federal energy administration and the federal Energy Minister, have certain specific monitoring and supervision competencies.

In the event of a sudden crisis in the energy market or when the physical safety of persons, the safety or the reliability of equipment or installations or the integrity of the transmission system are in jeopardy, the federal government, in consultation with the TSO and following an opinion from CREG, can take emergency measures (which can temporarily deviate from the provisions of the law).

Source link

Related post

Bitcoin Is ‘100 Times Better Than Gold,’ Michael Saylor Says – Here’s Why

Bitcoin Is ‘100 Times Better Than Gold,’ Michael Saylor…

Bitcoin and gold are both valuable assets that can be used to protect against inflation; nevertheless, there are important differences between…
Important To Teach People About Bitcoin – Bitcoin Magazine

Important To Teach People About Bitcoin – Bitcoin Magazine

This is an opinion editorial by Phil Snyder, professor, video director and editor. While first developing my Bitcoin course at the…
Check Bitcoin, Ethereum, XRP, Shiba Inu rates

Check Bitcoin, Ethereum, XRP, Shiba Inu rates

Today’s cryptocurrency prices: Check Bitcoin, Ethereum, XRP, Shiba Inu rates Sep 25, 2022, 03:16 pm 3 min read Ethereum’s value is…

Leave a Reply

Your email address will not be published.