Two Dutch CCGTs in three-way race for Belgium subsidy pot

06 August 2014 08:30 Source:ICIS
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A second 870MW gas-fired power station in the Netherlands is vying against a larger, 1.3GW Netherlands-based gas-fired plant for a six-year subsidised income stream conversely being tendered by Belgium’s power grid operator Elia.

Dutch multi-utility Delta has entered its existing Sloe power station in Zeeland, Netherlands, which is near the Belgian border, into the tender. Its offer includes a plan for cross-border connections between the plant and the Belgian grid.

The tender has been organised to bring new gas-fired capacity into the Belgium electricity market as back-up for variable renewable power generation.

And Delta is determined: “If we win the tender, we will either contact the Dutch transmission system operator [TSO] TenneT to help build the grid – or we will do it ourselves,” a spokeswoman said.

The company is bidding against two rivals. First, Dutch energy company Essent, part of the German RWE group, confirmed its participation earlier this year, stating its intention to use existing infrastructure and create a cross-border connection to the 1.3GW Claus C combined cycle gas turbine power station in Maasbracht, Netherlands, also not far from the Belgian border.

“The subsidies make this project economically possible given that Essent has to make a substantial investment in the cable,” Essent.be chief executive Frank Brichau told ICIS.

‘Win-win’

The plan was presented as a “win-win situation” for both countries, given that Belgium faces a capacity issue in traditional non-nuclear production, while the Netherlands is over-capacity, Brichau said.

“Essent is in favour of establishing a market mechanism to allow all parties to use their existing plants to bid capacity to fill the gaps in the supply of alternative energy,” he concluded.

The third proposal is the Dils-Energie Project in Dilsen-Stokkem, Belgium, a joint venture between Swiss developer Advanced Power and a division of German engineering company Siemens named Siemens Project Ventures.

The project has been in planning since 2010 and is scheduled to start construction in 2015 or 2016. The plant will have capacity of 920MW, which meets Elia’s 800MW target for new subsidised gas-fired power capacity, and is expected to begin operations in 2018 or 2019.

Elia has been reviewing the offers since the tender process closed on 22 July.

The financial model is premised on subsidies over a six-year period to overcome the challenges of cheap coal and carbon faced by gas-fired power plants in their bid to retain profitability.

Maximum bid

The maximum bid for combined-cycle gas turbine (CCGT) subsidies is capped at €90,000/MW per year while the equivalent for open-cycle gas turbine plants is €45,000/MW per year.

It is similar in many respects to capacity mechanisms springing up across Europe, with each one tweaked in terms of maximum and minimum prices, the amount of capacity to be funded, the length of the income stream, the fuel-type of the plants, and so on.

The Belgium subsidies are planned to be retrospective and payments will depend on the future profitability of gas-fired plants. If market prices surpass government forecasts, the subsidies will be reduced accordingly.

The winning bids for the development of the new subsidised gas-fired power capacity will be selected by 31 December.

However, home-grown Belgian energy company Electrabel stated it had not taken part in the tender, adding it would be more interesting to change the conditions for existing gas-fired plants.

The company also reiterated previous statements regarding its decision to mothball its gas plant in Drogenbos in October 2015, confirming it could reconsider if regulatory changes made it possible. Joachim Moxon

By Joachim Moxon