Initial deal reached in Belgium to extend Doel nuclear unit’s life

Belgium has inched closer to securing supply margins for the winter 2015-2016, as a preliminary agreement between the government and energy company Electrabel on prolonging the life of the 433MW nuclear reactors Doel 1 and 2 was announced Wednesday.

The agreement was approved by the board of directors of Electrabel’s parent company ENGIE, the French-headquartered company’s half-year results revealed on Wednesday evening.

A Q4 ‘15 Belgian power contract traded on Wednesday, but at around the same price as a day earlier. The Belgian system risks a capacity deficit of 545MW if Doel 1 remains unavailable for next winter, according to estimates by transmission system operator Elia. The extension of Doel 2 to the end of March 2016 has already been confirmed, but Doel 1 has been shut down since February and the restart is still subject to approval by nuclear watchdog FANC. The agreement with Electrabel will also need to be ratified by Belgian parliament and a draft bill is to be presented after the summer holidays.

The system may still be short of 130MW for next winter, but this may also be covered due to the “probable availability” of co-generation plants, according to Elia.

The Belgian government is preparing the details of a rolling blackout plan to be used in cases of severe power shortage. The strategic reserve volumes are evaluated in order to satisfy the criteria that loss of load should not exceed three hours under normal conditions and 20 hours during rigorous winter conditions. The shortfall of 545MW could mean that loss of load could last between 10 and 40 hours.

As part of the agreement, Electrabel will pay an annual fee of €20m from 2016 to 2025 for permission to extend the lifespan of the nuclear reactors. The funds will go towards an energy transition fund to encourage research and development into new solutions for energy production and storage. This will be increasingly important as Belgium closes all its nuclear installations in 2025, a statement by the Belgium energy ministry said.

The nuclear contribution tax has been reviewed as part of the agreement. The utility will now be obliged to pay €200m for 2015, instead of €405m as previously determined in October 2014, and €130m for 2016. By comparison, the levy for 2014 was calculated at €469m, a decision which Electrabel still contests.

The levy for 2017 and beyond will be calculated according to a formula that takes into account the evolution of costs, volume of production and price of electricity, the energy ministry said.

The revision takes into account the trend for decreasing electricity prices on the wholesale market, it was added. The Belgian power system has been threatened by supply shortages since nuclear reactors Doel 3 and Tihange 2 were shut down in March 2014 due to safety concerns, but a combination of mild temperatures and high import volumes have so far prevented a sustained increase in power prices.

Electrabel will also be obliged to pay €100m in 2015 and €20m in 2016 as part of a tax on sites that are no longer in use for energy production. The energy company had contested the levy since 2006 but has now consented to attach the settlement to the current agreement.

The energy ministry was unavailable for comment by Wednesday evening. joachim.moxon@icis.com