ICIS Power Horizon: Belgian 18.3% renewable 2030 target bearish for electricity prices

This analysis has originally been published in an extended version for ICIS Power Perspective subscribers on 15 February 2019 at 10:52 CET.

Belgium plans to reach 18.3% RES share compared to final energy demand by 2030, according to the draft National Energy and Climate Plan (NECP) discussed in the Belgium Parliament on 5 February. The target would be achieved by scaling up the country’s share of offshore wind energy to 4GW for a total of 8GW of wind capacity and by increasing solar capacity to 11GW by 2030. The draft also reaffirms the country’s decision of phasing out 6GW of nuclear power by 2025, while it has a target of adding a total of 10GW of gas plants by 2030. If achieved, we forecast this will have a bearish impact on the wholesale Belgian electricity prices.

Background

• Although no national binding targets are set to contribute to the EU’s 2030 RES target of 32% of energy consumed, member states are required to prepare NECPs, where they reveal voluntary national contributions to the EU-wide target
  • Every EU member had to prepare draft NECPs by the end of 2018 as a requirement of the recast Renewable Energy Directive
  • The Belgian draft NECP was discussed at a national inter-parliamentary reunion on 5 February
  • The European Commission will comment on draft NECPs and may request amendments to increase ambition. Member states should then publish final NECPs by the end of 2019
  • According to the latest Eurostat data, Belgium’s RES[%] share in 2017 was of 9.06%, below the 2020 target of 13%
  • Belgium plans to reach 18.3% RES[%] share by 2030, and is especially ambitious in the renewables in electricity consumption (RES-E) aiming for 40.4% (see the graph below)
• The NECP annexes reveal additional measures to be used to reach the Belgian national contribution by 2030
  • The government has set a target of 6GW of wind by 2025 and 8GW by 2030 which includes 4GW of offshore wind, it also plans to increase the solar generation to 8GW by 2025 and 11GW by 2030
  • According to the NECP, the government plans to increase gas-fired capacity to 8GW by 2025 and to 10GW by 2030
    • In order to avoid a power capacity crunch caused by the nuclear phase-out, the Belgium government passed a new draft power plant subsidy scheme on 11 January
  • According to the NECP, in 2020 the renewable share will increase in particular due to an increase in RES-E thanks to offshore wind power generation

Analysis

• We applied the NECP targets to our long term ICIS Power Horizon price forecasting model
  • We added more solar power, as the NECP has a target of an extra 4GW of solar capacity added by 2025 and an extra 6GW by 2030 compared to the current ICIS Power Horizon base case
  • We assume 955MW less gas capacity in 2020 vs our base case.We also assume the last nuclear plant closes during 2025 rather than by the start of 2025

• Our scenario modelling shows that if the NECP capacity targets are met, Belgium would not only reach but even exceed the indicative target for RES-E in 2030
  • Our model shows that in 2030 44% of electricity consumption would come from RES generation, especially wind, whereas the NECP targets 40.4% RES-E
  • The emphasis on the RES-E to meet the overall RES targets implies Belgium predicts a favourable RES investment climate
• Price impact
  • In 2020, the annual electricity prices are on average €0.35/MWh (nominal) higher in the NECP scenario because there is less gas capacity assumed by the government than in our current base case
  • From 2021 the scenario price forecast is lower than our base case as we assume a slightly slower nuclear phaseout, and higher RES capacity
  • The added solar and wind capacity and later, gas capacity, means electricity prices are an average of €2/MWh lower between 2019 and 2030 than the current base case
  • Prices are on average €2.9/MWh lower between 2023 and 2030 compared to the base case as more renewable and gas capacity starts coming online according to the NECP

• Under the NECP scenario, Belgium will be importing less power in 2022, 2023 and 2024 than in the current base case
  • In 2021 and 2022 Belgium imports less from France, Germany and the Netherlands exports more to the UK
  • In 2025 Belgium is forecast to start importing a lot more due to the country’s nuclear phase out, however in general Belgium imports a lot less power from France, Germany and the Netherlands than in the current base case thanks to an increase in its own renewable and gas-fired generation

Rebecca Gualandi is Energy Market Reporter at ICIS. She can be reached at Rebecca.Gualandi@icis.com

Interested in seeing what impact this and other developments could have on the power price? Register now for a free ICIS Power Horizon trial by writing Justin Banrey (Justin.Banrey@icis.com).