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NUMMER 10 I 15 MAART
Belgian wind farms claimed to be over-subsidised in comparison to Dutch counterparts
BRUSSELS There is major confusion and commotion in Belgium surrounding the question of whether or not the federal government is over-subsidising offshore wind farms. A new and confidential report by the federal energy watchdog CREG (Commission for Electricity and Gas Regulation) claims that the costs of building Belgian wind farms in the North Sea are considerably higher than the costs of their Dutch counterparts.
JAN SCHILS
Calculations by the Flemish broadcaster VRT based on data from a confidential report by CREG showed that, due to over- subsidisation, the two new wind farms (Rentel and Norther) in the Belgian part of the North Sea will be 2 billion euros more expensive than similar wind farms in the neighbouring Dutch part of the North Sea. Following criticism from across the wind energy industry, the broadcaster admitted that criteria used in awarding contracts for the construction of wind farms and for government funding for such projects are different in Belgium compared to the Netherlands, which explains the price differences.
However, very quickly aſter VRT had reported the claims of ‘over-subsidisation’, opposition parties in the Belgian parliament lost no time in condemning this ‘colossal waste of funds’. Members of parliament of the coalition parties in government saw no other way to respond than to rashly announce in the press, put under pressure by green and socialist opposition parties and without consulting with the wind energy industry first, that subsidies for the building of new wind farms in the North Sea would be cut drastically, and perhaps even be halved. Energy specialist Leen Dierick of the governing CD&V party demanded details about the alleged over- subsidisation of wind farms. One of the major and decisive differences between the Netherlands and Belgium when it comes to building wind farms is that we in the Netherlands put such projects out to tender, which has tendering companies compete with each other on price to land the contract. In Belgium, on the other hand, the government grants (consortia of) companies concessions in a system that is completely devoid of competition because there are no competing companies. In the past, this way of working where politicians grant companies concessions has been questioned, as it potentially opens a door to nepotism and (worse still) corruption. Meanwhile, the report by CREG drew a vexed response from the federal minister for energy, Marie-Christine Marghem. She pointed to the fact that the energy watchdogs never questioned the government subsidies for offshore wind farms in the past, and even stated last year that there were no doubts. According to Marghem, CREG only started looking into the matter more seriously when she asked for a comparison to the Dutch wind farms Borssele 1 and 2.
Nearly identical The Belgian Offshore Cluster (BOC), the association of Belgian suppliers to the offshore industry, and the Chamber of Commerce for the West Flanders region, which is closely involved in the construction of offshore wind farms, are not happy with (what they call) “oversimplified reporting” on Belgian offshore wind farms: “The differences between Belgian and Dutch subsidies for wind farms are insufficiently highlighted.” Denmark’s Dong Energy has been awarded the contract to build the Borssele 1 and 2 wind farms in the Netherlands at a guaranteed energy price of 72.70 euros, while Belgium guarantees a price of between 124 and 130 euros per megawatt-hour for the new Rentel and Norther wind farms (which are under construction). This makes it seem as if Belgium pays twice as much as the Netherlands, but this is not actually the case, according to the BOC, which explains the
difference as follows: “For the Dutch Gemini wind farm, which is currently under construction, the Dutch government pays an LCOE cost (levelised cost of energy) of 165 euros. Converted to Belgian conditions (19–year concession), this equals a price of 123.5 euros per MWh, which is nearly identical to the Belgian subsidy of 124 euros per MWh. In terms of the state funding they receive, Belgian wind farms are at the European average. The United Kingdom, Germany, and France even pay more,” claims BOC chairman Christophe Dhaene. “Although there is no over-subsidisation, we are seeing that Denmark’s Dong Energy has started a downward trend. This creates opportunities for wind farms that have not been built yet. On the back of Belgium’s pioneering role in the development of wind farms, we hope that our companies will, in the near future, be ahead of the curve as the global wind energy market expands. This will create a nice cost recovery effect for our economy.”
Major differences Companies investing in Belgian wind farms have to incur far steeper costs and take more risks. In the Netherlands, the government takes care of preparatory work such as analysis of the sea bottom, wind studies, meteorological studies, while it also takes a lot less time to obtain a permit than it does in Belgium. In the Netherlands, the grid connection for wind farms with a high-voltage station is made and maintained by grid manager Tennet, the Dutch equivalent of Belgium’s Elia. And if this connection is not completed on time or not available, the wind farm developer will be entitled to compensation. In Belgium, it is up to wind farms themselves to lay a cable from the wind farm to the shore, as well as to maintain it throughout the full operating phase. This also means that they bear the full production risk. There are also major differences in terms of the capacity and yields of wind farms. Borssele’s larger concession area guarantees more energy production, and means there are no (internal) slowdown effects. In the Belgian area, wind turbines are placed closer together. And they are situated in deeper areas, with a clayey sea bottom between the sand beds. And finally, there is a timing effect. Aſter all, the Borssele offshore wind farms will be built in a few years’ time. The developers can therefore use newer wind turbine technology (which doesn’t exist yet) that will produce more energy per wind turbine.
Still profitable? The wind farm industry in the Belgian section of the North Sea is apprehensive about the outcome of this recent discussion about alleged over- subsidisation. If it were to prompt the government in Brussels to slash funding, the question would arise whether it would still be profitable to build wind farms, said one industry spokesperson. Cutting subsidies in a big way could lead to funding for three planned offshore wind farms (Northwester 2, Seastar, and Mermaid) being cut by as much as 3.5 billion euros. The consortia involved consist of the following parties, among others: Colruyt (Northwester 2), dredging company DEME, municipal green power producer Aspiravi, and Liege’s municipal intercommunal Nethys (Seastar of the Otary consortium) and Mermaid (Otary and Engie Electrabel).
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