Currently, several shifting factors influence the rapidly changing Belgian energy market, among others the continuing EU-wide process of de-regulation and liberalization, the discussion on phasing or non-phasing out of nuclear energy, the incentives to develop renewable energy sources, the changing structure of the country’s energy distribution and so forth. U.S. companies wanting to export to the Belgian energy market must be aware and take into account these uncertain or changing factors, which will determine the potential for exports of relevant goods and services to this market.
Except for coal and some renewable energy potential, Belgium has no natural energy sources. The coal mines that supported the country’s industrial revolution in the 19th Century have become unprofitable and the last mine was closed in 1994. The country now imports all its coal, natural gas and petroleum requirements for its energy needs that amount to almost 42,000 ktoe (kilo-ton oil equivalent, or about 489 TWh).
Of this total consumption, 31% is used for residential needs, 30% by the industry and 23% for transport purposes. Because of various policies (among others, energy security and environmental considerations) there has been a slight shift in energy sources. Between 2000 and 2007, solid combustibles dropped from 13.9% to 7.8%, petroleum dropped from 40.7% to 39.2% while natural gas grew (22.3% to 25.4%), as did nuclear energy and renewables (20.8% to 21.4% and 1.6% to 5.0%, respectively).
Regarding electricity production, Belgium has an installed capacity of 104.600 GWh, but produces 88.800 GWh and imports a further 6.000 GWh. Of the national electricity production, 54% comes from nuclear energy, 39% from fossil fuel power plants, 5.4% from renewable energy sources and 1.5% from hydraulic pumping stations.
On the national level, energy policies in Belgium are guided by strategic and socio-economic interests. As with most western countries, strategic interests concern the security of supply and source diversification, especially in view of recent disruptions of gas deliveries by Russia to the EU. Recently two new supplier countries have emerged in 2006, Qatar and Libya, on top of the traditional gas-producing countries delivering to Belgium. This issue has led to a national (still ongoing) debate on the possible overruling of the decision to abandon nuclear energy in the country. Economic interests are largely the result of breaking up former national monopolies on energy production, transit and delivery as enforced by EU legislation. Social interests include environmental considerations and EU directives stemming from the Kyoto Protocol, and job retention and creation.
Sub-Sector Best Prospects
Several trends are still shaping the Belgian energy market, yielding opportunities for U.S. firms.
1) Electricity market
a) Market liberalization:
Deregulation has been set in place on a policy level, but this has not yet led to a satisfactory level of competition. The federal and regional governments will most likely continue to create incentives to improve the efficiency of market forces on the industry. While the various government bodies have persistently warned against a likely shortage of Belgian electricity production capacity, the industry itself seems reluctant to invest in relevant infrastructure at the moment. Key factors highlighted for this are the fear of a low electricity price in the long run (Belgium’s electricity prices for residential and industrial users are on the EU-27 average, but relatively low for western-EU standards), limited cross-border network capacity impairing exports of excess production, and finally uncertainties with respect to environmental policies, the eventual re-instatement of the civil nuclear electricity program and the market behavior of the incumbent utility Electrabel. U.S. firms can therefore expect opportunities in those areas improving some of these bottlenecks.
b) Production facilities:
CREG has highlighted the need for investments in power generation infrastructure in Belgium because of a perceived future shortage of electricity production. It also notes that investments are taking place in other EU countries with similar energy pricing levels, including by GDF/Suez, owner of the dominant provider Electrabel. Therefore, the lack of investments in Belgium cannot be based solely on economic factors, and investments with associated opportunities for U.S. firms, equipment providers and subcontractors alike, could appear in the near future.
The deregulation and opening of the energy market has allowed companies with no specific tradition in electricity production to invest in their own electricity generation plants. An example mentioned earlier is BASF that has commissioned a 400 MW plant to feed its own production processes.
c) Nuclear energy:
The uncertainty around the abandonment of the nuclear energy industry in Belgium negatively affects the prospect of any investments in this sector. However, with 54% of Belgium’s electricity coming from the seven ageing nuclear reactors, abandonment seems unlikely as no other source can easily replace that capacity before 2015, the date when the first decommissioning is due. One can therefore expect a decision on continuation of the nuclear energy program as this deadline approaches, with subsequent purchases of equipment and services for revamping and maintaining the country’s nuclear reactors, if not the ordering of entirely new production plants.
d) Emissions-controlling measures and renewable energies:
Belgium is committed to lowering its CO2 output under the EU’s adherence to the Kyoto Protocol. Several studies made specifically for the Belgian market have shown that a wide approach will be needed to attain the national emissions-reduction targets. These comprise a mixture of consumption reduction, green/ renewable technologies and investments in cleaner, more efficient production facilities.
Many power plants in Belgium consume a mixture of coal and natural gas, and are highly polluting. Some parties suggest their replacement with more modern versions, which would serve the purpose of capacity expansion as well as lowering the country’s output of CO2 and other pollutants. Possible indications of this trend may be found in the slow but steady progress of Belgium’s thermal power stations, from 49.8% in 2001 to 50.4% in 2006. Retro-fitting these facilities with pollution-mitigating devices could also present opportunities for U.S. firms.
In this context, CREG submitted a proposal for an indicative power generation program in 2005-2014, stating that the capacities to be invested in the period 2005-2014 that amount to 1,729 MW in renewable energy sources and 1,749 MW in qualitative co-generation. In this same proposal, by 2014, decisions are recommended on investments in eight units using combined steam and gas cycles (CCGT plants) of 400 MW and four gas turbines with open cycles (GT) of 80 MW.
Further investments come from large industrial sites that focus on co-generation. For example, ExxonMobil has just commissioned co-generation facilities at its Antwerp refinery that generate 125 MW of power, reducing an estimated 200,000 tons of CO2. Given the importance of the (petro)chemical industry, the second industrial sector in Belgium with its many processing sites, similar investments can be expected from other companies.
Finally, many smaller businesses are investing in renewable energies given the advantages of using electricity from their own sources (i.e. not subject to a volatile market) and the generous incentives proposed by the government, often allowing for very short return on investments. Distribution centers and other businesses with large surface areas that allow the installation of windturbines and/or photovoltaic cells are driving this market.
e) Maintenance and provision of spare parts:
Despite the current economic crisis, maintenance and repairs to facilities are still needed, in particular in the secondary (transforming) sector that is well represented in Belgium. Opportunities for small equipment manufacturers specializing in process control and similar equipment can find a market in Belgium, especially when working through an effective, well established distributor.
Read the complete commercial guide to Doing Business in Belgium