In recent months, a new support mechanism for offshore wind energy has been discussed and agreed by the competent government authorities. For the members of the Belgian Offshore Platform, it was important that this mechanism should achieve a correct balance between the affordability of the system for society and the consumer on the one hand and the need for a legally secure, long-term investment climate on the other hand. The decision of the government to allow a significant and structural discount for major consumers is certainly a first step in the right direction. With the publication of the royal decree, speculation about the investment climate for the offshore wind sector should have come to an end. However, the remaining ambiguities in the text and in particular the uncertainty about the timing of the connection to the electricity grid on the mainland continue to pose a real threat to the successful realization of the planned wind parks at sea.
The new mechanism
Instead of a fixed subsidy, the new system foresees the payment of a variable level of support over a period of 20 years within a maximum ceiling for investors. The amount of the variable support will be calculated on the basis of a standardized LCOE* (fixed in the royal decree at € 138/MWh), reduced by the amount of the electricity reference price. In other words, if the price of electricity increases, the level of support will decrease.
The fixed LCOE takes no account of the cost of connecting the electricity generated at sea to the mainland. An additional support of € 12/MWh is foreseen for future wind parks that are not able to connect to a central connection point at sea and therefore need to invest in their own connection with the mainland. In order to connect directly with the mainland in this way, it is first necessary to obtain permission from the competent authority.
At the start of a project’s construction and every three years thereafter, the CREG will analyze all the project’s income and expenditure. If there are any substantial changes, the CREG can adjust the level of support granted.
Ambiguities and the delay of the Stevin project are creating uncertainty among investors
However, the members of the BOP are unfortunately forced to conclude that the LCOE has been determined on the basis of a theoretical estimate, which does not reflect the real cost of developing and exploiting a wind turbine park on the North Sea. In addition, the manner in which the CREG will carry out its three-yearly reviews is not clearly described. This is regrettable: investment decisions require clarity and certainty.
The approved system is only valid until the end of June 2017. However, the development of a new wind park can easily take more than five years. Moreover, account also needs to be taken of the delay in the implementation of the Stevin project and the provision of a connection at sea. By failing to address this delay and the other ambiguities, the new system does not give investors the necessary security to take decisions relating to the realization of their project.
“The new support mechanism is an important milestone and a clear signal from the government that Belgium wishes to further develop its already strong position in the field of offshore wind energy. However, there is still more work to be done,” says Jean de Leu, chairman of the Belgian Offshore Platform. “It is of crucial importance that the remaining uncertainties in the new legislation are clarified as soon as possible. Similarly, the uncertainty around the timing of the connection to the mainland electricity net must be removed with a minimum of delay, so that the 5 billion euros worth of investment in the five planned wind parks can be successfully realized. The current situation is damaging for every active development trajectory and could also have a harmful effect on Belgium’s energy and climate targets.“