Febeliec, the Organization of large Belgian energy consumers published an alarming report this week on the prices that Belgian industrial consumers pay for electricity compared to their competitors in the Netherlands, Germany and France. For both parts of the country and for all types of consumers, Belgian power prices are clearly more expensive than in any of the surrounding countries. Industrial consumers pay 6,5 to 10 EUR/MWh more on the total electricity price in Flanders and 7 to 25 EUR/MWh more in the Walloon region. And that is compared to the average price similar consumers pay in surrounding countries. More than these figures, the relative differences are telling. Large industrial consumers face a 12% (1 TWh consumer in Flanders) up to 45% (100 GWh consumer in Wallonia) price handicap for electricity compared to their Dutch, French and German competitors. Recently, several large Belgian industrial companies have announced that they will close down plants in Belgian, with the loss of many jobs as a result: Ford, ArcelorMittal, Caterpillar, Duferco, Saint-Gobain. Not all of them are energy-intensive, but it is clear that such an energy price handicap is not keeping these companies here. Febeliec is more than right in calling for action.
First of all, my compliments to Deloitte, that made this study for Febeliec. Often, studies comparing energy prices fail to produce relevant results, especially when they are based on empirical data such as traditional surveys. What individual companies pay is the result of a large number of parameters. It is hard to find much line in such diversified empirical data. Deloitte has chosen a more theoretical approach. Studying baseload prices, they avoid the trap of drawing conclusions from incomplete and/or unrepresentative data. Deloitte has studied baseload prices for the commodity part of the bill and the official tariff structures for grid fees and taxes. Doing so, it can draw pertinent conclusions on structural differences. These have been checked by the expertise of Febeliec, but I can’t imagine anything else than a broad confirmation.
In the conclusions, we can see a few big lines:
1. The bad position for Belgium can be explained by: lower exemptions for Belgian large consumers compared to Germany, lower reduction on wholesale commodity compared to France and higher overall tax levels compared to the Netherlands and France.
2. Inside Belgium, there is a structural difference between the Walloon Region and Flanders, which is completely due to the difference in taxes on power consumption.
3. The competitive disadvantage is biggest for the ‘smaller’ large consumers, the consumers of ‘hundreds of GWh’s rather than those of TWh’s’. But obviously, the larger consumption of a TWh consumer leads to a larger disadvantage in total euros per year.
Having an insight into the energy bills of more than 200 mid-sized and large energy consumers in all of the countries in the study, we can only confirm these conclusions. They are the logical consequence of the power market policy in the different countries. We can summarize that policy as follows:
France has never fully embraced electricity market liberalization. It wants to continue to give the price advantage of its nuclear power production to its consumers, both industrial and residential. The loi NOME introduced an element of competition, but the mechanism still causes prices to be lower than those in the liberalized surrounding markets, although recently, the drop in prices in Germany has caused the French power price advantage to disappear.
The Netherlands manages to keep its industrial power prices reasonable by keeping grid fees and taxes at bay. Contrary to popular belief, the Netherlands is not the Walhalla of renewable power. Yes, there are many windmills, but if you look at them closely, you will see how old most of them are. In the last decade, the Netherlands hasn’t had the programs of massive subsidies for renewable energy like we have seen in Germany and Belgium.
Germany has very high grid fees and taxes. But it has also adopted a policy of conscious protection of large consumers of energy. With the Härtefall regulation, an German energy-intensive company can get massive exemption of the extremely high EEG-entgelte, the tax for paying renewable power subsidies. And it gets even better if your load duration exceeds 7000 hours, which means that you have an extremely stable off-take of power, which is only possible if you use the power for stable, around-the-clock and electro-intensive processes. Such companies pay 0 euros for using the grid in Germany. This might give the impression that Germany is a power consumer’s paradise. But that is not the case. The Febeliec study is focusing on those very energy-intensive companies only. For many others, the cost of power in Germany is extremely prohibitive, much more expensive than in Belgium.
Belgium has a power market policy that is … typically Belgian. And I’m not just referring to the difference between the regions. Belgian energy policy fails to make firm choices, such as the deliberate measures for protecting large consumers in Germany. Belgian energy policymakers try to protect small consumers (especially residential) which waters down the potential for protecting large industrial consumers. Moreover, politicians don’t always take their responsibility. They broadly smile before the camera’s when they open another renewable energy production site. But when it becomes clear that the subsidies for renewable have caused a derailing of the tax part of the power bill, they look the other side. They blame the suppliers and the lack of competition and refuse to take responsibility over the cost-increasing effect of renewable energy policy. Well, the Febeliec study is clearly showing that the main problem are the taxes, and not the market. Energy producers in Belgium are not selling their product at a structurally higher price than producers in neighboring fully liberalized markets such as Germany and the Netherlands (although there is quite a big gap with Germany at this moment, but it is explicable).
The problem is clearly larger in Wallonia. The Green Certificates system in the Southern Region of Belgium has continued to pay out much larger subsidies to owner of solar panels for a much longer time than the system in Flanders. The Walloon Government is currently reviewing the green certificates system, but the high subsidies have caused an investment boom, meaning that a lot of owners will continue to benefit from these high subsidies, causing further inflation of the cost to be reflected in energy taxes on consumers’ bills. The Febeliec study is confirming what we are seeing in the power bills of our Belgian clients: there is a big problem with the cost of green power in Wallonia. If you know how much investment costs in solar panels have decreased in the last four years, this problem of over-subsidizing is shocking. It might have caused the creation of jobs in the solar panel sector. Subsidized jobs, I should clearly say. If that causes the loss of industrial companies and non-(or less-) subsidized jobs, this is a very painful evolution. We hope that it is not too late to cure this, and that the Walloon government will increase the exemption of green certificates costs to industrial consumers, just like the Flemish government has done earlier. And we hope that the Febeliec study will inspire both governments to make even bigger efforts to protect the energy-competitiveness of our economy. And they should not just think about the large single-site companies. There are many companies that use a lot of electricity scattered over different sites. As exemptions are calculated on a site-by-site basis, they often pay an extremely high power bill. This should be considered when reviewing exemption systems. Finally, we hope ministers think about the Febeliec study before they air unnecessary and cost-increasing ideas such as the creation of a capacity subsidy for gas-fired power stations, or the construction of a doughnut artificial island to store renewable energy at sea.