What is moving the coal market?

By Ondrej Zicha – Polish version

2016 could be a year marked by the trend reversal of world coal prices. After years of steady decline, coal prices rebounded in March. In October, API2-prices event hit the level of 65 dollar per tonne, a level last seen one and a half years ago.

afb1

Source: Own study

Since 2011, coal prices lost more than 70%. Coal was marked as a “dirty” fuel and in line with the wide spread policy of decarbonisation, other energy sources were preferred. This made demand decrease faster than supply, so prices continuously went down to reach levels below 40 dollars per tonne in February and March this year. These prices made it difficult for miners to be profitable, endangered the entire sector and even caused bankruptcy of some big players like Peabody.

China drives world coal prices

Changes of the Chinese policy are the main reason for the price rebound. China takes about 50% of both worldwide production and consumption. In February, Chinese officials announced the country will close more than 1000 coal mines before the end of year. The mines on the list were mostly rather small ones and had to be closed because of inadequate working conditions. In April, this decision was followed by another one limiting the number of working days in local mines by 16%.

Limiting the coal production should go hand in hand with decreasing coal consumption, as China is pushed to do so because of extremely high air pollution. However, changing to other more ecologically friendly fuels will take some time while mines will already be closed at the end of this year. China is now investing a lot in renewable sources but these investments need some time to be realised. Additionally, some analysts remark that the current grid system is not prepared for more and potentially unstable renewable sources and therefore requires further investments.

On top, we should take into account that China has proven its statements to not always be 100% correct. China claims it’s abandoning fossil fuels, but according to Greenpeace’s report published in July, the country is currently building another 400 GW of installed coal capacity while the shutdown is only 70 GW.

This means China mainly needs to import more coal in the short term (year-on-year increase in August was 52%), which brought coal prices back at profitable levels and is good news for coal miners all around the world.

Situation in Poland

The rising coal prices are great news for Polish miners as they are struggling with serious problems. Kompania Węglowa, the biggest coal producer in the EU was restructured to Polska Grupa Górnicza (PGG) in order to save the Polish coal sector from bankruptcy. The higher coal prices could help the company to stay alive in a tough market.

On the other hand, the new company is still facing many difficulties which decreases its competitiveness. First of all, the benchmark price index for coal mined by PGG unfortunately is the Polish Coal Index PSCMI1 (not the API2 like on other European markets). However, the Polish index usually follows the European benchmark but this hasn’t happened (yet). As we can see on the graph below, the polish coal prices are even below the API2 index since June.

afb2.png

Additionally, PGG is still struggling with too high mining costs. The unions have a very strong position in the Polish coal sector and generally are not willing to reduce the non-standard benefits of workers in the mining sector. Despite some positive changes in the last months like a temporary suspension of 14th month salaries, further and more radical changes are necessary to make PGG fully competitive.

Outlook for the future

Mining restrictions in China led to tight supply in certain regions. As a consequence, the Chinese government last month decided to ease the mining restrictions. In case of problems with supply, local mines would be allowed to increase production to meet demand. On top, the limited working days in the most efficient Chinese mines could be eased as well. However, this was not confirmed by the Chinese officials and for the time being, the market isn’t taking this into consideration.

Seeing the above, we can only be sure about one thing – China is the main driver of coal prices at this moment and any political decision there can impact the market situation.

Meet the blue certificate, another certificate of the polish property rights market

Prefer the Polish version? You can find it here:

By Bartosz Palusiński

On June 28th, the polish president signed the amendment to the RES law. The changes will come into force on July 1st, 2016. The first change that will impact the polish end consumer is the reduction of the share of the green certificate obligation from 15% to 14,35% for the second half of 2016. This means the energy seller will need to submit less green certificates for electricity sold to the end consumer.

Unfortunately the reduction will be compensated by the introduction of a new type of certificate: the blue certificate. These certificates confirm that the energy is produced from agricultural biogas. The obligation will be set at 0,65% of the volume of purchased energy, exactly the same amount as the reduction on the obligation of green certificates.

At first sight you’d think this change should have a neutral impact on the end consumers. The price of both certificates is calculated in a different way. The price of green certificates is based on a market mechanism and at the moment these certificates are traded at around 70 zł/MWh.

The price of the blue certificates will probably be aligned with the replacement fee. The replacement fee is a maximum price for certificates set by the regulator to increase liquidity. The current replacement fee is at 300,03 zł/MWh which is more than four times more expensive than the current price of the green certificates!

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Table 1: Obligation of the Property Rights (source: Grid Fees & Taxes section of E&C Consultants)

Moreover, the percentual obligation of both certificates will rise to 19,35% for green certificates and 0,65% for blue certificates as of 2017. However, this is a maximum and the legislation mentions the minister in charge of energy is allowed to make adaptation until November 30th, 2016. This ability introduces a fairly large uncertainty on the market.

In the offers of suppliers for 2017, 2018 and 2019 we notice different approaches in establishing the final price for end consumers based on the different legislative changes (introduction of new colours such as the blue certificate and the end of others such as the yellow and red ones in 2019). Next to this, sellers apply different calculations to define the price of property rights for the next three years, keeping in mind risks of changes in price and liquidity on the TGE. This makes it even more important to implement a strategy to handle this unstable market environment and limit its impact on the energy cost of the end consumer’s business.

table2

Table 2: Share of the obligation of the Property Rights (source: Grid Fees & Taxes section of E&C Consultants)                                * Energy Minister change that value by 30/11/2016

Influence on the energy cost of end consumer

This highly unpredictable legislative environment makes it hard to clearly define the energy budget for the next few years. In the table below you can find an estimation of the price of each colour for 2017, 2018 and 2019. An end consumer using 100.000 MWh electricity per year, might lose 1,4 million zloty if there is no prolongation of the existing law to support the yellow, red and violet certificates.

table3

Table 3. Estimated price of particular colour (source: Grid Fees & Taxes section of E&C Consultants)

Other changes to the RES law

As of July 1st, the RES fee will be introduced on the electricity bills. This fee covers distribution services and will be collected by the distribution system operator. For the second half of 2016 this fee is set at 2,51 zł/MWh. The rate for 2017 will be announced before November 30th by the regulatory office. Companies that obtained the status of industrial consumer can be granted a reduction.

As well, transition fees will increase as of January 1st, 2017. This fee is added to the invoice for the distribution services and covers the producers’ cost in case of an early termination of a long-term contract or the sale of capacity and electricity. Below you can find the fees for end-users (other than households) that have installations connected to the grid:

  1. Low voltage transition fee increases from 0,85 to 1,65 zł per month per kW of contracted capacity
  2. Medium voltage transition fee increases from 2,10 to 3,80 zł per month per kW of contracted capacity
  3. High and extra high voltage transition fee for 2017 will stay unchanged
  4. High and highest voltage transition fee increases from 1,08 to 1,10 zł per month per kW per contracted capacity for end-users that consume more than 60% of the contracted capacity and for which the cost of electricity is more than 15% of their production value.

Would you like more information on these regulatory changes in Poland? Feel free to contact us via info@eecc.eu or call Bartosz Palusiński via +48 509 82 00 25.

 

Mercado energético español: ¿qué nos ha dejado el 2014?

By Maria Martinez de Ubago

Durante el 2014 han tenido lugar cambios regulatorios en el sistema eléctrico español que han afectado profundamente la estructura del mismo. Entre otros destacan el nuevo y polémico sistema de subasta del servicio de interrumpbilidad, el establecimiento del fondo de eficiencia, el inminente cambio en la definición del sistema de periodos, las medidas para hacer frente a la sobrecapacidad, el nuevo impuesto de hidrocarburos con el que se pretender incentivar la exploración de pozos de petróleo marinos y el decreciente precio del petróleo que impacta directamente en el precio del gas en España. Este 2014 se ha caracterizado, al igual que el 2013, por la incertidumbre regulatoria. Incertidumbre que se trasladará al 2015, más aún teniendo en cuenta las elecciones generales de final de año.

El ministerio de Industria y Energía publicó en Agosto de 2014 un nuevo y polémico mecanismo para la asignación del servicio de interrumpibilidad durante 2015, según el cual los grandes consumidores reciben subvenciones por desconectarse de la red en momentos de saturación. Este mecanismo consiste en una subasta descendente en la que solo los pujantes más competitivos adquirirían ‘bloques interrumpibles’. La primera subasta celebrada, le costó al sistema 352 millones de euros, 325 millones de euros menos que en 2014 y casi 200 millones de euros menos que la previsión inicial para el 2015 realizada por el gobierno. Pero algunas industrias muy intensivas como Alcoa, muy descontentas con el resultado de la primera subasta, amenazaron con el cierre de dos de sus plantas y despidos colectivos. Tras un tira y afloja entre el gobierno y Alcoa, finalmente se llevó a cabo una segunda subasta para cubrir los MW que restaban hasta llegar a los 550 millones previamente previstos por el gobierno. Cabe destacar que este servicio no se ha usado desde 2009 y que España posee una capacidad instalada mucho mayor de la necesaria. A día de hoy queda pendiente la publicación de cuál será el coste de este servicio para los consumidores en 2015.

En Noviembre se publicó la liquidación del sistema Eléctrico así como la previsión del déficit de tarifa para 2015. Según esta circular, el déficit para 2015 sería cercano a cero. De esta manera, el gobierno justifica la congelación de los peajes en 2015. Esta medida tiene lugar un año antes de las elecciones generales y algunos tachan la medida de electoralista. Cabe destacar que, el servicio de interrumpibilidad que hasta ahora ha estado incluido en los peajes de acceso, va a pasar a devengarse como parte del precio de la energía. En parte por este hecho, el gobierno puede justificar la reducción del déficit de tarifa en la liquidación del sistema eléctrico.

En 2014, se ha creado un Fondo de Eficiencia Energética con el objetivo de cumplir con los objetivos de ahorro energético fijados por la UE para España. Este fondo será financiado por el fondo FEDER así como las distribuidoras y comercializadoras de gas y electricidad. Las comercializadoras se verán obligadas a aportar al fondo con carácter retroactivo. En diciembre de 2014, algunas comercializadoras ya han hecho pública su intención de trasladar el coste al consumidor.

El año termina sin claridad respecto a si se modificará o no el actual sistema de periodos así como si esto supondrá un incremento en la commodity para 2015. Algunos comercializadores han declarado que el nuevo calendario impactará en los precios. Sin lugar a dudas, este nuevo sistema de periodos hará que los peajes en Agosto se incrementen.

En Enero de 2015 se renovará el actual mecanismo de apoyo a las centrales de carbón nacional, tras la fuerte presión ejercida por dicha industria. Por otra parte, la UE obliga al gobierno español a reducir progresivamente las ayudas hasta que acaben en el 2018. A partir del 2018 solo podrán quedar en actividad las empresas mineras que sean económicamente rentables sin ayuda pública alguna.

El pasado mes de diciembre, el Ministerio de Industria publicó un informe de sostenibilidad ambiental para 2015-2020 en el que se prevé un fuerte crecimiento de las renovables y un retroceso en las centrales de gas y carbón con el objetivo de cumplir los objetivos europeos de eficiencia, renovables y emisiones para 2020 fijados el pasado 23 y 24 de Octubre en la cumbre europea sobre energía celebrada en Bruselas. Para cumplir con los objetivos marcados por Europa sería necesaria la instalación de aproximadamente 7000 MW de energía renovables, y un recorte en las energías convencionales de 7300 MW, principalmente en centrales de ciclo combinado. El sector está a la espera de la publicación de un real decreto que regule los mecanismos para hacer frente a la sobrecapacidad actual, cifrada en más de un 40%. Cabe recordar que el mecanismo de respaldo del sistema eléctrico se financia a través de los pagos por capacidad. Sería de esperar que una reducción de este backup, supusiese un ahorro para los consumidores finales.

En diciembre, el gobierno también aprobó un anteproyecto de ley en el que se incorpora un nuevo impuesto de hidrocarburos destinado a incentivar la exploración petrolífera en aguas profundas. Parte de esa recaudación irá destinada a las comunidades autónomas y ayuntamientos donde se localicen las prospecciones. Con esta medida el gobierno pretende ganarse la simpatía de los ejecutivos regionales que alegan daños medioambientales.

El precio del Brent tiene un impacto directo en el precio que pagamos en España por el gas, ya que la mayor parte de los contratos de gas están indexados al Brent y tipo de cambio. El panorama de continuo decremento en el precio del petróleo observado desde Agosto 2014, ha permitido que se hayan podido negociar contratos a 24 €/MWh frente a los 32 €/MWh observados en verano.

Como resumen, todos estos cambios regulatorios muestran los problemas a los que se enfrenta España a la hora de regular el mercado eléctrico. Los mecanismos que se crean son, con frecuencia, innecesariamente complicados y producen efectos secundarios que deben ser reparados mediante nuevas adaptaciones lo que al final no hace más que complicar las cosas. Para el consumidor final, las consecuencias de esta complejidad se traducen en un incremento del coste de la energía. Es por tanto esperable, que algunos de los cambios que hemos comentado en este artículo, se traduzcan en un incremento del precio. Desde E&C, haremos este seguimiento por ti.

Bedenkingen bij een nakend stroomtekort

Below you can find an interview in English about the Belgian situation

De angst voor een tekort aan stroom beheerst de krantenpagina’s. Terecht, want het stilleggen van drie kerncentrales maakt de kans op een (tijdelijk) deficit een stuk groter. In wezen is de situatie vrij eenvoudig. De combinatie van stroom invoeren uit Nederland en Frankrijk, industriële bedrijven tijdelijk uitschakelen en reservecapaciteiten aanspreken zou normaal gezien zelfs op een dag zonder wind en zon genoeg moeten zijn om het uitvallen van deze kerncentrales te compenseren. Problemen krijgen we wanneer het koud wordt. Dan verbruikt Frankrijk met zijn vele elektrische verwarmingstoestellen zijn stroom zelf en kan niet meer uitvoeren naar België. Dat maakt een stroomtekort waarschijnlijk.

 

Hoe dit stroomtekort zich zal manifesteren is een open vraag. De stroomvraag kan van uur tot uur zeer sterk verschillen. Daardoor zou een tekort zich maar gedurende beperkte tijd moeten voordoen. Wanneer elke stroomproductie installatie uit zijn voegen barst om voldoende te kunnen leveren, verhoogt uiteraard de kans op een echte black-out, een totaal stilvallen van het hele Belgische stroomsysteem. Het is de beheerder van ons transportnet Elia die dat moet vermijden. Zij lijken de nodige plannen daarvoor klaar te hebben. En Elia is een zeer gereputeerd bedrijf op het vlak van netbeheer. We mogen dus hopen dat het stroomtekort beperkt blijft tot enkele uurtjes zonder stroom in landelijke gebieden. Alhoewel ook dit voor de nodige ‘collateral damage’ zal zorgen bij bedrijven die toevallig in zo’n gebied liggen.

 

Als een stroomtekort zich al voordoet. Het zou ook opnieuw een milde winter kunnen zijn waardoor de vraag (in Frankrijk) niet piekt. Of koude dagen zouden met veel wind(-energie) kunnen komen. Of het zou kunnen blijken dat ons stroomsysteem over onverhoopte flexibiliteiten beschikt. Het is namelijk niet langer een systeem van alleen maar grote centrale productie-installaties maar van vele kleine installaties die in de rekenmodellen niet altijd correct in te schatten zijn. De kans op een tekort is verhoogd, maar het is geen certitude. Dit is wat beleidmaken inzake energie zo moeilijk maakt, zowel op de macro-schaal van een regering als de micro-schaal van een bedrijf dat zijn aankoop-opties overweegt. Over de toekomst kan je nooit iets met zekerheid zeggen.

 

Wat moet ik dan doen als bedrijf?

  • Goed opvolgen of je al dan niet in een zone ligt die Elia kan uitschakelen.
  • Samen met de technische mensen nagaan welke kritische processen je tegen stroompannes moet beschermen met noodaggregaten.
  • Indien een stroompanne grote economische schade kan aanrichten kan je verdere uitbouw van noodcapaciteit overwegen.
  • Indien je noodstroomvoorzieningen aanlegt, kan je zeker ook overwegen of je die kan gebruiken op uren waarin de spotprijzen hoog oplopen om ze op die manier wat terug te verdienen.
  • Bedenk bij dat alles zeer goed dat het geen certitude is dat een tekort met afschakelplan en hoge spotprijzen zich effectief voordoet. Kosten voor noodstroomvoorziening moet je dus in eerste instantie als een verzekeringspremie beschouwen.

 

Op economische vlak blijft deze situatie nu al niet zonder gevolgen. De prijs voor Belgische stroom in 2015 is al naar 50 euro per MWh gestegen. Dat is bijna 15 euro per MWh meer dan de prijzen die we momenteel zien in Duitsland en ook hoger dan in Nederland en Frankrijk. Enkel UK en Italië hebben op dit ogenblik hogere forward elektriciteitsprijzen dan België. Dit betekent dat iedereen die nu nog prijzen moet vastleggen voor volgend jaar een stuk meer betaalt. En ook hier moet je die forward prijs vooral als een verzekeringspremie zien. Indien we de winter beter doorkomen dan we dachten, dan zouden de spotmarkten wel eens flink onder die 50 euro per MWh kunnen handelen. Deze situatie toont nogmaals het belang aan van een goede energie inkoop strategie. Met een goed gedefinieerde strategie weet je precies hoe je op dergelijke situaties moet anticiperen en reageren.

Ook al doet het tekort zich straks niet voor, toch kan je er niet omheen dat de huidige situatie op een falend energiebeleid wijst in ons land. Dit is zeker zo wanneer je de problematiek in een bredere internationale context plaatst, iets wat ook de laatste weken maar al te weinig gebeurt. Het tekort aan productie-capaciteit in België doet zich voor in de context van een Noord-Europees overschot. De grote Europese stroombedrijven klagen op dit ogenblik vooral over het feit dat er te veel is geïnvesteerd. Dit maakt elke verklaring van het Belgisch probleem die veralgemeent zinloos. Professor Albrecht bijvoorbeeld, beweert dat een tekort aan investeringen in klassieke fossiele centrales onvermijdelijk is in een vrije energiemarkt waarin hernieuwbare energie wordt gesubsidieerd (zie hier). Dan luidt de vraag: waarom is er dan in Duitsland en Nederland wel geïnvesteerd? De vraag naar het waarom van de huidige situatie in België luidt dan ook best: “wat heeft België verkeerd gedaan waardoor de steenkool- en gascentrales in de omliggende landen en niet bij ons zijn gebouwd?”

 

Als ze deze vraag al durven stellen, dan beantwoorden politici ze vooral door naar elkaar te schieten. Politici die aan de nieuwe regering bouwen, schuiven de schuld van zich af naar de vorige regeringen. Politici die voordien het energiebeleid maakten proberen de handen in onschuld te wassen. Dat helpt ons natuurlijk niet veel vooruit. Feit is dat de Belgische politiek in de afgelopen vijftien jaar heeft gefaald in het voeren van een consequent energiebeleid. Op alle vlakken is er al te veel koud en warm tegelijkertijd geblazen. En met een grote diversiteit aan energieministers, omwille van de versnippering van bevoegdheden en vele regeringswissels, was er ook weinig coherentie. De volgende factoren in het bijzonder hadden een belangrijke bijdrage tot de huidige situatie:

 

  1. De oorlog die een aantal politici hebben gevoerd met eerst Electrabel en vervolgens GdF-Suez, waardoor onze grootste stroomproducent alle goesting om te investeren in zijn Belgisch productie-apparaat is verloren.
  2. Ondanks deze oorlog is de Belgische overheid er niet in geslaagd om de dominante positie van GdF-Suez echt te doorbreken. Daardoor was er sprake van grote koudwatervrees bij buitenlandse producenten om in België te investeren. Zoals een directeur van een buitenlandse energieleverancier het ooit tegen me zei: “De regering klopt zich op de borst omdat ze het aandeel van Electrabel in de productie van 90% naar 75% laten dalen. Voor mijn moederhuis is dat nog altijd een heel dominante positie en een rem op de zin om in België te investeren.”
  3. Dit probleem is aangewakkerd door het flip-flop beleid inzake de kernuitstap. Zonder zekerheid over de hoeveelheid (qua marginale kost goedkope) nucleaire productie waarmee je moet concurreren, is een investering in grootschalige stroomproductie uiteraard zeer riskant.
  4. Zelfs wanneer er al zin was om in België te investeren, is die volledig gesmoord in byzantijnse vergunningsprocedures. Zonder vergunningsproblemen had E-On een grote steenkoolcentrale gebouwd in Antwerpen, die goed van pas had kunnen komen volgende winter. Federaal minister Magnette had deze centrale een productievergunning gegeven, Vlaams minister Schauvlieghe weigerde de milieuvergunning. Een mooi voorbeeld van het totaal ontbreken van een gecoördineerd beleid. Het niet-bouwen van elektriciteitscentrales, van oplossingen voor het mobiliteitsprobleem of zelfs voetbalstadions maakt duidelijk dat het in dit land zeer moeilijk is geworden om grootschalige infrastructuurwerken vergund te krijgen. Daar moeten we ons toch vragen bij stellen.
  5. De vrijmaking van onze stroommarkt is onvoltooid. De overheid heeft zich enorm gefocust op de retailmarkt en weinig op de groothandelsmarkt. Zo is het financieel verzekeren van prijzen in de futuresmarkten nog altijd pover in vergelijking met andere landen. We hebben geen peakload en maar een beperkt aantal kwartaals- en maandenproducten beschikbaar op de Belgische futuresmarkt en de liquiditeit blijft laag. Wie een grote centrale bouwt wil goede hedgingmogelijkheden in een liquide groothandelsmarkt. Die hebben we dus niet in België.

 

De situatie die we nu kennen is dus eerder te wijten aan te weinig eerder dan te veel vrije markt. Het voorbeeld van omliggende landen toont aan dat een coherent energiemarktbeleid wel degelijk tot een positief investeringsklimaat kan leiden. Wat in vijftien jaar fout ging, krijgen we natuurlijk niet op een paar maanden tijd hersteld. Dit maakt de grootschalige verklaringen van de laatste dagen dan ook nutteloos. Johan Vandelanottes voorstel om kabels naar de omliggende landen leggen is een zeer goed idee. Zie hier. Maar de reeds geplande en vergunde kabel naar Duitsland bijvoorbeeld laat nog tot in 2019 op zich wachten, voor een kabel naar de Clauscentrale in Maasbracht moeten bij mijn weten de vergunningsprocedures nog opgestart worden. Ook de NVA-idee van een nieuwe kerncentrale is al even weinig een oplossing op korte termijn. Recente ervaring in Finland en Frankrijk heeft aangetoond dat tien jaar een minimum is om van de tekentafel tot productie te komen.

 

Bovendien lijkt nieuwe kernenergie nu ook niet zo’n goede idee, zeker niet in het licht van de huidige problematiek in Doel en Tihange. Proponenten van kerncentrales hebben altijd volgehouden dat deze betrouwbare, veilige en goedkope energie oplevert. De drie stellingen kan je in twijfel trekken.

 

  1. Zoals we op dit ogenblik in België merken is de betrouwbaarheid relatief. Door haar grootschaligheid maakt kernenergie onze globale energievoorziening net heel kwetsbaar. Een letterlijk klein probleem ter grootte van haarscheurtjes brengt onze hele energievoorziening in gevaar. Wanneer je de stroomproductie verdeelt over een groter aantal kleinere productie-installaties die verschillende technologieën gebruiken, ben je minder kwetsbaar.

 

  1. Net zoals Fukushima tonen de haarscheurtjes ook aan dat we qua veiligheid van kerncentrales niet altijd zo slim zijn als we denken. De veiligheid van kernenergie is altijd gepropageerd op basis van de lage kans op een ongeluk, wat op zich al een redeneerfout is (risico is namelijk de kans dat iets zich voordoet maal de ernst van de gevolgen, in het geval van kernergie maakt een zeer hoge ernst-factor de lage kansfactor ongedaan). Maar na Fukushima lieten geleerden weten dat de kans op een nucleair incident blijkbaar groter was dan tot dan toe was berekend. Onze kansrekening is dus niet zo robuust. Benieuwd met hoeveel de risicofactor gaat verhogen wanneer het haarscheurtjes-probleem terdege onderzocht is.

 

  1. En tenslotte is kernenergie helemaal niet zo goedkoop als velen beweren. De variabele productiekosten zijn inderdaad heel laag, wat hun marginale kost laag houdt. Maar kernenergie vraagt zo’n hoge investeringen dat energiebedrijven die maar willen maken mits flinke subsidies. De vaste kosten zijn immens. NVA zou er goed aan doen om eens naar het voorbeeld van de UK te kijken. EdF wil maar bouwen in de UK mits een gegarandeerde elektriciteitprijs van 92,5 pond per MWh gedurende 35 jaar. Dat is een pak meer dan wat we tegenwoordig in Vlaanderen aan subsidies betalen voor windmolens en zonnepanelen. Voor de 17 miljard pond die de UK wil geven aan een nieuwe kerncentrale kunnen ze een pak hernieuwbare energie en kabels naar de omliggende landen bouwen. Zeg me dus nooit meer dat kernenergie goedkoop is. Net zoals de regering in London zal ook NVA merken dat wij voor een nieuwe kerncentrale met flink veel subisidiegeld over de brug moeten komen. Is dat verstandig besteden van overheidsgeld wanneer de technologie minder veilig en betrouwbaar is?

 

Wat kunnen politici dan wel doen? Zij staan voor een zeer groot dilemma. Elke poging om als ingrijpende overheid de productie-capaciteit te verhogen, zal zich vertalen in subsidies die uiteindelijk bij de burger en/of stroomverbruiker terechtkomen. Denk maar aan de capaciteitsvergoedingen voor gasgestookte centrales. Is dat geld verstandig besteed wanneer er in de bredere Europese markt sprake is van overschotten aan stroomproductie? De keuze voor nieuwe kabels naar die overtollige MWh’en in de omliggende landen is dan ook economisch de beste. Voor een oplossing op middellange en lange termijn lijkt het me dan ook onontbeerlijk dat we nadenken over hoe we het vergunnen en bouwen van deze kabels kunnen versnellen. Moet het echt tot in 2019 duren voor die kabel naar Duitsland klaar is?

 

Nieuwe kabels leggen betekent echter dat we ons voor onze energiebevoorrading sterk afhankelijk maken van Europese solidariteit. En met name in het energiebeleid toont Europa zich daar niet altijd van zijn sterkste kant, waardoor een oproep tot meer eigen productie begrijpelijk is. Als we dus toch inzetten op meer inlandse stroomproductie dan lijkt het mij goed om vooral kleinschalige productie te stimuleren. We zouden bijvoorbeeld kunnen overwegen om de subsidie van wind, zon en WKK minder scherp terug te schroeven dan gepland. Investeringen in deze technologieën kunnen in kortere tijd gerealiseerd worden, de MWh’en die ze produceren dragen bij tot een verlaging van de commodityprijs en het behalen van de klimaatdoelstellingen. Ervaring in Nederland heeft aangetoond dat de WKK-capaciteit in de tuinbouwsector voor een mooi potentieel aan flexibele stroomproductie kan zorgen, wat de problemen van beschikbaarheid van hernieuwbare energie deels kan oplossen.

 

Over subsidies aan hiernieuwbare energie en WKK beslissen de gewesten, dus is eindelijk eens een coördinatie over de verschillende beleidsniveaus heen aangewezen. We kunnen alleen maar hopen dat de urgentie van de huidige situatie er toe leidt dat de nieuwe regering plaats maakt voor een energie-minister met daadkracht en een duidelijke bevoegdheid tot coördinatie van de gewestelijke initiatieven. Nationalistische gevoelens mogen dit niet in de weg staan. Onze markt is de Belgische markt en het probleem van de energievoorziening treft alle Belgen. Omdat de kabels erover heen lopen, zal een probleem met een stroomtekort niet aan de taalgrens stoppen.

 

Ondertussen is het voor komende winter “met de billen dicht”. Hopen op mild weer en/of onverhoopte flexibiliteiten in het systeem. De regering in lopende zaken heeft terecht aangegeven dat er in de afgelopen jaren wel degelijk één en ander is gebeurd om de flexibiliteit te verhogen door maatregelen te nemen inzake reserve productie-capaciteit, afschakelbaarheid van bedrijven en een noodplan. Het zou goed zijn dat politici nu kijken of er op korte termijn iets kan gebeuren om de mogelijkheden van deze maatregelen verder te maximaliseren. Zou het geen mooi gebaar zijn naar de Belgische burger dat de politici van de zittende en de zich vormende regering daarvoor samenwerken? De overheid moet ook duidelijk met de burger communiceren over het noodplan. Op die manier kunnen burgers en bedrijven zich voorbereiden. Inzake energiebeleid zijn er nu al lang genoeg politieke spelletjes gespeeld. Met een nakend stroomtekort is het tijd dat de politiek zich eens van zijn meest daadkrachtige kant toont.

 

E&C’s voorstellen voor het oplossen van het Belgische stroomprobleem zijn dus:

 

Op korte termijn (winter 2014 – 2015)
  • Kijken of de maatregelen inzake reservecapaciteit en afschakelbaarheid nog verder benut kunnen worden
  • Duidelijk communiceren over het noodplan
Op middellange termijn (winters 2015 – 2020)
  • Inzetten op kleinschalige productie door de subsidies van groen & WKK niet te snel terug te schroeven
  • Nagaan of de bouw van extra interconnectie-capaciteit met Duitsland en Nederland niet kan versneld worden
  • Onvolkomenheden inzake de werking van de Belgische groothandelsmarkt voor stroom wegwerken
Op lange termijn (na 2020)
  • In samenwerking met alle beleidsniveaus een strategisch plan voor het energiebeleid uitwerken dat België opnieuw aantrekkelijk maakt voor investeringen in productie-capaciteit
  • Het beleid inzake vergunningen van grootschalige projecten hervormen
  • Blijvend inzetten op energie-efficiëntie, daling van de vraag

 

End-consumers: beware of capacity payments

As of 2015, the UK will be the first European country to launch a capacity mechanism that aims at rewarding power plants for the MW’s they can produce. Similar plans for paying for MW’s are developed in other countries, including Belgium and Germany. We believe that there are serious reasons for concern as far as the end consumers are concerned because:

  1. The cost of paying for capacity will very likely be passed through to the end consumers, which are already suffering from excessively high power costs due to the sharp increases of the non-commodity part of the bill.
  2. On top of that, such capacity payments might be an expensive solution for a problem that doesn’t exist.

 

Why have capacity payments disappeared from energy pricing after liberalization?

Those among you that have been buying energy long enough to remember the regulated markets, will know that these prices contained important capacity components. The regulated tariffs paid for all elements of power supply: production, the supply itself and the grid utilization. As these tariffs were based on a dual structure of euro’s per kW (of capacity) and euro’s per MWh (of consumption), the single, monopolist utility received money (for the capacity payments) even when the consumption was very low.

When markets were liberalized, the different utility functions were split up. Grid utilization remained a (regionally) monopolistic market and continued to receive money based on a regulated tariff with the dual kW and MWh structure. That’s quite logical. Grid companies have high Capex and fixed costs, due to the high investments that are necessary for building the grids. A grid tariff with a high capacity component means that the grid companies continue to enjoy stable income, even when the number of MWh’s travelling over their infrastructure is going down sharply. The capacity-based payments are therefore creating a stable investment climate. This is precisely what the monopolistic utility deal is all about. The government gives the utility the certainty of clientele (the monopoly) and of stable income (fees independent of the consumption). The counter-side of that deal is the fact that the monopolistic utility is regulated. The government determines the tariffs and can make sure that this doesn’t lead to excessive profit-making by the monopolistic utilities.

The liberalization was all about introducing competition in the production and supply functions of the utilities, the so-called commodity part of the energy bill. Interestingly, the capacity components all but disappeared from commodity pricing. The whole market organized itself on a purely “per MWh” basis.

As far as the production or wholesale market is concerned, the powerful marginal cost pricing mechanism was introduced. Marginal cost pricing basically comes down to the following:

  • Let’s say that on a given hour, all the power stations within an electrical system (e.g. the Belgian market), can produce 12 million kW of capacity. (For simplicity’s sake, I’m disregarding the impact of cross-border trading.)
  • You can draw up for that hour a so-called “merit order” by ranking the power stations (and the KW’s that they can produce) according to their marginal cost, the cost that the power plant needs to make to produce the extra MWh. All fixed costs, such as Capex, are obviously excluded from marginal cost, as they have been made already. In the case of power plants, marginal cost is almost exclusively fuel cost, regardless of whether you produce the MWh or not. As a merit order goes from small to large, it will start with renewable energies, that have zero fuel costs, go on to the nuclear power stations, with their low fuel costs, and then, at the far end of the curve coal-fired and/or gas-fired power stations, depending on the relative cost of coal and gas at the moment. (For simplicity’s sake, I’m disregarding the impact of carbon prices on marginal cost pricing here. I’m also disregarding oil-fired power stations as they have become quite rare.)
  • Let’s say that during that hour the demand for power, what all consumers together need, is 10 million kW.
  • If we look back at our merit order now, we can draw a line, passing vertically through the curve exactly at 10 million kW.
  • Now let’s say that the power station that – according to the merit order – can produce that 10 millionth kW, is a gas-fired power station with a 50% efficiency, and the natural gas price at that moment is 25 euro per MWh. This means that this marginal power station has a marginal cost of 50 euro per MWh as you need 2 MWh’s of gas to produce 1 MWh of electricity.
  • Now here comes the nice thing. Let’s say that the market is willing to pay 50 euro per MWh for supply of electricity at that moment, i.e. everybody pays 50 euro per MWh for each of the 10.000 MWh delivered during that hour. This means that every power station on the merit order before the marginal power station will make a profit and that the marginal power station itself is break-even. In this case, the supply will exactly match the demand. If the market wants to pay only 49 euro per MWh, then the marginal power station will refuse to supply. A shortage occurs, pushing prices up until you reach the equilibrium.
  • If you repeat this search for the equilibrium at the marginal cost of the marginal plant for every hour, than you can make sure that no power station ever has to make a loss on variable cost, every producer is always sure that he has a positive cash-flow with more money coming in from the electricity sales than money flowing out for buying fuel.
  • For those power stations to the left side of the marginal power station on the merit order, these positive cash-flows are the money that they have available for covering their fixed costs.

Marginal cost pricing

Figure 1: Marginal cost pricing for power supply

The exact size of the marginal cost is depending on a variety of parameters:

  • The demand itself. In hours of high demand, the price will be higher than in hours of low demand.
  • The composition of the merit order. Expansion of the overall capacity of power stations with low variable cost will cause marginal costs to go down.
  • The fuel costs. If gas and/or coal prices go down, marginal costs go down.

Marginal cost economics have installed themselves in wholesale electricity markets (both spot and forward) in a way that I consider to be of almost aesthetic beauty (I am aware how geeky this sounds). I’ll come back on that in a later blog article. One of the reasons that power markets have so readily embraced marginal cost economics is the overall cost structure of power plants. In an almost perfect way, the power plants with the lowest variable costs have the highest fixed costs and vice versa. Being on the left side of the merit order, high investment-cost power plants like renewables or nuclear, will always be “in the money”, meaning that they can produce and turn in positive cash-flow whenever they are capable (unless their combined supply is larger than the demand, something we’ve seen recently in Germany, resulting in negative spot prices). As these are the power plants with the highest capex, it also means that they have most euro’s available for paying back the investments. On the other side of the merit order, gas-fired power stations might have less hours during which they turn in money, but then they also have the lowest investment costs.

In the retail markets, payments of the commodity (or the deregulated) part of the electricity bill is in almost every country of Europe on an exclusively per MWh basis. Some incumbent suppliers have continued to include capacity components in their commodity pricing, but most have now given up. Either they buy the electricity on a per MWh basis in the wholesale market. Or they have an opportunity cost in euros per MWh when they source directly from their production – they could have sold it in the wholesale market at a price in euro per MWh. Therefore, selling it on to their retail market customers in euro per MWh is the simplest, most transparent and lowest risk option, which explains why it has been widely adopted.

 

Why are governments thinking about introducing the capacity payments again?

Marginal cost pricing is by its essence more volatile than pricing according to tariffs that contain fixed cost elements such as capacity components. They will drop lower and rise higher. Volatility makes everyone nervous, including governments. Let’s explain this with the example of Germany. In the last three years, the wholesale prices of electricity in Germany have dropped to a historically low level due to a combination of factors:

  1. Like in most countries, power demand in Germany has dropped, meaning that the vertical line indicating the marginal power plant has moved to the left, causing plants on the right side of the curve to be ‘out of the money’ during many hours.
  2. Germany has seen an exponential expansion of its renewable power production. As all of these are on the left side of the curve, they have pushed the coal- and gas-fired power stations to the right, making it more difficult for them to be ‘in the money’.
  3. After the announcement of a nuclear phase-out in 2000, utilities in Germany and surrounding countries like the Netherlands have launched an intensive investment campaign in coal- and gas-fired power stations, due to which it is now quite crowded on the right side of the curve.
  4. Low coal and carbon prices have made the marginal cost price of coal-fired power stations drop dramatically, dragging the power price along with it.

price reduction

Fig. 2: German power cost reduction explained with marginal cost economics

Utilities are obviously complaining. They are not only seeing how assets are being pushed out of the money, the lower cash-flows on the assets in the money are also weighing on their profitability. The big losers are the gas-fired power stations. The combination of low coal, carbon and marginal prices with relatively high gas prices has pushed them far out of the money. These utilities are therefore lobbying actively for the installation of a capacity market or some other form of subsidizing power stations so that they continue to receive money even when they can’t sell their MWh’s because they are out of the money. Peter Terium, the CEO of large German utility RWE, for example, defends the introduction of a capacity markets with the words: “you don’t pay the firemen only when there is a fire” (Handelsblatt, 4th of March 2014).

The German Energy Minister Sigmar Gabriel seems to be hesitating whether he should give in to these calls for the creation of a capacity market or not. He calls for regional solutions rather than rolling it out on a national scale. Surprisingly, the UK, which was the first country to fully embrace energy market liberalization, is now also the first country heading for the introduction of a capacity market. The problem of the UK market is different from the problem in Germany. In the UK, policies to switch from coal- to gas-fired power generation, a nuclear phase-out and hesitant renewable energy policies have resulted in a production park with a very large share of gas-fired power generation (40%). You simply have a crowded right side of the curve of your merit order, meaning that too many power stations are out-of-the-money or just very slightly in-the-money. And as gas-fired power stations are (or were?) about the only ones for which it is (or was?) possible to obtain a permit, the government sees a need to intervene.

I find it very logical that energy companies are not happy with a situation of low profitability in which they struggle to pay back their investments. And giving its track record, I am not surprised that utilities call for the governments to help, to subsidize. Because in the end, whatever shape it takes, capacity payments are a subsidy. It’s the government organizing an extra source of income for the utilities. You can call it a capacity market, but it will never be a real or natural market. With a natural market I mean a market where an actual need for goods or services is economically arranged. As far as power is concerned, this natural market is the euro per MWh market. Just like that other artificial market, the carbon market, the capacity market will only exist because the government has decided that it should exist. If the government decides to cancel the capacity market, it will cease to exist, and we will still be having power. If the natural euro per MWh market for power ceases to exist tomorrow, then our lights will go out.

Now why have politicians been convinced of the need to create this artificial market for capacity? Even if there is no natural need for it, does it cater for some deeper need that markets cannot detect? The argument in favor of capacity payments which is used by utilities and politicians is that the market in euro per MWh isn’t giving enough incentives to invest in power plant capacity in a way that safeguards long term security of supply. Utilities naturally exaggerate this risk, using the powerful political argument of ‘the lights shutting down’. I don’t agree with that point of view, first of all because of personal experience. I’m working in the energy sector for 15 years and during that whole period I have heard about these threats of running out of power production capacity. The lights are still burning … Germany now produces large amounts of renewable energy. Industry insiders have always said that the intermittency issues of renewables would cause problems. Well, Germany has an extremely low outage rate of 15 minutes per power consumer per year, one of the lowest figures in the world. Power supply systems have proven to be much more flexible and capable of adapting to changing circumstances than most analysts estimate. Utilities, analysts and politicians acknowledge that there is no problem at this moment. It would be very strange if they did so, considering that the low commodity prices for electricity at this moment have a solid basis in excess supply capacities. So, what the capacity payments are supposed to solve is a problem of the future. I was hesitating to write ‘potential problem’ here. But apparently, the proponents of capacity markets are not. They make powerful projections about a future in which a power supply shortage is certain to occur. That’s forecasting, and I’m always very skeptical of that, especially when it’s done by someone who has a conflict of interest, which is clearly the case for an industry representative lobbying to get an extra source of income. In particular, I think that in this case the forecasts of looming shortages are colored by a combination of neglect and exaggeration of the following aspects:

  1. The overall decline in power demand is often disregarded or minimized. Industry representatives link it too exclusively to the economic crisis. They assume (or hope?) that demand for power will start growing again as soon as the economic crisis is over. In doing so, they neglect more fundamental drivers of power demand decline such as delocalization of industry and most importantly the effects of climate policy. Just have a look at the reductions in capacity (Watts) of the lamps that you buy, and you will understand that consumption might nog just start growing again in a phase of economic expansion.
  2. Analysis of the long term capacity issues is too often limited to one country, neglecting the fact that cross-border trading can deliver a very important contribution to their solution. Shutting down gas-fired power stations in Germany might seem like a very big problem, but it is less so if you take into account the excess gas-fired power production capacities across the border in the Netherlands. EU Commissioner Oettinger is also against capacity payments and emphasizes the cross-border aspect. See for example the following article in the Frankfurter Algemeine. As far as the UK is concerned, for example, it is very curious that not more attention is paid to the idea of expanding the transmission lines across the Channel to continental Europe with its excess capacities and low prices.
  3. Many of the assumptions put forward by the proponents of capacity payments are simply not materializing. With more renewable energy on the grid, peakload – baseload spread would widen and spot markets would become excessively volatile. I really don’t see any proof of that. The system seems to be capable of absorbing much more variability than those who have designed and built in could have ever imagined. Still, many analysts continue to put these assumptions forward as a given and are followed in that by politicians, without anyone doing an attempt at providing empirical evidence.
  4. When utilities announce that they will shut down gas-fired power plants, they don’t always mean that these plants are taken offline definitively. There will be just a few cases in which the plants are actually completely shut down, with all the equipment dismantled. In many other cases, the utility will have the possibility of more or less rapidly re-opening the plant when prices (in euro’s per MWh) increase. Now, if we are really heading for a shortage of production, this increase is exactly what should happen. So, we might end up with a shortage of warm kW’s, power stations that are ready to start producing at any moment. That could cause prices to go up at certain moments. That would create an incentive for the utilities to warm up these kW’s again, something which might happen quite rapidly.
  5. Analysis of the market factors driving this situation is based on a static view of markets. In the last three years, the coal, natural gas, carbon price combination has been highly unfavorable for gas-fired power stations. It’s logical that utilities consider shutting down these ‘out-of-the-money’ plants. But when the gas-prices fall, these plants might get ‘in-the-money’ again quite rapidly. As a matter of fact, at this moment gas prices have dropped considerably. The spot price for gas has dropped below 16 euro’s per MWh recently, meaning that high-efficiency gas-fired power stations are turning in money when the electricity prices are in the lower thirties. Owners of gas-fired power stations should have been making reasonable amounts of money recently. Are they telling this to the politicians when they are lobbying for capacity payments?

 

What will capacity payments mean for the end consumers?

Very simple: the price of electricity will go up. The capacity payments will be compensated by adding an extra cost item to end consumers’ electricity bills. Some argue that this will be compensated by lower commodity (euro per MWh) prices. I don’t think so. If the capacity payments are handed out to existing power stations, nothing changes to the merit order curve. The power stations will still switch on and off at the same marginal prices as before, so nothing will change to the market price. The only thing that will happen is that utilities will benefit from a source of income that they didn’t have before. The capacity payments will simply be a transfer of cash from power consumers to power producers. Can such a transfer be justified at this moment in our economy? Yes, utilities are turning in less cash than before. But should their customers be victimized for that?

I can understand that for utilities the current situation isn’t nice. But they are not the first sector that goes through a phase of reduced profitability due to over-investment. That is the root cause of currently low prices. Utilities have over-invested in coal and gas-fired power capacity based on forecasts of a supply shortage that didn’t materialize. They have also invested a lot of money in renewable energy, raking in the subsidies that governments were giving for that. The marginal cost pricing made them win massive windfall profits on left of the curve assets in the 2005 – 2008 period when higher coal and gas prices caused marginal costs to go up to levels three times as high as what we currently see. Should the government step in immediately now that the wheel has spun around to the other side? Should they make the end consumer pay for that? Or should we rather say to the utility sector that it should accept normal entrepreneurial risk and don’t ask for a subsidy when their forecasts don’t materialize? Seeing assets turning in less money than expected is daily reality for businessmen in many different sectors. Why should the energy sector be an exception and get support from the government as soon as the weather turns bad on their investments? I see clients of mine in the food industry building large factories that in the best case will turn in just a few percentages of margin and assuming large risks in the soft commodity markets. They don’t ask for subsidies when they have a bad year.

For an end consumer, the conclusion is very simple. Mobilize your lobbying organization to avoid the introduction of capacity payments. At the same time, prepare yourself for its introduction by investigating you possibilities for reducing its impact with load management.

 

What are the alternatives?

From the above, it might be clear that as a policy option, the introduction of capacity payments should be carefully considered. Especially since I believe that there are alternatives:

  1. The first one is very simple: just let the market work. If there is a shortage of (gas-fired) power production capacity, prices in those hours when gas-fired power stations are needed will rise high, creating an incentive for investment in gas-fired power capacity. Yes, the different speed of changes in demand and changes in supply will create bust and boom cycles in the prices. But that’s not unlike many other businesses.
  2. I totally agree with Mr. Oettinger that capacity issues need to be addressed on a European and not on a country-by-country scale. Enlarging the overall electrical system for which the supply and demand need to be balanced can seriously reduce the overall shortage. Consumption peaks will not occur at the same time in the different countries. And enlarging the ‘copper plate’ will also lead to more diversity in sources of supply, leading to a more balanced merit order curve and hence less problems with the marginal cost economics. If anything, the current issues should be a strong incentive to invest in extensions of cross-border connections. Belgium in particular should work on this instead of a capacity payment mechanism.
  3. When a shortage of gas-fired power station occurs, prices during the hours of peak consumption will rise, creating an incentive for consumers to reduce consumption during these hours. Again, let the market work. Addressing a supply-demand problem by working on the demand side will always be less expensive than working on the supply side. If the government wants to do anything, it could give further support to demand side management by creating incentives for large consumers to switch off capacity at peak moments through the regulated grid fees.
  4. As the example of the UK shows, the biggest issues occur when a production park becomes unbalanced. Well-diversified merit orders are the best guarantee for a healthy supply – demand balance. If the government wants to intervene, it could use its classical legislative instruments such as permit regulations to safeguard the diversity of the production park. Nowadays, permit procedures often take years, meaning that valuable time is lost in the adaptation of the supply side to changes in the market dynamics. Governments should do all they can to avoid this loss of time. In the case of Belgium, for example, I am convinced that the horribly slow permit procedures and the flip-flopping in the overall energy police have made a larger contribution to the current problem of looming capacity shortages than market deficiencies.
  5. If after all these previous measures there is still a shortage of power capacity, ‘reserve capacity’ support should be in the shape of support to grid companies for keeping gas-fired power stations open for absolute peak hours.

Here’s my plan for an alternative to the introduction of capacity payments, a more cost-efficient and fairer way of reducing capacity shortage, avoiding unnecessary increases of energy prices for the consumers:

  1. Continue the climate policy measures aimed at reducing consumption.
  2. Expand cross-border capacities and stimulate cross-border trading initiatives such as market coupling.
  3. Continue to support renewable energy, especially now that its investment costs have dropped. Combined with the previous measure more capacity on the left side of the merit order curve can reduce the need for more capacity on the right side.
  4. Support demand side management where it is realistic.

The end result could be a market where we produce ever lower amounts of power in renewable power stations and in gas-fired power stations at peak moments. If the grid in which this electricity is balanced is large enough and there is a good cushion of demand side adaptations, I don’t think that this will result in the sort of price peaks and blackouts that energy industry representatives predict. Introduction of capacity payments should be the solution of last resort, not the first thing we should think about. I know that if we introduce them only when the supply shortages manifest themselves, it will take some time for the extra capacity to be built. But I would rather risk two or three years of high peak prices and short blackout periods than risk an unnecessary and massive shift of money from power consumers to producers for solving a problem that in the end never materialized. We shouldn’t lightly risk creating a massive subsidy scheme that could result in over-capacity of unneeded gas-fired power stations.

The gap between Belgian and German electricity prices

Belgian year ahead baseload power in the wholesale market is now more than 14 euro per MWh more expensive than German power. In the spot markets, prices since the beginning of this year have on average been 6,72 euro per MWh more expensive in Belgium compared to Germany. Two years ago the German price was still more expensive than power in Belgium. But then German power started to drop more rapidly. I see two main reasons for these cheap wholesale prices in Germany. First of all, the rapid expansion of renewable electricity in Germany has had an undisputed bearish effect on prices. On top of that, Germany is producing much more electricity from coal than Belgium. And as coal prices have declined, this has helped to push down wholesale power prices in Germany even further.

 

In the last three years, wholesale electricity prices across Europe (UK being the most notable exception) have generally been falling. Simple supply and demand economics are responsible for that. With pockets full of cash due to the windfall profits of high wholesale prices in the 2005 – 2008 period and inspired by reports of a looming supply shortage, European energy companies engaged in an intensive investment campaign in new production capacity. The Netherlands, for example, has expanded its power production capacity by 8.846 MW in the 2009 to 2014 period, and most of that is conventional gas-fired and even coal-fired capacity (Source: Tennet). The supply capacity boom was further enhanced by the fact that renewable energy expanded much more rapidly than anyone had ever expected, specifically in Germany. This unexpectedly rapid expansion was provoked by generous subsidies and solidified by rapidly dropping technology costs. At the same time, the economic crisis and successful climate policies caused an electricity demand decline rather than the expected increase. The result is a global European market of overcapacity for power production.

 

The stupefying thing, as far as Belgium is concerned, is that amid all this excess supply it has managed to put itself in the position of a country with a supply shortage. This and only this is the explanation for the price rift between Belgium and its surrounding countries. The spread between Belgian and German wholesale prices widened recently due to the outage of two nuclear power stations in Belgium on security concerns. But this might just give policymakers a too easy excuse for the current situation. In the past years, Belgian power production capacity has dropped. It is clear that Belgian energy policy has failed to create the conditions for attracting investments in capacity expansion. Germany has not failed in achieving that. And that’s why the wholesale prices in Germany are lower.

 

The main reason for this failure of Belgian energy policymaking has an institutional character. I don’t want to tire foreign readers of this article with the quagmires of Belgian politics, but still, the complexity of its institutions has contributed a lot to this policy failure. In the last decade, Belgium has had many different energy ministers from many different parties. Energy policy tends to be a heavily colored by ideology, so all these changes in ministers have caused multiple turnarounds and flip-flops. On top of that, in Belgium with its complicated structure, the responsibility for energy policy is spread over the federal and regional decision-making level. Even if the federal minister seems to have most impact on security of supply issues, important aspects such as renewable support mechanisms or authorization procedures are decided by their Flemish, Walloon and Brussels counterparts (yes, city-region Brussels has a separate energy policy). This institutional framework isn’t exactly beneficial for the creation of the consistent policy that you need to attract investments in energy infrastructure which are typically high capital cost investments with extended realization periods. Examples of these policy failures are:

 

  1. Belgian energy policymakers have often focused on fighting highly symbolic battles with incumbent supplier and producer Electrabel (now part of the GdF-Suez group). Despite the rhetoric, it took them a very long time to really do something about Electrabel’s dominant position, discouraging alternative suppliers to invest in Belgium.
  2. Belgium launched a nuclear phase-out policy and then renegotiated it, and renegotiated it and renegotiated it. This obviously created a lot of uncertainty and refrained energy companies from investing in large-scale fossil fuel-fired power production in Belgium.
  3. Belgium (i.e. the Flemish, Walloon and Brussels’ regions) launched ambitious, generous support schemes for renewable but then rapidly withdrew them as the cost of this for the end consumer became clear.
  4. Politicians kept dreaming about energy independence and only realized the importance of increasing cross-border capacity when the security problems with the two plants surfaced. For example, there still is no cross-border capacity with Germany, it is only planned to be operational in 2019. This is obviously especially painful at this moment when German wholesale power is so much cheaper.

 

At the end of this month, the Belgians go to cast votes not only for their European representatives but also for their federal and regional parliaments. Many are hopeful that after these elections, having a few years in a row without new elections will create the sort of stable political climate necessary to put en route necessary reforms. Let’s hope we can also see the sort of reforms of energy policy necessary to normalize energy pricing. Now that investment costs in renewable energy have dropped a lot, it should be carefully considered whether some extra support for renewable couldn’t be a cheap and climate-friendly part of the solution. And there is no doubt that in a context of supply shortage with excess supply capacities in neighboring countries, rapid investment in cross-border capacity is an inevitable option. With the current price differential between Belgian and German power in view, we highly recommend to speed up the Alegro project that connects both markets. Do we really need five more years to build that line? Supporting gas-fired power stations with capacity payments is a bad idea. It will cause extra cost as these subsidies find their way to the end consumers’ bills. And with their high marginal costs, I can’t see how these gas-fired MWh’s will reduce the commodity price.

 

With the price rift peaking, industry representatives were very rapid to complain about the disadvantage it creates for Belgian companies competing with German companies. We obviously have to highlight here that the wholesale power price is only part of the overall electricity bills. On top of that, a consumer pays a retail margin to its supplier, but these margins are minimal in both countries, so they are not creating much difference. The main difference can be found in the grid fees and taxes. These are much higher in Germany than in Belgium, but energy-intensive consumers can benefit from large reductions on these high grid fees and taxes. The situation is therefore as follows. If you’re a German company for whom electricity cost is more than 14% of its added value and with more than 7.000 hours of load duration, you will pay almost nothing for grid fees and taxes. But many German companies that don’t meet only one or none of these criteria pay a lot more for consuming power than any Belgian company. Nevertheless, coming on top of important differences in grid fees and taxes, large price differentials in wholesale prices are creating unnecessary competitive disadvantages within Europe. However, we have to consider that today’s winners may be tomorrow’s winners. Belgian industry representatives pleaded for a long time to increase cross-border capacity on the French border and not on the Dutch and/or German borders. This wrong choice of border is now contributing to the competitiveness problem.

How will we pay the green energy bill?

The world is going through a green energy revolution. It started in Europe where governments in countries like Germany, Spain, Denmark or Belgium set up ambitious subsidy programs for renewable energy more than a decade ago. Technologies like wind and solar started to grow at rates that nobody had dared to anticipate at the onset. In the last three years 70% of all the new power production capacity installed in Europe was renewable. This rapid development has driven down sharply the technology cost. Solar and onshore wind have now reached grid parity, meaning that an investor no longer needs subsidies to have a reasonable payback on his investment on a windmill or solar panel. The savings he makes by not having to buy the electricity from the grid is sufficient for him to win back the money invested in a reasonable timeframe.

 

This grid parity may have important consequences. It could mean that the green energy revolution has become unstoppable. Home owners might decide always to put solar panels on their rooftops to cash in on the savings on the power bills. This could push the amount of solar energy available beyond the limits of what is needed or can be distributed over the grid. Grid parity could also mean that solar and wind develop more rapidly in countries that are less generous in handing out subsidies. We are indeed seeing that other countries are taking over from the usual European suspects in the top ten of renewable energy expansion. In US, for example, more than 99% of all the new power capacity installed in January was renewable.

 

However laudable this rapid development might be from an environmental point of view, the early adopters are currently suffering a serious hangover from their subsidy binge. In Germany or Belgium for example, early investors were guaranteed subsidies as high as 450 euro per MWh produced by solar panels for a period of twenty years. Germany has continued to compensate the grid companies that have to pay these subsidies by allowing them to pass through the cost to the end consumer. This has driven up the cost for the end consumer for green energy to unsustainably high levels: 62,4 euro per MWh (the wholesale value of the power itself is currently less than 36 euro per MWh). In Belgium, more particularly Flanders, the government has frozen grid fees, building up a liability for uncompensated green power subsidies of almost 2 billion euros, as my colleague Bart recently remarked. Similar problems can be observed in Spain where the government is facing a massive debt to energy companies for uncompensated renewables subsidies. The early adopter countries are now facing the massive question of how to pay back the green energy bill.

 

At least in Germany and Belgium, the problem is exacerbated by the fact that subsidies for renewable energy are passed through one on one in the bills of the end consumers. The subsidy schemes were created at the same moment that power markets were liberalized. In this mood, ‘market-based’ solutions were devised. Germany opted for a feed-in tariff system, obliging the grid companies to buy the green electricity at a pre-set price level, sell it at the market price and get immediate compensation for the differential between subsidy level and market price level in the shape of charge through payments by end consumers. In Belgium a system of tradable certificates was created. But as the governments of the different parts of Belgium failed to put the quota sufficiently high, grid companies had and have to buy excess certificates and are now demanding compensation for that in the shape of higher grid fees.

 

In Belgium, the chairman of the Green Party Wouter Van Besien has now uttered the idea of compensating the grid companies for excess green energy costs by pay-outs from the general budget instead of passing on the bill to the end consumer in the shape of higher grid fees. We could of course observe that this is a non-solution, as wherever the money comes from, it needs to be paid by the citizens in the end, whether that is as a taxpayer or as a power consumer. Nevertheless, I think it is an interesting idea. Energy has always been subsidized, just think about subsidies for nuclear power or coal which is then used to produce power. However, these nuclear or coal subsidies were not visible in the power consumer’s bill. Renewables are the first energy technology that is so visibly subsidized by passing subsidy costs through so directly. This nourishes the idea that renewable energy is very expensive, an idea which is particularly dangerous now that it has actually become that cheap. What we have to avoid by all cost is that the fatigue due to the problems with historical green power bills causes us to stop further development for renewable energy, especially now that it has become so much cheaper. Doing that would be like racing in a Tour de France stage in which you have already climbed four mountains and then abandon in the last 5 kilometers downhill.

 

If we pay (part of) the historic green energy bill from the general budget, we could also explore possibilities of reviewing the term over which we have to pay it back. In Germany CSU politician Ilse Aigner aired this idea of spreading the green energy bill over a longer period. She unfortunately described it as building up a debt for the future generations, which caused a rapid rebuttal of the idea by CSU President Horst Seehofer. It’s a pity, because it’s a good idea. The debt is already there, investors have been promised to receive subsidies over a twenty year period. Spreading it in time just means you take a decision over the time period over which you pay back that debt. Is it bad management to decide to go for a longer period?

 

I don’t even think the objection against spreading in time of inter-generational solidarity that some observers have uttered makes sense. The current generation has invested a lot in renewable energy. Why should it rapidly pay back that bill if the future generations will continue to benefit from the MWh’s that these windmills and solar panels are putting on the grid? And when the efforts of the current generation have driven down technology costs so that future generations will be able of building their own mills and panels at much lower cost?

 

In Germany, in Flanders and in Spain, solutions need to be found for a sustainable payback of the historical green energy cost. We need intelligent financial management solutions for this problem to make sure that the renewable investments can continue without hurting the current generation too much. And as my colleague Bart has rightfully commented on the situation in Flanders, stowing away the problem until after the next elections isn’t good management.

Germany’s grand coalition and the ‘Energiewende’

Last week, the SPD, CDU and CSU reached an agreement to set up a new government in Germany. The business world was looking at the program of this new government with fear. The conservative CDU/CSU have traded their pro-business but electorally nullified partner FDP for the socialist party SPD. Many feared that the changes in energy policy, for example, would mean extra costs for German business (see my previous blog article). I therefore read the energy part of the coalition contract with much interest. What happens in Germany is not only important for German business. The rapid transition towards renewable energy (Energiewende) has impacted energy markets all across Europe. So, what will the new government do to Germany’s (and Europe’s) Energiewende?

When the two big German political families make a government together, they call it a ‘Grand Coalition’. Not much than can be dubbed ‘grandiose’ in this coalition contract, however. In such a coalition of parties with very different ideologies, every piece of policy is the result of a carefully crafted compromise. That means that it’s often hard to find a clear line of policy. On the other hand, it also means that policies are often well balanced and don’t produce too much unwanted effects. This is very obvious in the energy policy of this new government. On energy, the coalition contract is often more clear in what it’s not saying, then in what it is saying. Many items seem to be open still for discussion and the text leaves many openings such as ‘we’ll only do that if it’s not producing adverse economic effects’. So anyone saying that he/she has a clear idea of the new German energy policy after reading these ten pages is clearly over-interpreting. Nevertheless, I’ll attempt to summarize what can be read:

1. On the sensitive subject of EEG, the feed-in tariffs paid to renewable power producers that are to be compensated by the EEG tax on consumer’s bills:

  • The government wants to move forward quickly on a restructured EEG law, planning to table a proposal by Easter 2014 and then having everything voted by summer.
  • The rate of further development will be slowed down, or at least brought under strict control. The share of renewable power production should not grow to more than 40 – 45% by 2025 and 55 – 60% by 2035.
  • EEG feed-in tariffs will be made decreasing over time.
  • Winners are picked, namely solar, off-shore wind, onshore wind in those locations that have favorable wind conditions and biomass projects using locally produced (waste) material.
  • As of 2018 an auctioning model will be introduced. As of 2014, a pilot project for such auctioning will be executed for 400 MW of solar. It will be interesting to see whether this could herald a new way of subsidizing renewable energy.
  • As of 2017 electricity from renewables is to be sold directly into the market and not through the grid operators.
  • The grid operator and/or the marketer of the electricity should get the possibility of switching off the capacity for up to 5% of the annual production.
  • It will be researched whether large producers of renewable electricity can be obliged to always produce a minimum quantity of energy.

The above could boil down to a complete overhaul of the German system of subsidizing renewable energy. But much remains to be researched, so it could still be watered down.

2.    On the reduction on EEG payments for energy-intensive consumers

The important thing is here that the text clearly states that the government wants to keep the reduction, albeit with some changes:

  • Companies will have to show that they really are subject to international competitive pressure to get the reduction. Does this mean that the government will make a list of sectors? Will it pick winners and losers?
  • It will no longer be sufficient to have an (ISO 500001) energy management system, companies will have to prove that they are effectively reducing their energy consumption.
  • Companies producing their own electricity will have to pay EEG. It is unclear how much and how this will be measured. Auto-producers would also have to pay a grid fee. This is clearly in contradiction with another ambition of the government contract, namely to promote production of electricity on-site with cogeneration units. It is the goal to have a 25% cogeneration share by 2020.

3.    On climate change

 

  • Germany sets a goal of reducing its carbon dioxide emissions by 40% in 2020 compared to 1990.
  • In one of the clearest passages of the coalition contract, it is stated that back-loading of 900 million emission rights should be a one-off operation. And despite paying lip service to emissions trading, the contract states that operations such as the back-loading should not be executed if they create disadvantages for the companies concerned. So, for those that had hoped that the new German government would support stricter allocations and higher prices for carbon, I’m not convinced that’s what the contract says.
  • The government wants to increase efforts in energy efficiency and draw up a national action plan for that, although it remains very vague what they mean with that, apart from having free energy audits for residential consumers.
  • If renewables produce most of the electricity, electrical heating will be promoted.

4.    Capacity payments

 

The government thinks that as of 2020 there will be a shortage of conventional (coal and gas-fired) power production to deal with the intermittency issues of renewable energy. Therefore it wants to support smart energy applications. But it also wants to give support to owners of fossil fuel-fired power stations to keep them open. I presume this will mean the handing out of capacity payments to keep unused power stations warm. Again, the text is very vague, but it’s important to follow up on this, as such capacity payments would mean the creation of a new cost that is to be passed through to end consumers.

5.    Grid infrastructure

  • The construction of new grid infrastructure will be coordinated with the further development of renewable energy production.
  • The grid and intermittency issues of large-scale renewable power production will also be countered by supporting the further development of a pan-European power grid. This is a wise decision that could have important impacts for surrounding markets.

6.    Natural gas

 

Is prominently present in the coalition contract by not being present. This means that the German government doesn’t see the necessity of developing the gas market. Oh yes, gas is mentioned once. Fracking for producing the German shale gas reserves will not be permitted as long as chemicals that are toxic for the environment are to be used.

7.    Other topics

 

  • The nuclear phase-out will be continued, the last German nuclear power station will shut down in 2022.
  • Storage of power, a.o. by power-to-gas conversion, will be studied and/or supported. The text is very vague on this topic.
  • The ability to act of the local utilities (the so-called ‘Stadtwerke’) will be a topic. Yes, that’s what the text says. No idea what it means. Will this government be the first one to realize that the disparity of the German energy sector is a cost-increasing problem and not a solution?

The new Merkel government’s energy policy might be anything from a serious transformation of the Energiewende to a continuation with small adaptations of the current policy. Immediately after the publication of the coalition contract, many observers questioned its financial solidity. This is certainly true for the energy policy part. Some of the topics could have severe cost-increasing effects. How does that match with the goal of keeping energy affordable? So it’s important to stay updated as the vague coalition contract text finds its way into legislation in the next months and years.

EU: don’t punish Germany for being best of class in renewable energy

The European Union wants to investigate whether the reductions on renewable energy contributions that Germany awards to its large industrial power consumers are in breach of competition rules. According to Handelsblatt, proceedings could start as early as the 18th of December. Worst case, the EU could indeed decide that these tax reductions are unpermitted aid for the German industry. But for many German companies, the amount of renewable energy contribution that they have to pay exceeds their EBITDA. Having to pay the full amount would most probably mean the end of steel, non-ferrous metals or paper production in Germany. And I dare not even think of what would happen if companies were obliged to pay back reductions received in the past years. In recent years, the excellent performance of the German industry has been the main economic power factor in Europe. Therefore, I believe (or hope?) that the EU is pragmatic enough not to take any rash decisions that cause the shutdown of German energy intensive industry. It looks like German and European politicians are working towards a compromise. However, inside Germany, politicians are also tabling proposals to curtail reductions on renewable energy contribution. Therefore, I would like to shed some light on this issue from our daily practice of supporting industrial consumers in buying energy in different European countries, including Germany.

The European Union has ambitious targets for the development of renewable energy, such as having 20% of its electricity produced from renewable sources by 2020. But the different Member States have developed their renewable policies at different paces. Germany has been a very enthusiastic renewable energy adept. Way back in 2000, Germany developed a policy of supporting green electricity by obliging its grid companies to buy power produced from renewable sources at legally set feed-in tariffs, the so-called ‘Erneuerbare Energien Gesetz’ or EEG. To spur the development of the renewable technologies, tariffs were set at high levels. Under the first EEG law, some solar panels received more than 500 euro per MWh in feed-in tariffs. Now, there are a lot of critical remarks that can be made about Germany’s green power policy. But one thing cannot be said, and that is, that it would be ineffective. Looking at BP’s data on power production, we can clearly see that Germany has outpaced the rest of Europe and the world in developing green electricity. 48% of Europe’s solar power capacity has been installed in (not particularly shiny) Germany. Runner-up in Europe and globally is Italy, with half as much solar capacity as the Germans. And even on a worldwide scale, 33% of all MW’s of installed panels is to be found in Germany.

Solar

Germany is also European champion in the development of wind energy, although its dominance in this sector is less outspoken. 30% of Europe’s windmill capacity is planted in German soil. On a worldwide scale, Germany has 11% (keep in mind that Germany has a little bit more than 1% of the world’s population), with only much larger countries such as the US and China having a larger windmill capacity installed.

Wind

Germany is also Europe’s champion in consumption of biomass, another renewable energy that has been heavily subsidized by the EEG laws. It consumes 9,4% of the world’s biofuels.

This rapid move towards more renewable energy production has been dubbed the ‘Energiewende’ in Germany. This word got a particular significance when Germany decided to revamp its nuclear phase-out policy in the wake of the Fukushima disaster. The country seems to be succeeding in replacing low-carbon emitting nuclear power stations by low-carbon renewable energy. It is now producing more than 25% of its power from renewable sources.

The Energiewende is also a policy of industrial reconversion. With their combination of excellent engineering skills and the economies of scales of the rapid expansion of internal demand, German companies specialized in renewable energy have made a sizeable contribution in the development of affordable solar, wind and other technology. Unfortunately for German consumers, these affordable panels or windmills are now ever more often produced in countries with lower labor costs such as China. But if you want to point out any piece of legislation that has contributed to lowering the cost of producing (and installing) renewable technologies, the EEG is a likely candidate.

All these developments haven’t come at zero cost. The grid companies pay the feed-in tariffs to the developers of renewable power projects in Germany. They resell that renewable power to the grid based on wholesale market prices. Because the feed-in tariffs are higher than these wholesale prices, the grid companies are making losses. They are compensated for these losses by funds collected by making end consumers pay a renewable energy contribution (EEG-Umlage). As the renewable power production has grown much more rapidly than anyone could suspect, this contribution has risen unexpectedly high: 62,4 euro per MWh as of the 1st of January 2014. This has caused the end consumer’s cost of electricity to rise above most other European countries (with Italy being the only exception). The graph below shows the power price in euro per MWh of a client of ours consuming 20 GWh of electricity in sites in four countries. It clearly shows that German power costs are much higher. A detailed analysis of the power bills shows that the high EEG costs are the main contributor to this problem.

Comparison

The German government has been aware of that problem and has chosen to implement a policy to protect its large energy-intensive consumers, the so-called Härtefallregelung. Large energy-intensive consumers can get heavy rebates on their EEG bill. It is precisely this policy which is now under scrutiny by the EU. However, viewing Härtefall as an unauthorized subsidy for that energy-intensive industry would be outrageous. The reduction is granted to protect the German companies against costs that are higher than in almost any other European country. To just name one thing, the 2014 cost of EEG on itself, is higher than the all-in (regulated) price of electricity in France. If anything, than the Härtefall is leveling out the non-competitiveness of Germany’s energy prices. Anyone that says that it is creating a competitive advantage has clearly never seen electricity bills from large consumers in different countries.

That German companies pay more for (green) electricity is a consequence of a lack harmonization in the European Union of energy and tax policies. If the response of the European Union to that would be a demand for harmonization of the corrective measures, than there is clearly something very wrong with our Europe. How can you claim tax exemption harmonization if there is no tax harmonization?

In this framework, I clearly understand the demand of Peter Altmaier for support and respect for Germany and its attempt to continue its Energiewende without jeopardizing its economic strength. The German minister for the Environment uttered this demand in a German television studio as he was preparing for a trip to Brussels where he discussed this topic with EU officials. Germany has made and continues to make an important contribution to the development of renewable energy, both in terms of capacities installed and of lowering the technology cost. Punishing Germany for that by a ruling on EEG exemptions that puts its large industries in financial difficulties would be a grave error. It wouldn’t be good for European politics, as it would lay bare the deficiencies in European policymaking. It wouldn’t be good for the economy as it would jeopardize the health of Europe’s industrial powerhouse. And it wouldn’t be good for the environment as other governments might be less willing to develop renewable energy if they see they can’t protect their industry from its cost-increasing effects. The discussion regarding the high cost for end consumers of the Energiewende is already leading to reductions of the subsidies granted to new renewable energy projects. Some politicians even call for a (temporary?) stop of further development of green power in Germany.

The exemption from EEG contributions is not just challenged by the European Union. It is also the subject of a vivid social and political discussion inside Germany. This discussion makes clear what the whole EEG exemption ultimately is: a question of how the cost of developing renewable energy is distributed across the different social actors within Germany. As the energy intensive industries are exempted, other actors such as smaller industrial consumers, the service or commercial sector and households, have a larger bill to pay. Handelsblatt, for example, has announced that due to rising EEG costs, 273 utilities across Germany want to increase the cost of power for 8,3 German families by an average 3,4% or 39 euro per family per year. Such cost increases for households could be reduced if the exemption for the large energy-intensive industry was watered down. Germany is now rapidly heading towards a new, more leftish, government, which seems keen on reducing the amount of exemption received. I can only call here for cool-headed politics that realizes the importance of having a competitive heavy industry in Germany (and Europe).

All these remarks don’t mean that I don’t see any failings in Germany’s renewable energy policy and the exemption regulation. There has clearly been over-subsidizing, and scaling back subsidies is a good idea. Germany should indeed ask itself at what tempo it wants to continue its Energiewende. I also want to repeat my criticism that the rules for getting exemption from the EEG-Umlage are too harsh. I’m thinking here specifically about the rule that says that power costs should amount to 14% of the added value of a company. A company that reaches only 13,9% gets no reduction, just a little bit more cost and you enjoy almost full exemption. It would be good to create a more balanced, layered system with different categories that make sure that a larger number of companies enjoys (smaller) reductions. And maybe Germany should consider whether the high stranded costs of subsidies granted in the last ten years cannot be spread out more in time by swapping them for a long term loan granted to the grid companies. Although I understand that spreading costs in time is an ethically sensitive issue, generations to come will enjoy the fruits of Germany’s efforts to build up its renewable energy production apparatus and affordable solar and wind power technologies.

Vlaams Energiebedrijf wil de Vlaamse overheid massaal op de spotmarkt laten kopen

The content of this blog article is very exclusive for the Flemish market, hence, it will be published in Dutch only.

Gisterenmorgen stond een artikel in de Tijd met als titel ‘Lieten laat Energiebedrijf in de pas lopen’. In de namiddag was de CEO van het Vlaams Energiebedrijf Dirk Meire spreker op de VIB & Roularta studiedag waar ik eerder had gesproken. Ik was dus wel eens benieuwd wie die stoute jongen was en waarom de minister hem aan de leiband wil leggen. Bovendien was eerder al bekend geraakt dat Inspectie Financiën grote vragen heeft bij de gang van zaken bij het Vlaams Energiebedrijf en onder andere het gedrag inzake risico’s nemen sterk in vraag stelt. Daardoor was mijn aandacht verder aangescherpt. Risicomanagement is nu eenmaal mijn core business.

Het Vlaams Energiebedrijf is ooit in het leven geroepen met de bedoeling een Vlaams alternatief voor Electrabel te vormen. De betrokken politici kwamen er al gauw achter dat een energieleverancier opzetten niet zo eenvoudig is. Bovendien, als je net een markt geliberaliseerd hebt, behoort het dan wel tot de kerntaken van de overheid om daarin als leverancier op te treden? Het Vlaams Energiebedrijf kreeg dus andere taken. Het zou zich bijvoorbeeld inzetten voor de promotie van energiezuinig beheer van overheidsgebouwen. Een op het eerste zicht nobel initiatief, maar komt het daarmee niet in conflict met privébedrijven die op dat vlak diensten aanbieden? Ook zou het Vlaams Energiebedrijf ervoor zorgen dat de Vlaamse overheid goedkoper energie kan aankopen.

Wat blijkt nu? Het Vlaams Energiebedrijf wil voor de Vlaamse overheid, haar instellingen en de Vlaamse gemeenten het aanbesteden van de energielevering gaan overnemen. En het komt daarbij met een vrij spectaculaire idee, het wil namelijk exclusief spotcontracten gaan afsluiten voor die overheden. Spectaculair aangezien dit zo’n grondige omslag is van het gebruikelijke energie-inkoopbeleid van overheden dat meestal eerder op het verwerven van budgettaire zekerheid is gericht. Laat ons even enkele van de door meneer Meire aangevoerde redenen om voor de spotmarkt te kiezen onder de loepe nemen:

  1. Meneer Meire geeft aan dat de spotprijzen historisch bekeken een stuk lager zijn geweest dan de forwardprijzen. Hij gaf daarbij het voorbeeld van de elektriciteitsmarkt, een voorbeeld waarin ik hem wil volgen. Maar waar ik meteen wil bij opmerken dat dit in de gasmarkt in de afgelopen vier jaar niet het geval was. Wie vanaf januari 2010 gas in de spotmarkt heeft aangekocht, heeft 0,4 euro per MWh meer betaald dan iemand die op de gemiddelde forward prijs heeft gekocht. Dus, de stelling die meneer Meire in het aansluitende debat poneerde dat forward prijzen altijd hoger zijn, die klopt niet. Ervarving in de gasmarkt spreekt dit tegen.
  2. De logica voor die hogere forwardprijzen ziet meneer Meire in het fenomeen van de zogenaamde ‘forward premium’. Ik ga niet ontkennen dat zoiets bestaat. Als verkopers een forward sale van energie overwegen, zullen zij inderdaad geneigd zijn om het risico op hogere prijzen enigszins te hoog in te schatten. Maar zeggen dat het dom is om die forward premium te betalen, dat is ongeveer hetzelfde als zeggen dat het dom is om verzekeringspremies te betalen. Als er niets gebeurt, ben je inderdaad over je leven bekeken een pak geld kwijt. Maar als er iets gebeurt, zal je maar wat blij zijn dat je braafjes de premies hebt betaald.
  3. Wie visibiliteit wil inzake zijn toekomstige energieprijzen (inzake commodity) die kan die alleen maar verkrijgen door forward prijzen vast te leggen. Daar betaal je inderdaad een premie voor, maar dat is nu eenmaal de kost om de onvoorspelbaarheid van een energiebudget in te perken. Er kunnen zeer goede redenen zijn om dat te doen of om dat net niet te doen. Wat zeker een hele slechte reden is, is denken dat je weet waar de spotprijzen naartoe gaan. En dat doet meneer Meire blijkbaar. Want hij presteerde het om een grafiek te projecteren waarin hij de kostprijzen volgens hun spotcontracten voor de volgende jaren weergaf. Een pure forecast is zoiets. Meestal gaan dergelijke forecasts gepaard met ergelijke disclaimers die zeggen dat wat je net is verteld meer fictie dan feiten is, maar meneer Meire blijkt dat niet nodig te vinden. Zo overtuigd is hij dat die fantastische spotmarkt altijd wel laag zal blijven. Een overgang naar de spotmarkt promoten met grafieken met volstrekt niet waar te maken prijsprojecties, ik kan dat onder niets anders dan misleidende reclame catalogeren.

Spotmarkten zijn zoals alle energiemarkten onvoorspelbaar. Als er zich in de komende jaren een groot veiligheidsincident voordoet in een Europese kerncentrale waardoor alle kerncentrales moeten sluiten, dan kunnen we heel scherpe stijgingen van de spotprijzen voor stroom verwachten. Dat zou dan wel eens veel meer kunnen zijn dan de 50% stijging die meneer Meire gebruikt heeft in zijn ‘risico-analyse’. Kan dat gebeuren? Ja, Japan heeft het in 2011 meegemaakt. En zelfs zonder dergelijke drastische fenomenen, hebben we gemiddeld over het jaar 2008 een stijging gezien van de spotprijzen voor stroom van 58% tegenover het voorgaande jaar. Opnieuw, dat is meer dan de 50% die hij gebruikt in zijn ‘risico-analyse’.

Bovendien, de hier genomende cijfers zijn volatiliteiten van gemiddelde jaarprijzen. Meneer Meire heeft niets gezegd over het fenomeen van de volatiliteit op korte termijn. In oktober 2007 bijvoorbeeld, steeg de spotprijs op Belpex, de Belgische stroombeurs, met 65 procent boven de spotprijs van september 2007. Dit zijn flinke aanslagen op de cashflow waar niet iedereen op staat te wachten, ook al vlakt zich dat in de volgende maanden wel uit. Februari 2012: +55%, September 2013: opnieuw +20%. Zijn gemeentes of andere overheden wel voorbereid op dergelijke schommelingen in de maandelijkse kasuitgaven?

Na het maken van dit soort nuancerende opmerkingen inzake spotmarkten zijn er soms verkopers van spotcontracten die ons beschuldigen dat wij iets tegen die spotmarkt hebben. Welnu, om hen gerust te stellen, heel veel van onze klanten kopen grote stukken of zelfs alles in die spotmarkt aan. Daar kunnen goede redenen voor zijn. Maar die moeten gebaseerd zijn op een grondige analyse van de effecten van energieprijsvolatiliteit op de financiële toestand van een bedrijf of organisatie zoals een overheid.

Volgens meneer Meire hebben schommelingen van de energieprijzen geen groot effect op overheden omdat ze niet energie-intensief zijn. Dat klopt, maar dan luidt zijn conclusie: ‘neem dan maar de spotprijs’. Dat is vreemd, want onze ervaring is dat net zulke organisaties eerder naar budgetstabiliteit streven. Als energie geen substantiële impact heeft op de rentabiliteit, waarom zou je dan het risico nemen dat de energie-inkoop toch een issue wordt omwille van een plotse, onverwachte budgetstijging? Ik ben geen specialist in gemeente- of overheidsfinanciën. Maar ik zie al die gemeentes nu zo’n grote inspanningen leveren om op de kosten te besparen. Als ze nu allemaal overstappen naar meneer Meire zijn spotcontracten, dan lopen ze het risico dat uit de hand lopende spotprijzen voor energie een deel van die inspanning opsouperen. Als belastingbetaler vind ik dat geen prettige idee. Bovendien, binnen gemeenten maar ook in een Vlaamse regering worden harde afspraken gemaakt over budgetten bij de opmaak van begrotingen. Ik kan me toch echt niet voorstellen dat er dan geen behoefte is aan enige budgetvastheid bij het inkopen van energie? We kennen allemaal de verhalen over overheden die stoppen met het inkopen van bv. printpapier omdat het budget is opgesoupeerd. Gaan die overheden dan de stroom uitschakelen wanneer een oplopende spotmarkt het energiebudget tegen september heeft opgevreten?

Meneer Meire minimaliseert ook de impact van schommelingen in de commodityprijzen voor energie. Hij wijst er (terecht) op dat het non-commoditygedeelte tot 60% kan bedragen van de totale factuur. Maar dan gaat hij er verkeerdelijk van uit dat dit een vast gedeelte zou zijn dat de volatiliteit van de commodity uitvlakt. Op de VIB studiedag gisteren liet de kabinetschef van minister Vandelanotte horen dat het de bedoeling is om het non-commoditygedeelte niet verder te laten oplopen. Maar deze morgen lees ik in de krant dat de netbedrijven alvast hun nettarieven willen verhogen. Het kan wel eens zijn dat die stijging van 50% van het commoditygedeelte samenvalt met een stijging van nettarieven en/of taksen en als we dan toch bezig zijn, ook nog eens een stijging van het verbruik. Dat zal toch niet zomaar passeren volgens mij …

Ik denk dat iedereen die in dit verhaal betrokken is, toch eens heel goed moet nadenken over die switch naar de spotmarkten. Ik denk daarbij in de eerste plaats aan de betrokken ambtenaren. Zij zullen met de vinger gewezen worden wanneer de keuze voor spotmarkten een fiasco wordt. Wij proberen hen ervan te overtuigen dat ze met hun organisaties goede afspraken moeten maken over de risico’s die je neemt bij het energie inkopen. Dit doe je niet door zoals meneer Meire heel eenzijdig het besparingspotentieel van een keuze voor spotprijzen in de verf te zetten. Als zo’n ambtenaar met meneer Meire’s cijfers over besparingen zijn oversten heeft overtuigd, en vervolgens krijg je een budgetstijging, dan zal hij toch niet echt comfortabel zijn. Ook voor politici lijkt mij de massale switch naar spotmarkten riskant. Stel, zij laten hun gemeente of overheid overstappen naar het Vlaams Energiebedrijf en zijn spotaankopen. En in het jaar voor de verkiezingen swingen die prijzen de pan uit. Is dit echt wat ze willen? Past zo’n spotcontract echt wel bij het risicoprofiel van een gemeente of overheid? Wat als we een herhaling krijgen van wat in 2007 – 2008 in onze energiemarkten is gebeurd? Wie gaat dan gelukkig zijn met die keuze voor de spotmarkten? Wie wil dat politieke risico nemen?

Wat mij nog het meest stoorde, was dat meneer Meire dit alles voorstelde als verschrikkelijk innovatief. Hij is daarmee de derde die mij in de afgelopen vijf jaar een spotcontract probeert te verkopen als iets verschrikkelijk nieuws. Hallo, een spotcontract, dat is het oudste commoditycontract in de wereld. Daar is niets nieuws aan. En daar zijn ook niet alleen maar voordelen aan, zoals meneer Meire in zijn presentatie probeerde aan te tonen. Bovendien laat hij daarbij grote onzekerheid over de hoedanigheid waarin ze dit gaan doen. Op één en dezelfde slide noemt hij zichzelf een energieverkoper en een aankoopcentrale. Hij geeft zelfs aan dat ze rechtstreeks in de groothandelsmarkt willen sourcen, waardoor ze al helemaal niet meer verschillen van een energieleverancier. Is het Vlaams Energiebedrijf dan een poging om een monopolie te vestigen over de levering van energie aan overheden in Vlaanderen? Want om eerlijk te zijn, om spotcontracten af te sluiten, daar heb je absoluut geen nieuw vehikel voor nodig. Er staan tal van leveranciers klaar om dat te doen.

Ik ga hier eens flink tegen mijn winkel praten, door te stellen dat het oprichten van een centrale die het aankopen van energie door overheden faciliteert, op zich een goed idee is. Wij stellen inderdaad ook vast dat bij overheden de marktkennis om succesvol energiecontracten af te sluiten vaak ontbreekt. Maar een aankoopcentrale houdt zich bezig met aankoop en niet met verkoop. Als het Vlaams Energiebedrijf een leverancier wordt, dan gaan wij alle overheden aanraden om hun aanbiedingen naast die van andere leveranciers te plaatsen. Ik denk overigens dat dit ook wettelijk verplicht is. Meneer Meire stelt dat er door te kopen via het Vlaams Energiebedrijf geen aanbesteding meer nodig is. Op één van zijn slides zegt hij letterlijk dat het Vlaams Energiebedrijf gaat leveren en factureren aan eindafnemer zonder aanbesteding. Dat lijkt me juridisch toch een vrij straffe uitspraak. Wanneer het Vlaams Energiebedrijf telkens zelf een aanbesteding organiseert, dan kan het volgens mij nog. Dan zijn ze inderdaad een aankoopcentrale die de aanbestedingen van de individuele afnemers overneemt. Maar wanneer ze de energie zelf in de groothandelsmarkten gaan aankopen, nogmaals, dan zijn zij een leverancier. En dan moeten hun aanbiedingen aan concurrentie worden onderworpen. Door bovendien zo pertinent te stellen dat het Vlaams Energiebedrijf gaat leveren en factureren, bevestigt meneer Meire overigens het beeld dat het Vlaams Energiebedrijf een leverancier is en geen aankoopcentrale.

Indien het Vlaams Energiebedrijf zich toch tot zijn functie als aankoopcentrale zou beperken, dan is het heel eigenaardig dat die aankoopcentrale zo exclusief voor één product, namelijk spotcontracten kiest. Het is alsof je een aankoopcentrale maakt voor auto’s en die centrale vervolgens zegt: “we gaan alleen maar blauwe auto’s voor jullie kopen want dat vinden wij de mooiste”. Het zou veel logischer zijn dat het Vlaams Energiebedrijf voor de overheden de aankoop faciliteert van de grote diversiteit aan contracten die in de markt bestaat. Zodat elke overheid voor zichzelf kan uitmaken welk product het beste aansluit bij de specifieke verwachtingen. Het kan toch niet dat het Vlaams Energiebedrijf één bepaalde manier van aankopen zou promoten op basis van nogal stevige overtuigingen over enerzijds de prijzen in de groothandelsmarkt en anderzijds risico’s van energieprijzen voor overheden? Overtuigingen die ik op zijn minst ongenuanceerd en betwistbaar zou willen noemen, en ik was duidelijk niet de enige die er gisteren zo over dacht.