Engie is allowed to purchase a maximum of a quarter of electricity from new offshore wind farms

The government has approved the final criteria for the concession auction for new wind farms in the North Sea. In order to open up the energy market, there will be restrictions for dominant market parties.

After a few more changes, the federal government has given the green light for the final criteria of the concession auction for the new wind farms in the Belgian North Sea. As planned, there will be three new concessions in the Princess Elisabeth zone by 2030, together accounting for an additional 3.5 gigawatts on top of the 2.3 gigawatts today. Minister of Energy Tinne Van der Straeten (Green) allows half of the electricity to go to industry via direct purchase contracts. What is new is that there will be a restriction for parties that already have a dominant position in the electricity market, read Engie

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Developers will be able to bid in an auction to win the concession, starting at the end of this year for the first 700 megawatt zone. As previously decided, they can request a price guarantee of up to a maximum of 95 euros per megawatt hour via a two-sided additional contract (CfD). If electricity prices fall below that limit, the government will match the difference to ensure that the projects remain profitable. If electricity prices are higher, the developer must pay the surplus again.

The developer who is satisfied with the lowest price level in the auction has a good chance of winning the concession. However, it is expected that candidates will not fully rely on the 20-year government guarantee. Whoever wins the concession will have six months to conclude long-term contracts and thus sell up to half of the electricity production directly to industrial parties or large electricity producers or traders.

These mutual contracts must have a term of 20 years with a fixed price. There is no longer a government guarantee on that part of the production and developers may receive up to 3 euros per megawatt hour more than the price that was negotiated with the government.

“Thanks to direct access to electricity production from offshore wind turbines, we have assets to anchor and green our heavy industry, which is necessary for the energy transition,” says Van der Straeten. ‘Companies can thus protect themselves against price fluctuations and stimulate investments in renewable energy.’

It is striking that an additional restriction was introduced to prevent ‘dominant players in the electricity production market’ from purchasing too large a share of the electricity. These players, primarily the French Engie, but possibly others such as Luminus, may purchase up to half of the direct power purchase contracts for 20 years. This way they can buy up to a quarter of the wind energy. With this intervention, which was added at the last minute, Van der Straeten wants to open up the market as much as possible.

Another new feature is that after the term contracts with a term of 20 years have been concluded, developers may conclude additional purchase contracts with shorter terms. To do this, they must organize a competitive and non-discriminatory auction in which the player who bids the highest price also wins the contract. There are no restrictions for that route and dominant market players can also win the contracts. If the price is higher than the reference price agreed with the government, the developer may receive a maximum of 3 euros extra per megawatt hour. The rest must be paid to the state.