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To promote transparency and provide information, the Federal Planning Bureau regularly publishes the methods and results of its works. The publications are organised in different series, such as Outlooks, Working Papers and Planning Papers. Some reports can be consulted here, along with the Short Term Update newsletters that were published until 2015. You can search our publications by theme, publication type, author and year.

Cost-benefit analysis of a selection of policy scenarios on an adequate future Belgian power system - Economic insights on different capacity portfolio and import scenarios [CBA_2017]

In this report, different capacity portfolio and import scenarios for Belgium are investigated. They are based on the reports published by the Belgian transmission system operator Elia in 2016. Four scenarios are scrutinized differing in their overall context (level of carbon price) and/or in the choice of the content of their structural block. A fifth scenario is added which constitutes a sensitivity analysis: in this scenario, a considerable amount of new natural gas-fired power plants on top of the structural block is built on the Belgian territory in order to study the impact of a fairly lower level of (net) imports and even explore the net export option. The five scenarios are compared in order to assess potential longterm strategic choices from a societal perspective.

This report presents a cost-benefit analysis of policy scenarios consistent with an adequate Belgian power system by 2027. The policy scenarios are based on information contained in two reports published by the national Transmission System Operator (TSO) Elia in 2016. The Elia reports deal with the adequacy and flexibility needs of the future Belgian power system by calculating the need for and the required volume of a “structural block”. The structural block is defined as the national volume of adjustable capacity needed to keep electricity supply and demand in balance at all times while satisfying the current legal security of supply criteria. This cost-benefit analysis then looks at the implications of different constitutions of the structural block on a number of social welfare components. It responds to concerns ventilated by a number of stakeholders after the publication of the Elia reports.

More specifically, the Federal Planning Bureau calculates a number of costs and benefits for different power capacity portfolio and import scenarios for Belgium. Four main scenarios are scrutinized differing in the level of carbon price and/or in the choice of the content of their structural block, being natural gas-fired power plants versus decentralised technologies. These four scenarios are however all characterized by a relatively high dependence on foreign electricity supplies. A fifth scenario is added which constitutes a sensitivity analysis: a considerable amount of new natural gas-fired power plants on top of the structural block is built on the Belgian territory in order to explore a situation in which Belgium’s electricity trade balance is almost neutral in 2027. The results of the five scenarios are compared in order to assess potential long-term strategic choices from a societal perspective.

One outcome of the analysis is that a decentralised structural block (compared to one solely filled by natural gas-fired power plants) engenders benefits in terms of the production surplus, CO2 emissions, employment and energy trade deficit. Nonetheless, to secure our future power supply, natural gas-fired power plants are proven to be indispensable in this setting.

The overall positive impact results from a strong increase in the producer surplus that is not being compensated for by a decrease in the consumer surplus. The former effect is triggered by the higher prices at which the different producers can sell their electricity while the latter is caused by higher wholesale power prices that consumers have to pay. CO2 emissions and CO2 auction payments are lower because power generation relies more on decentralised carbon-free renewables. The positive employment creation effect is brought about by the higher labour intensities of renewable technologies, whilst the shrinking energy trade deficit can be ascribed to lower imports of natural gas. Required investments, however, are considerably higher and amount to a factor 2.5 compared to a solely gas-filled structural block.

The fifth scenario teaches us that not only investing in decentralisation, but also in additional gas-fired power plants in order to diminish the level of (net) electricity imports (and even reverse it into a net export position) might generate some benefits for Belgium. Compared to (simple) decentral production, the consumer surplus climbs significantly because of a decrease in the wholesale power prices. Above that, the energy trade deficit drops further because of the elimination of net power imports on a yearly basis. On top of that, extra jobs are created because of the additional construction of new centralised generation units in Belgium. But there is a downside: required (additional) investments are substantial, domestic CO2 emissions skyrocket and the case for Demand Response completely vanishes.

Of course, the realisation of the benefits and costs hinges on external circumstances: if they change, the overall picture changes and these results no longer hold. It is therefore of utmost importance to carefully observe and, where possible, try to influence the external context. This can be done on two levels: European and Member State level. As regards the European level, European climate policy should be steered towards a context which closely resembles the Gas before Coal scenario by having more ambitious carbon prices. Concerning the Member State level, sovereign national decisions that potentially could have a huge impact on other Member States should be duly announced and, by preference, replaced by more intensified regional collaboration and cooperation as is specified in the European Winter Package.

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  Authors

Danielle Devogelaer (A), Dominique Gusbin (A)
 
A : Author, C : Contributor

Date(s)

22/02/2017

  Publication type

Others

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