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Energy holds an important place in our economies. It is a production factor for the manufacturing industry as well as a key element in our everyday life. It is essential to evaluate a country’s energy dependence and its potential vulnerability to energy supply disruptions or energy price shocks because this may translate into losses in competitiveness and growth. For a country like Belgium, this type of evaluation is even more crucial because the Belgian ground does not contain any indigenous fossil fuel resource, the potential of renewable energy sources is relatively limited and nuclear energy is being phased out. In order to assess Member States’ energy dependence, the European Commission designed a set of energy dependence indicators and looked at their evolution over recent years. Looking at the past is relevant and interesting but appraising future trends brings an extra dimension to the issue. This is all the more so since the EU has set ambitious energy and climate policies, which call for significant structural changes in the energy system. The recent FPB publication Belgium Energy Trends to 2050 provides the material to compare and gauge past and future trends of some energy dependence indicators. The results of this side analysis are summarised below.
The European Commission identifies three dimensions of energy dependence: (1) security of energy supply, (2) energy and carbon intensity and (3) contribution of energy products to trade. The first dimension encompasses the dependency on energy imports, the diversification of import sources (and routes) and the composition of the energy mix. The idea behind this set of three indicators is that a diversified energy mix and diversified origins of energy imports can compensate for a country’s high dependence on imported energy sources and consequently reduce its energy dependence. The second pillar of energy dependence assesses the performance of a country in terms of energy intensity and carbon intensity. The rationale here is that the higher the energy intensity of the economy, the more vulnerable a country is to energy price spikes, and the higher the carbon intensity of the energy sector, the more vulnerable a country is to more stringent climate change policies. The third and last dimension relates to the potential consequences for current account imbalances of energy trade deficits (or surpluses).
The Federal Planning Bureau recently published a report describing energy and greenhouse gas emission projections for Belgium under a reference scenario. The time horizon of these projections is 2050. The reference scenario simulates the development of the Belgian energy system under current trends and adopted policies but assumes also that the legally binding greenhouse gas and renewables targets for 2020 will be achieved. The numerous figures provided in this report allow extending the timeframe of the EC’s analysis of Belgium’s energy dependence to the period 2010 to 2050. However, this extension is not possible for all dimensions of energy dependence or for all indicators. For instance, the FPB study does not deal with the countries of origin of the imported fuels or with the future development of current account imbalances.
Among all the indicators identified by the European Commission as relevant for assessing energy dependence, the present analysis will focus on those related to the security of energy supply. More specifically, three indicators will be scrutinised. The first indicator is (primary) energy import dependency, i.e. the extent to which Belgium depends on imports to meet its energy needs. It is calculated as the ratio between total net energy imports and total energy needs (i.e. gross inland consumption + consumption of international bunker fuels).
The second indicator is electricity import dependency. It is defined as the ratio between net electricity imports and final electricity demand. The third indicator measures the degree of diversification of energy sources. To measure this diversity, a Herfindahl index is used. The lower the index, the more diversified the energy mix: a score of 1 means that the country relies on a single energy source.
The analysis covers the period 1990-2050 and results are provided in the table below in steps of 10 years. The evolution between 1990 and 2010 is based on observations, while figures beyond 2010 come from the reference scenario described in the FPB report.
Belgium imported 78% of its energy needs in 2010. According to DG ECFIN’s analysis, Belgium’s import dependence is far above the EU average of 53%. However, this high level of dependence is mitigated by the country’s well-diversified origins of energy imports, well-connected gas networks with neighbouring countries and the Zeebrugge LNG terminal on the one hand, and by the country’s well-diversified energy mix (see infra) on the other hand. Belgium’s high dependence on energy imports comes from the fact that the country has no indigenous fossil fuel resource, i.e. Belgium imports 100% of its oil, natural gas and solid fuel needs and fossil fuels account for no less than three quarters of the country’s total energy consumption.
Between 1990 and 2020, energy import dependence is roughly stable (it fluctuates between 75 and 78%). A significant increase can then be observed up to 2030, when it reaches 88%, followed by a slight but steady decrease in the last two decades (it equals 85% in 2050). The spike in 2030 reflects the full achievement of the nuclear phase-out decided by law (all nuclear reactors must be closed by 2025): nuclear heat reported in the gross inland consumption is, by (statistical) convention, a domestic resource, which would gradually be partly replaced by imported natural gas for power generation. The declining trend between 2030 and 2050 is mainly due to the development of domestic renewable energy sources.
Since 1992, Belgium has been a net importer of electricity (2009 constitutes the only exception to the rule). Net electricity imports represented 1% of total final electricity consumption in 2010. Strong fluctuations are observed for the period 1992-2012 but Belgium’s import dependence always remained below 13%. The largest electricity trade partner is France, but electricity flows with the Netherlands also sometimes recorded rather high levels. Looking forward, still moderate levels of electricity import dependence are expected until 2020. However, afterwards, Belgium should import a greater share of its electricity needs (from 24% in 2030 to 20% in 2050). This evolution again reflects the phase-out of nuclear energy as well as the move towards a stronger integration of the electricity market within the EU, in terms of both market functioning and cross-border interconnections and the fact that variable renewables (i.e. wind and solar) should enter into the system.
Belgium has a rather well-balanced energy mix. The index for the energy mix progressively increased between 1990 and 2010 (from 0.27 to 0.29) but it remains within the range of the EU average of 0.24. Compared to the EU, Belgium has higher shares of oil, gas and nuclear but lower shares of solid fuels and renewables. The decision to close the nuclear power plants as well as the implicit ban on investments in new coal power plants will have major implications for the degree of diversification of energy sources. The index will deteriorate considerably from 2025 onwards: it will reach a value of 0.36 over the period 2030-2050. Despite this unfavourable trend, the diversification of the energy mix should remain better than in other Member States (e.g. Luxembourg, the Netherlands) due to the dramatic increase in the share of renewables (from 5% in 2010 to 15% in 2030 and 17% in 2050), which partly compensates the zero share of nuclear and the drop in the share of solid fuels.
In the calculation of the index described above (and presented in the table), renewables are considered to represent one single energy source. Yet renewables encompass a wide range of different energy sources: hydro, wind, solar, biomass and geothermal. Diversification within the renewables category should also be reflected in the index for the energy mix. Therefore, an alternative index can be calculated which accounts for this observation. The new figures do not change the overall picture, namely the evolution towards a less diversified energy mix, but the impact is softened. The index decreases from 0.36 in the first calculation to 0.35 in 2020 and from 0.36 to 0.33 in 2050.
The analysis of the evolution of a set of energy dependence indicators over the period 1990-2050 shows a deterioration in Belgium’s performance in terms of security of energy supply from 2020 onwards. By then, Belgium should not only present a much higher dependence on imported fuels and electricity but also a less diversified energy mix. The main explanatory factors are the planned nuclear phase-out, the implicit ban on coal for power generation and the relatively low potential of (domestic) renewable energy sources. Belgium will therefore be potentially more vulnerable to energy price and/or supply shocks than today. However, other important issues are outside the scope of this indicator analysis even though they also contribute to the security of energy supply. They include, for instance, a geographically diversified portfolio of energy suppliers, the level of integration within the EU gas and electricity markets and the development of interconnections for electricity trade.