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Will Belgium stay in the dark?

Without reform to the country’s energy policies, the future of industry in Belgium looks bleak.

Belgium’s energy challenges are complex and pose new challenges to the future of the country’s competitiveness. As Europe continues to de-industrialize, Belgium’s high energy costs and growing concerns about blackouts put it at a significant disadvantage when compared to neighboring countries.

In June 2014, the Federation of Belgian Industrial Energy Consumers (febeliec), revealed that electricity costs for Belgian industry remained higher than in the country’s main trading partners: France, Germany and the Netherlands. The benchmark survey, carried out by Deloitte, demonstrated a price handicap stretching from 9-47%, depending on the region and the amount consumed. In 2013, the cost difference ranged between 12-45%. The substantial difference in cost for industry in Belgium is a result of the fact that the country has no system of progressive tariffs. Unfortunately, when asked to revise this policy, Cwape, Wallonia’s electricity regulator, simply refused.

Moreover, Belgium’s green energy taxes continue to add to the cost of doing business in Belgium.  According to the Flemish Socio-Economic Council (SERV), the electricity bill could rise by another 30% in Flanders as the cost of renewable energy gets passed on to the consumer. The Federation of Enterprises in Belgium (VBO/FEB), reports that this would not only increase the cost of energy for business, but also the cost of labor.

An inflated electricity bill would lead to a rise in the country’s health index. Due to Belgium’s unique system of automatic wage indexation, a 30% increase in the cost of electricity would also translate into a 1% increase in the cost of labor, or an additional €1.4 billion cost for business. VBO/FEB recommends that the cost of green energy be funded by the government in order to avoid the cost being passed on to businesses. Additionally, energy prices should no longer be linked to the index.

Cost is not the only concern. The ongoing uncertainty surrounding the reactivation of nuclear power plants Doel 3 and Tihange 2 has also caused much controversy in recent weeks. Energy consultancy Sia Partners believes that if these plants are not brought back online, Belgium will be unable to produce enough power throughout peak hours in the winter of 2015-2016. With Belgium set on a nuclear phase-out by 2025, it is suspected that the reactors will not be put back in service. The Federal Planning Bureau revealed that the cost of a blackout would be €120 million an hour, 94% of which would fall on companies.

VBO/FEB has therefore recommended that the federal and regional governments conclude an energy pact as quickly as possible. The pact will continue to ensure security of supply as well as competitive prices so that industry can continue to invest in Belgium. However, with government negotiations still ongoing, and with no end in sight, the country’s energy policies do not look set to change soon.