The IEA Welcomes Belgium’s Progress Towards Energy Market Liberalisation but Urges Action to Reduce Competition Barriers for Customer Benefit

(Brussels) — 10 March 2006

“Given its geographic position, Belgium is able to contribute substantially to the development and success of liberalised European energy markets. The country has made progress in recent years, notably in electricity markets”, said Claude Mandil, Executive Director of the International Energy Agency (IEA), today in Brussels at the launch of Energy Policies of IEA Countries – Belgium 2005 Review. “To enable Belgian customers to benefit fully from competitive European energy markets, however, much more work needs to be done”, Mr Mandil added. “Part of these efforts will be to improve the country’s internal integration and energy efficiency, and to analyse and understand better the implications of the decided phase-out of nuclear power.”

As Belgium is a federalist country, the three regions determine most energy policies individually. This has made it challenging to achieve national energy policy goals, such as energy security, market liberalisation and sustainable development. Market rules vary between the regions, creating isolated gas and electricity markets that do not operate seamlessly. This fragmentation makes it difficult to achieve competition because potential new entrants are less likely to enter small, segmented markets. The end result is that Belgian customers cannot gain the real benefits of liberalisation. Furthermore, lack of harmonisation among the regions hinders the country’s integration with its European neighbours and critically inhibits the development and success of the EU’s energy markets. The IEA recommends Belgium tie together its regional markets. Market harmonisation does not require the regions to give up their policy independence, but requires enhanced federal and regional dialogue and co-operation.

Belgium’s natural gas and electricity markets are highly concentrated. Companies owned by the international power group Suez SA dominate at all levels – this also inhibits market development. More needs to be done to trim their market control, encourage new entry and increase competition, in order to bring the real economic benefits of liberalisation to Belgian customers. Successful market harmonisation and EU integration will help expand the relevant market and thereby reduce the dominance of Suez companies, but in the interim additional actions must be taken. Sufficient resources to accomplish this task should be given to relevant regulators and authorities.

Belgium’s decision to phase out nuclear power between 2015 and 2025 is a great challenge, as nuclear energy supplies about 55 per cent of the country’s electricity. Actions must be taken now to prepare for it. Filling the resulting gap will require other supply sources, such as electricity imports, new generation capacity or energy savings. Energy savings through efficiency improvements may offer the lowest-cost means of covering some of the gap, and the government should significantly strengthen its energy efficiency policies, particularly in the transport and residential sectors. The federal government should conduct more comprehensive long-term studies on the nuclear energy phase-out and its effects on energy security, environmental protection and economic growth, and make these studies available to the public.

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