When Engie Eletrabel's slightest wishes are granted - Economic Policy

When Engie Electrabel’s slightest wishes are granted – Economic Policy

For Engie, a big contract is the best way to leave the government with the unpleasant surprises linked to a possible explosion of costs for the dismantling of Belgian nuclear power plants.

Last week, the federal government signed a blank check to Engie Electrabel, the main operator of Belgian nuclear power plants. In exchange for extending the operation of the Doel 4 and Tihange 3 nuclear power stations, the government is prepared to cap the bill for the dismantling of the power stations and the geological storage of nuclear waste. If the cost price is higher than an amount still to be paid, it is the government – and therefore the Belgian taxpayer – who will pay it. However, the chance is real that this is the case. In nuclear matters, the bill is in the billions and quickly exceeds the budget initially planned. This favor granted to Engie is also in contradiction with the principle of “polluter pays”, which Europe imposes on operators of nuclear power plants.

Last week, the federal government signed a blank check to Engie Electrabel, the main operator of Belgian nuclear power plants. In exchange for extending the operation of the Doel 4 and Tihange 3 nuclear power stations, the government is prepared to cap the bill for the dismantling of the power stations and the geological storage of nuclear waste. If the cost price is higher than an amount still to be paid, it is the government – and therefore the Belgian taxpayer – who will pay it. However, the chance is real that this is the case. In nuclear matters, the bill is in the billions and quickly exceeds the budget initially planned. This favor granted to Engie is also in contradiction with the principle of “polluter pays”, which Europe imposes on the operators of nuclear power plants. By capping the maximum bill, the government makes sure to put Engie at its heels. For some time now, the uncertainty around the bill for nuclear liabilities has been grumbling in Paris. Fears that are far from unfounded since the Belgian government is constantly delaying the decision on how it wants to see this waste stored permanently. This vagueness transforms the already difficult calculation of the final bill into a true divination session. The company wants to get rid of this risk and refers to the agreement concluded by the operators of the German nuclear power plants. The German government has resumed nuclear commitments there on terms that are fairly favorable to producers. The German government thus covers the risk that disposal will cost more than expected. There is a good chance that Engie Electrabel will obtain a similar or even better agreement. And that would be going a bridge too far. The government can and should provide Engie with more clarity on the final bill, but the risk of additional costs should remain with the operators. If it makes concessions on this point, Belgium will pay a much too high price for the necessary reinforcement of its energy supply. For such a concession, Belgium could ask to keep more nuclear power plants open longer, and longer than ten years. It is all the more regrettable that such a situation could have been avoided. Until two years ago, Engie Electrabel assumed that the youngest nuclear power plants would be extended for a longer period, without any opposition from the government. The Michel government, and the governments that preceded it, missed the opportunity to extend the operation of nuclear power plants on favorable terms. Since the De Croo government confirmed the nuclear phase-out law, the situation has changed and the balance of power has been reversed. Especially since, since then, nuclear energy is no longer part of Engie’s strategy, which is now moving towards less risky activities such as renewable energies and the operation of energy networks. This change of course laid the foundations for a much more comfortable position for the company during the negotiations, especially knowing that Belgium would probably still need the nuclear power plants. Now that Belgium must actually knock on the Engie Electrabel door, Paris can set the conditions. And this, even if France can make good use of Belgian nuclear energy, given the current problems of French nuclear power plants. Belgium is thus paying a high price for its years of lack of vision and delays in energy supply. Especially since this price may still increase. Last week, a law that provides better protection for the provision used to finance nuclear liabilities was published in the Belgian Official Gazette. Until recently, Synatom, a nuclear provision company and the subsidiary of Engie which manages this savings pot, was authorized to lend 70% of the provisions already made to Engie Electrabel. Specialists describe this loan as a cash loan to Engie Electrabel, without guarantee. The new law requires Engie Electrabel to repay these loans in full by 2030. The Nuclear Utilities Commission is also given the power to prevent Engie Electrabel from becoming an empty shell. Today, it is not clear to what extent this law will be maintained. The new law also provided, for example, that operators would remain liable for additional costs related to the dismantling of installations and the disposal of waste. But there is no trace of this passage during the publication last Friday in the Belgian Monitor. The declaration of intent between Engie and the government has other weak points. Who, for example, will intervene if the provision does not yield a sufficient return to balance the funding? Will this investment risk be covered by the government or Engie Electrabel? And at what price will the nuclear power plants be transferred to the new company? What will be the remuneration of Engie Electrabel as operator of nuclear power plants? For Engie, a big contract is the best way to leave a large part of the risk to the government. These details therefore have every interest in being settled in favor of the government.

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