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CAPACITY MIXES FOR THE FLEXIBILITY MEANS CALCULATIONS AND FOR THE ECONOMIC ASSESSMENT
To assess the flexibility means and perform the economic analysis, the identified GAP is filled with existing and new capacity for the ‘EU-BASE’ and ‘EU-SAFE’ scenarios. Figure 5-17 summarises the different scenario considered to fill the ‘non-viable’ GAP.
All scenarios assume a certain intervention ‘in-the-market’ allowing capacity to cover their ‘missing money’ in the market. In these scenarios, all existing units are always assumed to be ‘in-the-market’, since the ‘missing money’ linked to extending the lifetime of existing units (if technically feasible) should be lower than investing in new capacity. Three different settings to fill the need for new capacity are considered to reflect investments in different technologies:
• ‘Efficient gas’: the GAP is mainly filled with new CCGT (or CHP). This is the main scenario used for the short-term flexibility analyses. A sensitivity including more batteries and less DSR is also performed. In addition to the new CCGTs already contracted in the CRM auctions, an additional CCGT is considered from 2027 onwards and a second additional CCGT is considered as from winter 2028. In the EU-SAFE scenario, a third additional CCGT is also assumed as from winter 2029. The remaining GAP is filled with DSR/batteries.
• Energy Limited Resources (ELR)’: non-thermal technologies (demand side response shedding and batteries) are mainly filling the GAP up to the maximum potential identified. In the EU-SAFE scenario, one additional CCGT is considered from 2028 onwards since the total battery/DSR new potential was not able to fill the entire GAP. No additional CCGT is considered in the EU-BASE scenario.
• ‘Mix’: this scenario assumes that the GAP is filled through a mix of the two other scenarios: combining new thermal technologies with new non-thermal technologies. In the EU-BASE scenario, an additional CCGT is assumed from 2028 onwards. The same holds for the EU-SAFE scenario, with an additional CCGT introduced earlier (from 2027 onwards).
It is important to mention that filling the needed capacity with different technologies will require the installation of more than the 100% available capacity identified in the GAP to account for outages, energy/activation constraints, etc.
5.7. SUMMARY AND CONCLUSIONS OF THE EVA
The economic viability assessment presented in this chapter indicates that without some form of structural market intervention, the energy-only market signals will not provide the necessary investment incentives to ensure that the Belgian reliability standard is met over the entire horizon of this study. The main results in terms of adequacy for the scenarios and sensitivities on which the EVA was applied are provided in Table 5-1.
The GAP identified in Belgium in the adequacy assessment will not be filled without market intervention. At the EVA equilibrium, it can be concluded that:
• Most existing units are found to be economically viable. The units at risk for closure are the old peakers or old CCGT if gas and carbon prices are high;
• Some new capacities in the form of demand side response and batteries are economically viable but do not allow to compensate for the closure of existing old units and to fill the GAP;
• After the EVA, the reliability standard of Belgium is not met as from 2025 in the EU-SAFE scenario and as from 2028 in the EU-BASE scenario.
It can therefore be concluded that the adequacy need is not only enduring, but also significant in terms of volume. Without new capacity, Belgian adequacy will not be guaranteed as the results demonstrate that typically, the capacity expected to leave the market is not sufficient to cover for the GAP. This confirms that a strategic reserve mechanism is not the appropriate instrument to ensure adequacy for Belgium.
In line with the assumptions taken for this study and the assessments performed, the need for a market-wide supporting mechanism - such as the CRM which is currently in operation in Belgium - is therefore clear.
Finally, as a sanity check, economic viability was verified for a scenario in which the GAP for Belgium has been filled. It was concluded that in this scenario no additional new capacity would be economically viable in Belgium, and moreover that also some existing capacities risk leaving the system due to non-viability. This confirms that in a situation where the reliability standard for Belgium would be respected – with the CENTRAL scenario as a basis – some capacities present in the system are not economically viable without intervention.
