Driven by European, federal and regional legislative initiatives and market developments, the energy sector will continue to be in a state of transformation in 2024. In this brief overview, we look ahead at eight key (legal) developments that will help shape the further transformation towards a sustainable energy network.
Transposition of Second Renewable Energy Directive
A major update to the Second Renewable Energy Directive (Directive (EU) 2018/2001) entered into force on 20 November 2023. Particularly noteworthy is the introduction of several procedural and substantive relaxations regarding the authorisation framework for renewable energy installations. Through more streamlined procedures, the EU legislator hopes to accelerate the roll-out of renewable energy. One way of doing this is by capping the processing times for certain permits relating to renewable energy projects, so that a final and enforceable decision can be obtained more quickly. In addition, several legal presumptions are also being introduced which should make it easier to grant a permit in line with EU nature protection law (such as the Habitats and Birds Directives).
The update must be transposed into national law by 1 July 2024. For both legislators and licensing authorities, it will be a race against time. This does require some nuancing, however, as a number of the changes have already been implemented to a greater or lesser extent in the instruments adopted by the European Council in response to the energy crisis. For instance, since the end of December 2022, Council Regulation (EU) 2022/2577 “establishing a framework for accelerating the deployment of renewable energy” has been of considerable importance. It was also recently decided to already extend the period of operation of this Regulation until 30 June 2025.
Expansion of offshore wind in the Princess Elisabeth Zone
In 2021, the Belgian federal Government took the decision to produce 5.4 to 5.8 gigawatts of offshore wind energy by 2030 with the development of the Princess Elisabeth Zone (“PEZ”). A new legal framework seeks to minimise the social costs of this expansion and includes a competitive bidding procedure, the creation of larger plots, and the conducting of preliminary studies by the Directorate-General for Energy.
Publication of the first tender is scheduled for 2024, with a view to commissioning the new plants from 2029. To make this possible, several regulatory texts still need to be implemented.
A ministerial decision determining the lots on which a domain concession will be granted is still awaited. In this regard, on 23 September 2022, the Government reached agreement in principle on a division into three lots with an associated maximum installed capacity of 700, 1225-1400 and 1225-1400 megawatts respectively.
A royal decree should also be adopted to determine the conditions and procedure for granting the various licences. The Government reached an agreement in principle on this on 28 April 2023. To implement these core principles, an act to amend and further supplement Article 6/3 and following of the Electricity Act was adopted on 19 December 2023. In particular, this act provides for:
- a minimum required percentage of citizen participation;
- extension of the maximum permissible subsidy period from 15 to 20 years;
- a legal framework for the processing and management of personal data in the context of tender processes;
- a monitoring and sanctioning power for FPS Economy and CREG (the Federal Commission for Electricity and Gas Regulation);
- adjustments in terms of payment arrangements (via “two-sided Contracts for Difference”) and funding flows of the support regime; and
- the introduction of a re-assessment procedure regarding the taxation of excess profits.
Finally, two royal decrees are still to be adopted regarding the extension of the offshore transmission grid (the Modular Offshore Grid or MOG). The first decree should set the deadline by which each part of the MOG must be in service. The second will set out a compensation scheme for the benefit of the relevant domain concessionaires in case the MOG extension does not (fully or partially) enter into service by the specified date, or in case of full or partial unavailability of the MOG after commissioning.
More gas grids: hydrogen and CO2
The federal Hydrogen Act of 11 July 2023 will continue to be implemented in 2024. Fluxys Belgium is likely to be designated as the hydrogen transmission system operator.
In late December 2023, it was announced that the Flemish Region had filed an action for annulment of the Hydrogen Act before the Constitutional Court. However, a ruling cannot be expected until the first half of 2025. In the meantime, Flanders is also working on its own hydrogen distribution decree.
Regardless of this conflict of competences, European legislators reached a final agreement in December 2023 on the new directive and regulation that will provide the framework for hydrogen, natural gas, and renewable gases. In 2024, both federal and regional governments will have to consider whether their respective initiatives are still in line with this European framework.
In addition, the legislative process on a decree for the transport of carbon dioxide (CO2) is currently under way in Flanders. This decree introduces, among other things, local clusters, closed industrial networks and the transport network for CO2, for which one or more operators will also be appointed. The necessary implementing measures are also in preparation. Here too, 2024 promises to be an interesting year.
Heat grids
In 2023, the Flemish energy regulator VREG stated that 85 active heat networks had been reported in the Flemish Region. In addition, there were indications that many smaller heat networks were being constructed which had not (yet) been reported.
There is sometimes confusion about the term “heat network” because, in the Flemish regulations, in addition to large-scale industrial and district heating networks, communal sources in apartment buildings are also classed as heat networks. The latter type can be described as “self-sufficient” heat networks, because they are, in principle, not dependent on an external (residual) heat source. It is therefore difficult to estimate the number of heat networks that are currently in the design, financing and/or construction phases.
In our practice, we see a substantial increase in the construction and operation of both industrial heat networks and district heating networks (often with a link between the two) and “self-sufficient” heat networks. Energy-as-a-Service (“EaaS”) models are also increasingly being implemented in real estate projects. Here, an Energy Services Company (“ESCO”) acts as heat producer, heat network operator and/or heat supplier, possibly in combination with other energy-related services, such as the construction and operation of electric vehicle charging infrastructure.
Considering, for example, legal restrictions on new fossil gas connections and the increasingly limited available space suitable for project development, our assessment is that the demand for and investment in (self-sufficient) heat networks will only increase.
The construction, expansion and operation of heat networks will continue to generate legal challenges in 2024. The applicable regulations have been thoroughly amended in recent years (especially in Flanders, and it is to be expected that Wallonia will catch up), putting traditional business models under pressure. Furthermore, such projects are characterised by technical challenges and innovations, the need for long-term contractual relationships, the often-complex property-law structuring, and the friction with fundamental regulations on electricity distribution. All these elements also give rise to various legal issues, where timely (legal) structuring is crucial. In addition to already common heat sources such as CHP plants, geothermal sources, heat pumps, solar panels and solar collectors, we also expect an increase in the use of semi-public heat sources such as energy harvested from rivers or sewage systems.
Electric vehicles and charging infrastructure
The car tax reform has triggered a very rapid electrification of the Belgian car fleet. This trend is expected to continue in 2024.
As a result, additional investments in the construction and operation of charging infrastructure will inevitably have to be made in 2024, whether at workplaces, at consumers’ homes, or along public highways. In Wallonia, there is a need to catch up. Furthermore, the Flemish Region will have to consider, among other things, obligations to provide charging infrastructure in new buildings and major renovations of residential and non-residential buildings. In real estate projects, questions increasingly arise regarding the applicable regulations and the general business-law and contractual structuring of such projects. Here, too, we see an increase in EaaS models where, for example, an ESCO operates the charging infrastructure and/or relieves the co-owners’ association in apartment buildings of technical and administrative concerns.
Virtual consumption of decentralised electricity
In 2024, we expect additional questions regarding virtual alternatives to the physical offtake of decentralised electricity. In April 2023, VREG approved a protocol developed by Fluvius on energy sharing, peer-to-peer trading of green electricity and the selling of green electricity in apartment buildings or multifunctional buildings. In practice, the application of these virtual alternatives is not straightforward. There are problems of interpretation regarding the legal basis, and users appear to be insufficiently aware of the fact that costs other than for the energy component, such as network tariffs and levies, remain payable.
Questions also remain about citizen energy communities and renewable energy communities, each with their own rules of the game. Under the current Flemish framework, energy communities should provide a platform for consumers and companies to jointly invest in sustainable energy solutions, such as solar panels and charging stations. As of today, 80 energy communities have already been reported to VREG, but it is unclear whether they in fact all meet the requirements to qualify as an energy community, given that there is no substantive monitoring. Furthermore, a recent cost-benefit analysis commissioned by VREG concludes that collective activities generally contribute little to reducing the grid operator’s investment needs. Only under certain circumstances would collective activities provide limited benefits for the distribution network.
Nuclear energy
In late 2023, the federal Government reached an agreement with French energy group Engie on the extension of the operation of the Doel 4 and Tihange 3 nuclear power plants. This extension is considered unique and crucial to further guarantee Belgium’s security of electricity supply over the next 10 years. The necessary legislative drafts will be debated in Parliament in 2024, and the European Commission needs to approve the agreement. The agreement will ensure security of supply in the short to medium term. However, security-of-supply challenges remain, and further initiatives can also be expected here.
Infrastructure works
Grid operators are facing large investments to modernise their electricity grids and adapt them to the further roll-out of decentralised generation units. As a result, the Dutch electricity network has been experiencing congestion problems for some time, which means that no or only limited capacity can be offered for new connections or the expansion of existing connections. This problem is now also quietly manifesting itself in Belgium. Especially in West Flanders and Hainaut, the high-voltage grid is approaching its capacity limits. In anticipation of planned grid upgrades, with the Ventilus and Boucle du Hainaut projects, Elia started offering temporary flexible connections in 2023, whereby the system operator retains the right to switch off connections at peak times. Between 2024 and 2028, the high-voltage operator plans for EUR 9.4 billion in investments in Belgium.
In 2024, our Energy team remains ready to assist our clients with a multidisciplinary approach in the above-mentioned fields or other aspects related to the further transformation of the energy sector.
