Competition effects of the renewable energy policy reform in Flanders

Annemie Bollen, Socio-Economic Council of Flanders (SERV); Peter van Humbeeck, Univer­sity of Antwerp (UA) and Socio-Economic Council of Flanders (SERV)

To promote renewable electricity, Flanders is using a system of tradable green certificates. Despite the many modifi­cations in the past, problems have risen instead of declining. Almost everyone now agrees that an important change in policy is needed. The main question is: do we keep looking for solutions within the existing system or do we stop using a system depending on trade in a green certificates market? An insight in how this market works makes this question easier to answer, but this is commonly not well documented nor understood. We show that in the case of Flanders some major and persistent problems with the green certificates are closely linked with to choice for a mar­ket system. The reason is that this market is not working properly, due to concentration on the demand as well as on the supply side. Even in a serious modified system of tradable green certifi­cates, sufficient competition in the elec­tricity market and in the green certificates market is an impor­tant precondition, and one that is very hard to meet in Flanders. We therefore propose a different incentive scheme for renewables that also can work in a more concen­trated market. If a proper func­tioning of de market cannot be guaranteed, this option is more effective, efficient and just. Another conclusion is that the current problems and debate point to a structural failure in policy preparation. The competition effects and impacts on markets are not assessed ex ante nor ex post by the market regulator VREG or the energy agency VEA when preparing or evaluating energy regulation in Flan­ders.

This information is however crucial to make good policy decisions. We suggest VREG to get its priori­ties right and build more capacity for adequate market analysis and regulation.