BELGIUM: An Introduction to Energy

The Belgian Energy Sector 

The Belgian energy sector:

- is embedded in the regulatory heart of the European Union, the so-called 'EU village' in Brussels, which constitutes the centre for regulatory and advocacy activities relevant to the sector;

- is located at the intersection of the markets with integrated cross-zonal bidding zones for electricity, interconnectors, heavy industry and LNG terminals for natural gas and developing infrastructure for hydrogen, to name a few;

- is known for having been an first mover's industry and knowledge of offshore (farshore) wind energy projects.

Whether it be in the traditional fuel sectors or in the continuing development of – onshore and offshore – renewable energies, Belgium has been at the forefront of development for many decades.

In this context, the Energy & Utilities Team at Fieldfisher Belgium has been and continues to be particularly well placed to advise public and private market operators on commercial and regulatory issues.

Recent Structural Trends 

The Belgian and EU climate and energy markets have recently witnessed a number of structural trends mainly driven by the extreme electricity and gas prices, resulting in the following activities:

State intervention for urgency reasons 

An increase in state intervention, in the aftermath of the COVID-19 and Ukraine crises, into what traditionally were – since liberalisation – purely market-driven markets. The intervention relates to overruling contract prices and adapting market mechanisms, all under the title of urgency and regaining control over the high prices.

Market reaction to such measures 

As a reaction to this, the development by market operators of additional physical and financial hedging instruments and long-term agreements including corporate power purchase agreements, in order to have a tighter grip and provide stability on its sourcing.

Review of subsidy mechanisms 

A continuing trend of reviewing existing and future energy subsidy mechanisms towards a full investment type subsidy system or two-way contracts for difference (CfDs) mechanisms, meaning that in times of high electricity prices a payback to the government and final consumer would be required. Our clients want to know how to anticipate or react to such changes.

Customer at the heart of the market 

An enhanced consumer-centric approach adopted by both grid operators as commercial suppliers of energy, and energy-related services including aggregation, demand-response and flexibility services. We've witnessed a growing interest, both from operator's as well as on the investor's side, in developing more flexible products in the electricity market design, by supporting demand-side measures reducing peaks in electricity consumption. This often leads to complex questions regarding the ways in which such products are possible and how they can or should be supported.

Sharing  

An increasing interest from businesses and citizens into (renewable) energy communities and energy sharing. This leads to questions of reviewing setups and flows within a power project, and questions as to modalities of energy contracts within such joint efforts.

Sustainability  

An increasing interest from clients in transitioning traditional business-as-usual approaches towards more sustainable practices, particularly in light of recent regulatory developments at the domestic and EU levels, including as a consequence of the EU Green Deal.

The EU Legal Framework 

At Fieldfisher Belgium, our Energy & Utilities Team stands out as a comprehensive team of fully dedicated climate and energy law experts, working both on commercial and technical regulatory matters, accompanying large consumers and producers to achiever a tighter grip on sourcing and investments.

A second big chunk of the services to be delivered by our energy law firm is specifically related to EU energy questions and the relationship between different EU organisations in the energy field (Commission, ACER, sector organisations, European Court of Justice, regulators etc.). Large companies and operators often seek further guidance as to the exact status of energy legislation within the EU dynamics and how to participate in or challenge such law-making developments. This is all the more relevant due to the current stream of regulation announced to implement the abundant Fit for 55 package in the coming years. Today our Team receives many questions as to the revised EU ETS system, the new so-called CBAM system as to import of goods in the EU and new support and regulations on hydrogen and CCS/CCU and related state aid guidelines. We are keen to assist our firm clients in their regulatory and advocacy strategies and contract drafting on their projects for these new topics.

In our practice, the ever-changing European legal framework leads to client questions related to REMIT, capacity mechanisms and State aid for existing and new energy technologies.

Along with opening up of new market segments, we see in parallel new opportunities for clients to reconsider more traditional views on corporate housekeeping and legal strategy within a company. It is our aim to be clear on how arbitration might have a role in this, as well as how the ESG guidelines (and more strict legislation) can be taken into account in developing this strategy. Since this usually is a multi-country approach and decision within a company, energy law firms must be able to advise the client on these topics in multiple jurisdictions in and outside of the EU.

The number of climate-and utilities' related norms and standards incorporated in domestic laws and policies have  increased exponentially, alongside a developing climate change law and governance regime at regional and international levels, on which the Team has been and actively continues to advise and intervene on behalf of our clients, as well as for academic purposes.

Typical advice and assistance within these markets as an energy law firm can be categorised as follows:

- advisory and regulatory works focused on project development and regulatory issues both at EU and Belgian (federal and regional) levels;

- energy specific contract drafting equally encompassing regulated contracts and commercial agreements including highly technical – and sometimes unprecedented – contracts such as demand response services agreements, flexibility or hydrogen agreements;

- regulatory strategy and assisting multiple public authorities in public procurement for energy and utilities’ related projects including renewable energy generation and energy savings projects;

- climate and energy dispute resolution and litigation before national and international arbitral, administrative, commercial and constitutional courts, as well as before the European Courts of Justice.