ODE 2022 conference: price setting in the Belgian energy market

 Written by our Consultants Thomas Craps and Principal Consultant Maarten Vansteenbeeck

Our team attended the ODE conference on price setting in the Belgian energy market. “Organisatie Duurzame Energie” is the sector organization for renewable energy in Flanders. With the current gas and electricity prices this was the perfect moment to gain some extra insights into market trends, which we would like to share with you.

The key takeaways

1. The demand in energy has not increased that much, yet the offering of gas on the market has significantly been reduced due to the conflict in Ukraine (the supply from Russia decreased by 85%). Replacing the Russian gas is a big challenge for Europe.
2. The energy prices have reached a historical peak in the last months. The situation affects us all, from businesses to private consumers. The current crisis is certainly finite, yet the upcoming years will be rough and a return to pre-conflict prices is very unlikely.
3. Both the demand for and the price of electricity and gas fluctuates every hour. Depending on the demand, different technologies (wind, solar, nuclear, coal or natural gas) are being used to produce the necessary energy.
4. There is no direct link between the price for electricity and the price for natural gas. The price is set using the marginal pricing model, the most expensive production method (see previous section) is the deciding factor.
5. On the retail market subsidizing a basic amount of energy consumption by consumers can become a long-term solution to ensure a fair energy distribution.
6. Setting a maximum price for gas will not solve the current crisis on the wholesale market itself because it does not influence the supply side of the problem. To solve the issue here, lowering the general demand will be the answer.

Did we peak your interest? The full recording is available here.

Do not hesitate to get in touch with us to discuss how your company can prepare and adapt its business processes to the changing situation in the energy market.