Surging costs cloud outlook for Belgian Princess Elisabeth wind island

The budget for the Princess Elisabeth Zone project – which will link up with a planned artificial energy island in the North Sea – has roughly doubled from 3.6 billion euros, mainly due to a combination of inflation, rising material costs and a scarcity of HVDC grid infrastructure, according to Belgian TSO Elia.

Due to the rising costs, Elia recently announced that it would postpone signing the HVDC contract with an undisclosed supplier.

“The doubling in costs – from 3.6 to 7-8 billion euros – was almost exclusively caused by unpredictable external factors. That’s why the Elia Group board decided to postpone the signing of the contracts for the HVDC infrastructure,” a spokesperson for Elia told Gas Outlook.

In an update on February 18th, Elia said it is “aiming to keep all options open by delaying this decision” and called for a “calm debate” as it is ready to fully cooperate with the involved parties to weigh up different concepts.

Meanwhile, the construction of the foundations of the artificial island and the implementation of the previously-signed alternating current (HVAC) contracts continue unabated, it said.

Elia’s decision mainly affects one of the three planned offshore wind farms (1,400 MW) in the Princess Elisabeth Zone, delaying its development by at least three years. However, the commissioning of the first two wind farms – for 700 MW and 1,400 MW capacity, respectively – are still expected to go ahead.

Yet the delay is not without repercussions for Belgium’s energy security and decarbonisation goals, as nuclear reactors come offline.

“This delay postpones the development of a 1,400 MW offshore wind farm and a possible interconnection with the UK. As a result, Belgium could face supply security concerns between 2030 and 2032, that need to be tackled in another way,” Wouter Vandorpe a Brussels-based Partner in the Energy & Utilities Practice at lawfirm Fieldfisher, told Gas Outlook.

“The delay also inevitably leads to this park not being able to contribute for Belgium to complete the EU-wide renewable energy target of 42.5% by 2030, as this park will no longer contribute in time.”

The tender for the first 700 MW offshore wind farm in the Princess Elisabeth Zone was launched in November this year and the winner is expected to be announced in the fourth quarter of this year, according to the government. The wind farm could start producing first electricity in the fourth quarter of 2028. Tenders for the second and third wind farms are envisaged sometime between 2026 and 2028. The auction model is based on two-way Contracts for Difference (CfDs).

New government

Belgium’s new government, a five-party coalition led by Flemish nationalist Prime Minister Bart De Wever, has signalled a potential review of the framework conditions for the second and third tender. The government is expected to make a decision on the future of the offshore wind projects and the associated energy island by the end of March in light of Elia’s recent announcements, a spokesperson for the cabinet of energy minister Mathieu Bihet confirmed when contacted by Gas Outlook.

It now seems like the process could drag on for a little longer.

“Now in terms of timing, we have now, of course, ongoing discussion with the Belgian government, and they have announced, by the way, that they wanted to have a decision in the near future. I think we will now be working on a solution towards the summer, I would say,” Bernard Gustin, CEO of Elia, said during an earnings call on March 7th.

The CEO also noted that delays to other offshore wind projects could improve the supply chain situation.

“[…] we see that some other projects are also a little bit more on the slower path, which I hope will bring the supplier market to a more reasonable level,” he said.

Meanwhile, Vandorpe notes that the coalition agreement from January 31st states that it will implement the already-made agreements regarding the Princess Elisabeth Zone, hereby suggesting that tender conditions for the first wind farm will remain unchanged. However, at the same time it adds a proviso by stating that it will evaluate the results of the tender for the first wind farm. This leaves the door open to modifications even after receiving all the offers from the wind developers, he said.

“From a legal standpoint, a tendering authority has broad discretion to pause, modify, or withdraw an ongoing tender. Such changes are not unusual, but from a commercial perspective, stability of rules during tendering procedure is of course crucial to attract the best consortia to aim for these Belgian offshore wind parks at the best price,” Vandorpe said.

“So if changes are made, these should be announced well in advance, plus they should keep the rights of all potential tenderers equal at all cost,” he added.

Along its modest coastline, Belgium targets 8 GW of offshore wind capacity by 2040, up from around 2.3 GW of installed capacity currently.

As for security of electricity supply, Belgium is heavily dependent on output from its two nuclear power plants, Tihange and Doel, which in 2024 generated more than 40% of the country’s electricity, according to data from Elia.

The European Commission recently approved an extension of the lifetimes of the Doel 4 and Tihange 3 reactors by 10 years from 2025 to 2035, however the new government wants to extend this by another ten years. The two reactors have a combined capacity of about 2 GW. The remaining five reactors are expected to go offline in 2025.

Meanwhile, the government has said it will support new nuclear build-out in the country.

Offshore and onshore wind and solar accounted for 10%, 8% and 12% respectively of Belgium’s electricity generation in 2024, while gas accounted for less than 18%.