Tue Nov 9th, 2010 at 08:01:22 AM EST
Current Dutch energy policies are failing to sustain consistency towards energy transition - not particularly news, but underlined by a new report, released last week, available here. It is the parting message of the Advisory council for research on spatial planning, nature and the environment (RMNO) - an advisory body that got dismantled by the minister last year. Perhaps the dismantlement spurred the council into an increased critical tone, but it's telling nonetheless of the sad state of affairs in the Netherlands.
Rather hopelessly, though, the report reads as a to-do list for the government. Specifically, the council encourages the continuation of Carbon Capture and Storage (CCS) and enforce CCS developments even when the CO2 price makes it an unprofitable business; harmonisation in off-shore wind with neighbouring countries; create policies for heat production and conservation, and development of an electric "smart grid" at the European level. Particularly the German Feed-In Tariff framework is hailed as an overwhelming success.
Thus in short: a success in energy transition, relies on a national government with a proven track-record of dismal interest. Yeah us.
Not-withstanding the pros and cons of each subject (which I will leave alone), the overarching theme in the report is a plea for active involvement of government into these topics, and the report cites the transition from coal & oil to gas during the 60s last century as a key example of the prominent role of government in this successful transition. Yet at the same time, a missing sense of urgency and the lack of a long-term strategy, a coherent vision on energy security and energy durables, and no political direction at the government level are listed by the council as the prominent reasons of the sorrowful state of Dutch energy transition to renewables.
Germany, much praised and analysed in the report, introduced a key law on durability in 2000 (and got improved since). But from that 2000 law flowed the Feed-In Tariffs, long-term contracts, subsidies and quotas:
But what is it that makes RES such a success story and is it possible to adopt and copy this approach in other countries? The Feed-in Tariff (FIT) constitutes the legal framework for the promotion of RES. This policy mechanisms designed to encourage RES deployment and to facilitate grid parity was first explained in Germany´s 2000 RES Act. This act was preceded by Germany´s Act on the Sale of Electricity to the Grid (1991-2000) and since its original publication in April 2000 two adapted versions have been passed in 2004 and 2009. The main principles of the FIT are a guaranteed grid access for RES based electricity, long-term contracts over 20 years and purchase prizes that are methodologically based on generation costs and tend towards grid parity. An annual degression rate of currently 1.5% on purchase prizes is incorporated to encourage innovation towards higher efficiency rates.
This bundle of measures creates a certainty of annual revenues that is especially imperative in the case of RES requiring high initial investments but relatively low maintenance and resource costs. The extra costs caused by the FIT are finally passed on to the consumers. Financial support systems such as the FIT, subsidies, quotas or green certificates are indispensable to help covering the cost disadvantages faced on liberalized electricity markets. A number of studies conducted by amongst others the European Commission and the International Energy Agency found that financial support schemes based on a well-adapted FIT are most efficient in terms of capacity and generation figures. This success of the FIT induced many countries to adopt and adjust the FIT system. As of 2009, versions of the FIT have been enacted in 63 jurisdictions including Australia, China, France and Spain.
Funnily enough (funny for the cynics), the exact opposite rules in the Netherlands. In 2006, haphazard subsidies for windmill installations were simply scrapped, leaving investors in the lurch. This was then replaced by the current SDE regulation, partly based on the German model, but the government wrecked it by excluding long-term guarantees, limiting the budget, and only extracting funds from the income from selling natural gas. Side effects include that subsidies for installing solar panels are so dazzlingly complex and bureaucratic, it can be considered discouragement to even try. Despite that, money dries up on the very first day people can subscribe for subsidies, leaving thousands without subsidies. In contrast with that, feed-in tariffs for Dutch wind are too low to get wind profitable except for windmills at the shore line, and thus the budget pool keeps largely untouched.
As the RMNO report highlights, subjects as CCS, heat generation and conservation, and a "smart grid" all lack government vision. The council best responsible to bridge the gap between politicians and scientists and for developing long-term strategy, the RMNO, gets scrapped. Its tasks are redirected to the Netherlands Environmental Assessment Agency, which doesn't seem to advise the ministry of Economic Affairs (the ministry that got most of the criticism).
And to top it off, we now have a government at the helm that preaches less government involvement.