Subsidies for sustainable energy are vital for facilitating transition
The Dutch government promotes the sustainable production of electricity and gas by providing subsidies through the Sustainable Energy Production Incentive Scheme (SDE). These subsidies will no longer be needed once there is a level playing field for sustainable and fossil energy. The Dutch government is in a position to actively promote this development.
Eneco calls on the Dutch government to promote a completely level playing field. This will be achieved once the social costs of fossil energy and nuclear energy, including CO2 emissions, pollution and climate issues, are calculated into the cost price and fossil fuel no longer receives government financial support. Once this occurs, there will no longer be a need to subsidise sustainable energy. At that point sustainable energy will be in a position to win the competitive battle with fossil fuel on its own volition. Actively promoting the sustainable generation of electricity will, however, be necessary until this level playing field is achieved.
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SDE+ lacks a number of necessary improvements
The Dutch government promotes sustainable energy production by providing subsidies through the Sustainable Energy Production Incentive Scheme (SDE). In connection with the installation of the new Dutch government led by Prime Minister Mark Rutte and Vice Prime Minister Maxime Verhagen, a new version of the SDE scheme will go into effect from 1 July 2011. This new version, called the SDE+, will be financed from a surcharge on the energy bills of individuals and businesses.
Eneco applauds the fact that the SDE subsidy scheme will be continued, but believes there is still room for substantive improvements with respect to a number of points.
Eneco is calling for a number of necessary improvements to be made to the SDE+.
The Dutch government will be unable to achieve the European target of 14% sustainable energy in 2010 with the limited budget it has allocated for the SDE+. It will, after all, be necessary for the Dutch government to make sufficient subsidies available within the context of the SDE+ in order to be able to genuinely achieve the EU targets.
The Dutch government has currently only allocated budget for the SDE+ for the period 2013 through 2015. Eneco is appealing for long-term certainty regarding the budget for the scheme. This would provide the required certainty for investors in sustainable energy.
Eneco is furthermore calling for the limited resources of the SDE+ to be utilised efficiently. This means that, when awarding subsidies, proper checks should first be carried out to determine whether the involved project will actually be realised. It is vital that more stringent feasibility tests be introduced. There is also scope for improvement with respect to the way in which the amount of subsidy is calculated. This will also make it possible to apply the subsidy more efficiently.
* SDE+ is an incentive for large-scale sustainable energy production, such as wind farms.
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Requiring suppliers to provide sustainable energy: only if this will improve the investment climate
The SDE+ scheme will be evaluated in 2014. The option of requiring a mandatory share of sustainable energy will also be addressed at that time.
Requiring suppliers to ensure a certain percentage of the energy they supply is generated sustainably in the Netherlands represents a means of stipulating a mandatory share of sustainable energy.
Eneco believes a supplier obligation can only be effective providing that it meets strict terms and conditions.
Eneco is convinced that suppliers should only be legally required to provide sustainable energy providing that this would bring about a genuine improvement with respect to the SDE+ and providing there is a solution to the risk of coal-fired plants benefitting disproportionately from this measure.
Requiring suppliers to provide sustainable energy could, in principle, prove to be more beneficial to the investment climate in sustainable energy than the current SDE+. This is because the SDE+ has a limited government budget, while the market would pay for the mandatory provision of sustainable energy by suppliers. It would be vital in this case for energy companies to be able to charge on all costs and for all sustainable sources, including wind at sea, to fall under the mandatory provision of sustainable energy by suppliers.
Mandatory provision does entail the risk of energy suppliers becoming too dependent on producers in general and on coal-fired plants in particular. This would be the case if energy suppliers such as Eneco had not yet been able to develop sufficient own sustainable production capacity (considering that a wind farm can easily take eight years to complete). In that event Eneco would be obliged to purchase sustainable energy derived from co-firing biomass in coal-fired plants. The supplier obligation would in this instance lead to coal-fired plants that co-fire with biomass gaining a position of power in the sustainable energy market. It is imperative that a solution be found for this.
The solution can be found, in example, by obligating both suppliers and producers to generate a proportion of their energy sustainably. This would create a more balanced market. In keeping with this, Eneco supports requiring Biomass Co-Firing in coal-fired plants without the provision of additional subsidies because otherwise the least expensive method of producing energy would lead to an unfair competitive advantages for coal-fired plant operators.
** Supplier obligation means suppliers must ensure a certain percentage of the energy they supply is generated sustainably in the Netherlands.
Mandatory biomass co-firing rather than subsidies
Eneco is committed to sustainable energy and consequently does not have any coal-fired plants. Coal is scarce and supplies are being depleted. Coal-fired plants furthermore emit large amounts of hazardous materials, including CO2, by burning coal. This leads to climate problems and entails health risks. The coal chain from extraction to emissions is not sustainable. We would prefer to see other parties’ plans to build new coal-fired plants not go ahead because their construction would result in a substantial increase in CO2 emissions and because a larger supply of energy from coal would impede the transition to sustainable energy.
Co-firing biomass in coal-fired plants constitutes a relatively inexpensive way to produce sustainable energy. While Eneco does not have any coal-fired plants itself in keeping with its sustainable strategy, it nonetheless believes that co-firing biomass at existing coal-fired plants could contribute to the required production of more sustainable energy.
Eneco is calling for requiring rather than subsidising coal-fired plants to co-fire biomass.
Co-firing biomassa along with coal makes the electricity from the plants more sustainable and reduces CO2 emissions. Promoting biomass co-firing is consequently a good thing.
We would, however, like to see the Dutch government promote biomass co-firing in a different manner than is presently the case. The Dutch government currently promotes biomass co-firing by granting subsidises. This biomass co-firing subsidy compensates the coal-fired plants for the price difference between coal and biomass. As a result polluting coal-fired plants receive subsidies from the government in order to be less polluting. Eneco does not believe this is right based on the principle of ‘the polluter pays’. Subsidies for biomass co-firing maintain the unlevel playing field between grey and green.
It would be fairer and more effective to obligate coal-fired plants to reduce their emissions.
Requiring biomass co-firing instead of subsidising it would mean that the costs of making coal-fired plants cleaner would be paid by the operators. Mandatory biomass co-firing would also cause the measure to have a structural effect, while biomass co-firing done in the interest of gaining subsidies would cease when the subsidies expire.
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Coal-fired plants must be required to pay for operating and managing CO2 capture and storage themselves
Carbon capture and storage (CCS) can limit the emissions of coal-fired plants. Eneco applauds this because CCS means less CO2 will end up in the atmosphere. However, CCS is not yet applied on a large scale in practice. It is a reasonably new technology for which a great deal of research and investment is still required. This is why Eneco can envisage the government wanting to provide financial aid with a view to getting CCS off the ground. Subsidising the development of the technology, research, pilots and searching for applications could stimulate and accelerate this process.
Eneco does not, however, believe structural government subsidies for the operation and management of the CO2 capture and storage in coal-fired plants are appropriate. This is because the costs for making coal-fired plants cleaner must actually be paid from operating these plants in order to create an level playing field for green and grey energy.
Coal-fired plants must pay for the operation and management of CO2 capture and storage themselves.
Taxpayers should not have to pay the costs for making coal-fired plants cleaner. Based on the principle of ‘the polluter pays’, coal-fired plants should be required to pay these costs themselves and to incorporate them into the market price. This would lead to more honest competition with electricity generated from, for example, biomass, wind and solar.
The (structural) subsidies for operating CCS is consequently not in line with the Dutch government’s aim to attain a sustainable energy supply in which all pros and cons will ultimately be incorporated into the price via an open market without subsidies.
The CO2 price must be raised
Eneco would very much like to see an level playing field for sustainable and fossil energy. This is currently lacking because the social costs of fossil sources are insufficiently reflected in the cost price.
One of the causes is the excessively low CO2 price due to the oversupply of free emission rights within the EU Emissions Trading System. This guideline requires companies that have high levels of emissions, such as coal-fired plants and blast furnaces, to submit emission rights for their CO2 emissions.
They have until now received these rights free of charge from the governments in such large quantities that there is now a substantial surplus. While the energy producers will have to start buying their emission rights from 2013, the other companies will continue to receive large quantities of free emission rights until 2020. This keeps the price of CO2 too low.
An overly low CO2 price makes the price difference between green and grey energy too large and does not provide companies with an incentive for reducing their emissions. It means that a large proportion of the costs resulting from CO2 emissions will have to be paid by future generations.
Eneco is calling for a minimum CO2 price for as long as the CO2 market does not operate effectively
This will bring the price of fossil energy closer to the actual cost price and as a result sustainable energy will be able to compete more effectively with it. It also provides the emitting companies with an incentive to reduce their CO2 emissions by, for example, investing in energy savings, sustainable business processes or CO2 storage.
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The energy label must show the own production
Energy suppliers are required to use the energy label to inform their customers how the supplied electricity has been generated. The label states the percentage of the electricity supplied to customers that has been generated from coal, natural gas, nuclear energy, etc. and renewable sources such as wind energy and biomass.
But the widely applied voluntary calculation method means that the energy label primarily provides an image of an energy company’s total trading activities. As a result the energy company’s own production virtually does not appear on the label. So based on this calculation method, customers do not gain insight into the actual electricity production from coal, nuclear or gas from their electricity companies and this gives them a distorted picture of the environmental effects of the supplied electricity.
Eneco is consequently calling for one standard calculation method in which the own production will be shown directly on the electricity label.
This would mean that only the net amount of electricity that an energy company buys or sells on the market would be calculated using the current trading method. This ‘net trading method’ makes it possible to assess an energy company’s overall behaviour, i.e. how it generates electricity and what type of electricity it purchases for its customers.
Eneco will naturally apply the proposed net trading method to its own electricity label.
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Gas roundabout demands good preconditions
Gas is the cleanest fossil fuel and can be used flexibly. This is why Eneco has opted for gas as a transitional fuel in the changeover to completely sustainable energy.
A reliable and extensive supply of both natural and green gas is pivotally important within Eneco’s sustainable strategy. The Dutch government’s ambition to become the main gas roundabout of Northwestern Europe assists in ensuring this supply and receives Eneco’s support.
The Dutch government must create preconditions in order to enable the gas roundabout to be successful.
- A physical gas roundabout will not be sufficient in itself. The Dutch government will have to ensure, sometimes through additional policy and sometimes through less policy, that gas is easily tradable, that gas storage is well-organised, that gas is of constant quality and that gas transport is less expensive. In concrete terms, Eneco would like to see:
That the CO2 price is stable and sufficiently high. This will strengthen the role of gas vis-a-vis coal within European electricity production.
- That the level of investment certainty for gas storage is raised substantially.
- Clarity regarding what the quality of the gas will be and who is responsible for this.
- That customers throughout the Netherlands can buy biogas for heating or mobility.
- That regional domestic gas transport rates are eliminated.
Creating good preconditions will make gas an attractive option for investors. This is necessary considering that the business community will have to make the € 7.7 billion in investments required to achieve a well-functioning gas roundabout.
*** Gas roundabout is a trading hub for gas in which the Netherlands plays a leading role.
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New nuclear plant will not contribute to a sustainable energy supply in the Netherlands.
Eneco is committed to working towards the development of sustainable energy for everyone. Eneco, as the Netherlands’ largest independent energy company, does not believe nuclear energy fits in with this aim. Nuclear energy is neither necessary nor sustainable, but it is expensive. New nuclear capacity in the Netherlands goes against the interests of businesses, consumers and the government relating to attaining a reliable, affordable and clean future energy supply for the Netherlands.
A new nuclear plant in the Netherlands is unnecessary. Building a new nuclear plant in the Netherlands is also pointless with respect to enhancing the affordability of energy. This is because, while nuclear energy is CO2 neutral, it is certainly not clean and not sustainable. What’s more, nuclear energy impedes the continued development towards a completely sustainable energy supply.
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Energy saving schemes for everyone
Eneco is committed to sustainable energy for everyone. As a result we are dedicated to leveraging our sustainability strategy to ensure there is always energy for everyone, also in the future. Energy saving plays a pivotal role in this regard. This is because everyone who saves energy
also helps the climate, prevents pollution and conserves valuable raw materials. This applies doubly when customers combine energy saving with sustainable energy that they purchase or generate themselves.
This is why Eneco helps and supports customers by both providing tailor-made advice and energy-saving products such as the Smart Meter, Energy Manager and Wattcher. One of the three pillars of our strategy, alongside supplying and generating, is solutions: practical products and services that enable customers to save energy and to produce sustainable energy themselves.
The Dutch government has made energy saving a top priority. This is reflected in the fact that it, for example, aims in the years ahead to double energy saving in the Netherlands from 1 to 2% per year. This is closely intertwined with the goal of reducing greenhouse gas emissions and raising the share of sustainable energy to 14% in 2020.
The Dutch government has introduced a broad package of measures with this in mind, including the 'long-term energy saving plan' for businesses and institutions and the 'More with Less' Programme with which Eneco is also affiliated via the Energy Netherlands sector organisation. The Dutch government has introduced a number of resources aimed at encouraging private individuals to save energy such as the energy label for homes, public information through websites and brochures and a range of subsidy and loan schemes.
Eneco supports aiming requirements at those who determine energy consumption and they are the end users.
vernment policy must also take into account that collective heat supplies and Heat and Cold Storage (HCS) can make a beneficial contribution to energy efficiency.
Eneco also calls for making energy saving schemes more accessible and uniform nationwide. Offering schemes nationwide
Government schemes have been put in place at all different levels - national, provincial, regional and municipal. Subsidy and loan possibilities consequently vary from place to place. For example, you can apply for a subsidy for a sustainable and energy-saving green roof in Amsterdam, but not in Rotterdam. In the Dutch municipality of Voorst, the provincial government will cover one-third of the costs, up to a maximum of €500, for insulating homes built before 1980. The Province of Groningen does not, for instance, offer this scheme.
Making schemes available to everyone
The above situation makes applying for a subsidy or loan complicated for many private individuals. In order to bring about an improvement, we are calling for the implementation of one centralised government counter for energy-saving schemes that private individuals can turn to for advice and assistance with submitting applications.
These improvements will make applying for a sustainability loan or subsidy easier and more manageable for private individuals, which will mean that everyone will be able to take advantage of these schemes.
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