With the National Energy Accord, signed on 6 September, the Netherlands has its own version of the Energiewende. Or has it? Energy Post editor Karel Beckman explains the ins and outs of the Accord and discusses its implications for the future of Dutch energy policy. His verdict: despite the hype that has surrounded the Accord, it does not come anywhere near an “energy transition” in the German style.
Why an Energy Accord?
The origin of the Accord was a Parliamentary motion on 26 April 2011 that called on the government to develop a “National Energy Transition Accord”. Underlying reason for this vote was the fact that Dutch energy and climate policy had been as erratic as the wind in the years before, under different governments. As a result, the country was lagging behind other EU members in renewable energy, with just a 4% share of renewables, far removed from tts EU target of 14% in 2020.
TheLiberal-Labour government that started in office in November 2012 agreed in its coalition agreement that the Netherlands should get a “fully sustainable” energy supply in 2050, “within an international context”. Subsequently, the Social-Economic Council (knowns as the SER in Dutch), a high-level advisory board of the government, in November last year took it upon itself to get a wide range of civil society groups together to sign on to a grand “energy transition accord”. The government gratefully consented to this proposal.
Intense negotations followed and on 6 September more than 40 organisations signed what was now called the “Energy Accord for Sustainable Growth”. The signatories include the big labour unions and employers’ associations, major environmental organisations (including Greenpeace and WWF), various business associations (e.g. in real estate, construction, transport, banks and pension funds), the National Association of Municipal Councils and, most importantly, the government itself in the guise of Minister of Economic Affairs Henk Kamp.
Many of the participants were quite euphoric about what was described as an ‘historic’ moment. The Chairman of the SER, Wiebe Draaijer, speaks of an “ambitious agreement” in his foreword and even twice calls the negotiators “heroes” for having achieved the accord.
What is the official status of the Accord?
It is difficult to pinpoint what exactly the official status is of the Accord. On the one hand all the groups mentioned, including the government, put their signature to it. At the same time, the Accord does not contain anything that could be construed as legal or contractual obligations. There are no legal instruments or mechanisms attached to it, although it does promise that various laws and instruments will be drawn up and implemented in the coming months and years.
In an English-language press release, the SER put it like this: “Continuity and support for the agreement require a proper anchoring mechanism and good governance. The starting point is to tackle the many action points and procedural arrangements that the parties have agreed in this context. The effectiveness of the agreement therefore depends on our success in anchoring the relevant arrangements and in monitoring their progress and incorporating learning effects.”
Thus, for all the euphoria surrounding the Accord, it is at this moment nothing more than a collection of good intentions. As long as none of the agreements in the Accord are implemented into laws, there is no guarantee that a future government (or even a future Greenpeace) will feel beholden to it.
What are the goals of the Accord?
The Accord does not contain any broad policy goals or a broad vision of where the signatories believe the country should be at some point in the future in terms of CO2 reduction or fossil fuel use or any such criterion. In that sense it is much more modest and pragmatic than the Energiewende, which has as its final goal a 80-95% reduction of CO2 emissions in 2050 compared to 1990 and a target of a 50% reduction of primary energy use (in absolute terms) in 2050.
The text starts out with this telling summary: “In this Accord more than forty organisations have laid the basis for a robust, future-proof energy and climate policy enjoying broad support… This agreement offers long-term prospects with arrangements for the short and medium term, creates trust, and thus reduces investment uncertainty among both individuals and businesses. The agreement will give a major boost to investment and employment and help the faltering economy get back on track as quickly as possible. It will also minimise the burden on households and businesses.”
Aside from the fact that it is a bit odd for the SER to claim that the Accord “creates trust”, which is after all not for the authors to decide, what is noteworthy here is that the Accord not only aims to be good for the environment but also for the economy. In other words it is as much an economic as an environmental agreement: it promises that its implementation will lead to jobs and growth and will place only a minimal burden on consumers and businesses.
What has been agreed in the Accord?
In more concrete terms, according to the Accord the signatories “will make an effort to reach the following goals”.
- “A saving in final energy consumption averaging 1.5% annually. This is expected to be more than enough to comply with the relevant EU Energy Efficiency Directive.”
- “In this context, a 100 petajoule (PJ) saving in the country’s final energy consumption by 2020.” (In a footnote it is said that 1 PJ is equivalent to the energy consumption of 15,000 households.)
- “An increase in the proportion of energy generated from renewable sources from 4.4% currently to 14% in 2020, in accordance with EU arrangements.”
- “A further increase in that proportion to 16% in 2023.”
- “At least 15,000 full-time jobs, a large proportion of which will be created in the next few years.”
These are all quite short-term goals that do not reach beyond the next ten years. Nor can they be construed in any sense as particularly “ambitious”: both the energy savings target and the renewable energy target – the two mainstays of the Accord – have long been adopted in EU legislation. In fact, the Accord does not contain any goals or agreements that go beyond existing EU (and Dutch) legislation.
Why then the enthusiasm about the Accord? What is new about it is that, after years when civil groups in the Netherlands could not agree on energy and climate issues and successive Dutch governments kept changing energy policy, now all those groups as well as the government have finally agreed on a set of a concrete efforts which they have promised to undertake. These should finally lead to the realisation of energy savings and renewable energy targets that may have been on the books already but in real life seemed very far out of reach.
What then are the actions or efforts that have been agreed on? The text describes ten categories or literally “foundations” that the Accord is said to rest on. I wil discuss only the most relevant of those, since some of the “foundations” turn out to be little more than policymaking intentions (such as the intention to lobby in Brussels for a “strengthening of the EU Emission Trading Scheme” or “to prepare the electricity grids for the integration of renewables in the energy system”) and others are too detailed or local to be of interest to general readers.
The chapter on energy savings contains a great many different actions and intentions, that presumably should all add up to the aforementioned savings target of 1.5% per year, although no attempt has been made to quantify the effects of the various measures. Many of the measures that are listed concern the implementation of existing rules and regulations, such as building codes and energy efficiency standards.
The municipal councils managed to obtain for themselves a new role as “energy saving facilitators” who will act as “intermediaries” between consumers, businesses and other institutions, but the councils are not held to any specific targets.
Civil society groups, business and government have promised to carry out a PR campaign to promote energy saving starting in 2014. In addition, business will also wage a campaign to get consumers to replace old (inefficient) household devices.
The energy suppliers have promised to make households that have acquired a smart meter an “offer” to help them save energy. The Ministry of Finance has promised it will come up with a practical method for energy suppliers and other market parties to provide consumers with loans and other financial instruments to promote energy saving. The government will also establish a revolving fund of €150 million to stimulate energy efficiency measures. In addition, the government will make €400 million available to social housing corporations to invest in energy savings measures. This money will be paid out of an increase in energy taxes.
Increasing renewable energy production
The Accord promises to achieve 14% share of renewable energy in 2020, in line with EU obligations, to be increased to 16% in 2023. The financial instrument that will be used for this is the existing subsidy scheme (called SDE+), which is not a feed-in tariff in the German style, but essentially a straightforward subsidy, paid for out of taxes, and based on differentials between cost prices of renewable energy and market prices. The amount of SDE-subsidy that is available is limited (i.e. not open-ended) – it will gradually rise to €3 billion annually in 2020.
One of the more significant elements in the Accord is that the signatories have agreed to channel most of the available renewable energy subsidies to wind power, in particular offshore wind. The reason apparently is that, as the Accord puts it, “with regard to offshore wind energy the Netherlands has competences that could result in a leading position of Dutch business in the world”.
The Accord aims at the construction of 4500 MW of offshore wind energy, of which over 4000 MW has yet to be built. Currently offshore wind farms in the Netherlands get about 17 cents per kWh in subsidies. The Accord stipulates that new offshore wind parks must cut costs by 40%. That will leave a subsidy of some 12 cents per kWh. If the target of 4500 MW is reached, the price tag for the government will run between €20 and €25 billion for this part of the Accord. (See also my earlier article about the Accord, when it was not official yet, and a column I wrote about the Accord in Dutch.)
For onshore wind, a target of 6000 MW has been agreed to, up from 2434 MW that was up and running in the Netherlands at the end of 2012. In 2012 €324 million in SDE subsidies were accorded to onshore wind power. The Accord also promises that if necessary Tennet, the Dutch electricity transmission system operator, will build a “socket” in the sea to connect the newly to be built wind farms to the grid.
Limiting coal-fired and large scale biomass-fired electricity production
In electricity production, the Accord contains a package deal in which the power producers promise to limit the use of biomass in coal-fired power stations (to 25 PJ), which incidentally will save the government €375 million in SDE+subsidies. The power companies have also agreed to close five old coal-fired power stations that were built in the 1980s. In return, the existing tax (surcharge) on coal-fired power production will be abolished – which is not insigificant as currently some 5,000 MW of new coal-fired power capacity is being built in the Netherlands.
Unfortunately for the signatories, the Dutch competition authority ACM announced on 26 September that the deal to close the old power stations “harms consumers” and thus will probably not be allowed. Interestingly, the ACM also noted that the decision to close the coal-fired power capacity will not have a beneficial effect on CO2 emissions, since “the emission rights can be used elsewhere on the European market for CO2 emission rights. Emissions are thus not reduced but are merely transferred elsewhere”. It is not clear now what will happen to this part of the Accord. The SER and the energy suppliers have said they disagree with the ACM and will take the case to Brussels if necessary.
Stimulating decentralised energy production
The Accord sets out the aim that over 1 million households and small businesses should supply their own electricity use “to a substantial degree” by 2020. It tries to achieve this by “giving people more options for generating renewable energy themselves, with local and regional initiatives being supported – where necessary and possible – by municipalities, provinces, and central government”.
Concretely, “with effect from 1 January 2014, tax relief of 7.5 eurocents per kWh will be introduced in respect of renewable energy generated by a cooperative or by an association of owners if the energy is then also utilised by small-scale consumers, and if the members of the cooperative or association and the installations are located within a four-digit postcode plus adjoining postcode areas.”
It adds significantly that “The parties agree that this arrangement should be made as simple and efficient as possible, with energy providers making arrangements with central government to ensure this”. Incidentally, the “tax relief” that the cooperatives get is to be paid for out of an increase in energy taxes for everyone else.
Mobility and transport
Unlike in other areas, in the important mobility and transport sector no short-term measures were agreed to. Instead, the signatories have agreed on ambitious targets for 2050 in this sector, namely a 60% reduction in CO2 emissions compared to 1990) with a reduction of 25 Mton (-17%) in 2030.”
The Accord notes that “in order to achieve this, the parties have drawn up a green agenda for growth setting out long-term prospects and short-term measures. Steps will be taken in twelve key areas. The parties will shortly produce a shared overall strategy concerning the future fuel mix, public-private partnership in preparing the market, source-specific policy and Dutch leadership, and arrangements regarding the public infrastructure for charging electric vehicles.”
In other words, in the transport sector, most of the work still needs to be done.
What is next for the Accord?
Reactions to the Accord have been mostly (mildly) positive, which is not surprising, as virtually all groups that have anything to do with energy have signed on to it. The major criticism probably is that the Accord does not go beyond 2020.
There has been very little political debate about the Accord so far (this could still happen if it starts to sink in how much the government has promised to spend on offshore wind power) and hardly any public debate. Again, this last is not surprising, as the Accord – unlike the German Energiewende – does not involve any sense of public mission or sacrifice. There has no been direct reaching out to the Dutch public. In that sense it is not clear yet to what extent the Dutch people support an Energy Transition and what they would be willing to do for it.
As the Accord is not “anchored” in public support yet, its ultimate success remains uncertain. Indeed, the most telling aspect about the Accord perhaps is that such a modest step forward is hailed as a major policy breakthrough.
An English summary of the Accord can be found here.