Energy is too important to be left to politics

Erratic Dutch policy on renewables down the years has put investors off. Now civil society has stepped in, in a bid to promote the transition to a more sustainable energy system. For years Dutch policy on sustainable energy has been characterised by its inconsistency, leading investors to cry off. While energy transition still constituted a key plank in Dutch political policy at the start of the millennium, it doesn’t even rate a mention in the current coalition accord. However the accord does designate energy (sustainable or no) as a ‘top sector’, thereby acknowledging its status as crucial to the Dutch economy.

Dutch coal and wind energy at the Eemshaven (c) ANP

What used to be known as ‘transition’ has thereby been embedded in general policy, which is based on the identification of these so-called top sectors: nine industrial sectors designated by the state as economically crucial centres of excellence at which all available subsidies and investment should be targeted. Energy is one of these (see box).

Lack of concrete goals

Despite its abandonment of an actual transition policy, the Dutch government has declared its support for ‘a realistic and ambitious green growth strategy, that safeguards the environment and security of supply’. In its coalition accord of last September the cabinet asserts: “Our country has all that’s needed to make a meaningful contribution to the rapid development of new energy sources such as sun, wind, biomass and geothermal: a sophisticated chemicals sector, an innovative agricultural sector, major ports and a strong energy sector. This development is imperative in the light of climate change and finite raw materials and is also a challenge to innovative companies (...) Internationally we are aiming for a fully sustainable energy supply in 2050.”

The so-called ‘top sector policy’ is aimed at keeping the Netherlands in the international race as a knowledge-based innovative economy. The cabinet has identified nine sectors in which the Netherlands has always been a strong player, ranging from agro/food via water to energy. Each sector is headed by a leading team of experts from the private sector, academia and government. The Energy Team is geared to innovation, resulting almost automatically in a more sustainable approach: “The Energy Top Sector sees innovations in energy as essential to achieving its goals of green and growth. In the short term – 2020 – energy innovation will cut costs. Innovations in energy will contribute to cutting the costs of reducing carbon emissions, the development of renewable resources and improving their exploitation. In the long term – 2050 – energy research and innovation will form the basis of the fundamental transition to a low-carbon economy through the development of new technologies.”

It’s this last assertion in particular that has come under fire :‘It’s like some kind of magic incantation, without anything being concretised,’ says André Faaij, professor of Energy Systems Analysis at the University of Utrecht. ‘No concrete goals, no definitions of what constitutes sustainable, no timetable, no targets for cutting carbon emissions. In other words, how is this transition actually going to be achieved?’

Faaij is scientific director of the Copernicus Institute of Sustainable Development at Utrecht University and earlier this year co-authored a critical report on Dutch transition. Together with two other leading institutes (TNO and ECN) Copernicus concluded that the Netherlands is precariously dependent on fossil fuels. Not only are state coffers heavily reliant on revenues from the Slochteren gas field in northern Groningen province, but also heavy users such as the chemicals industry, transport sector, horticulture under glass and power suppliers are financially dependent on cheap fossil fuel.
It’s partly because of this heavy reliance on traditional energy sources that the transition to a more sustainable energy system collides with major vested interests. Nevertheless the transition needs to be made now more than ever, say the report’s authors. In the medium term the Dutch are set to become net energy importers due to dwindling gas reserves. That will have major macro-economic repercussions so reducing dependence on the expensive import of fossil fuels is a must. What’s more, if the Netherlands fails to make haste in developing and implementing a sustainable energy system it’s set to lose the knowledge advantage it currently enjoys. Instead the country will be forced to buy in the new technology rather than sell it. That means losing out on crucial opportunities to profit from future growth in sustainable energy markets.
The researchers fear that existing jobs in the industry will be lost. The only way to compensate is to channel available resources into innovation in those areas where the Netherlands has traditionally been a strong player.
And there are quite a few of those, insiders say. ‘The Netherlands is an important European energy player, with a good infrastructure, high levels of knowledge, a strategic situation and enough energy sources of its own.’

The government’s coalition accord lists the following points

Biobased economy: biomass must be deployed in such a way as to achieve highest value usage. The government sees major opportunities for Dutch businesses working in tandem with foreign companies.
Energy conservation: an end to restrictive rules and regulations
The small-scale generation of energy, including solar, will be encouraged through tax breaks, to be paid for by a surcharge on the standard tariff for so-called ‘grey’ energy from fossil fuels
Offshore wind: accelerate cost reduction through incentives for innovative offshore companies
Electric transport is seen as a highly promising development for the Netherlands. The infrastructure to charge vehicles must be expanded.

Faaij can see the logic in the government’s focus on sectors in which the Dutch have a head start. That’s certainly true of biomass, which has traditionally been a major source of the country’s energy. ‘One third of all sustainable energy will have to come from biomass,’ he says. ‘But that’s not possible using first-generation biofuels. The Netherlands has the expertise to lead the field internationally in achieving the necessary innovation. And it still has a strong suit in offshore too.’

In the short to medium term, co-firing wood pellets in coal-fired plants will play a major role in ensuring a constant energy supply, Faaij believes. Alongside the technology, this involves complex logistics chains, market development, certification and organisation of international trade – all areas where the Netherlands has the extensive experience which Faaij sees as essential in building up advanced bio refinery capacity.

Consistency required

For this reason Faaij and the other authors of the critical transition report find it astonishing that even on co-firing no consistent policy exists.

In the short term – 2020 – energy innovation will cut costs

Each successive government has developed new ideas, some of which seem to directly contradict those of the preceding policy makers. The upshot smacks more of political point-scoring than a bid to profile the government as a reliable partner, Faaij believes. As a result investors are scared off. ‘And soon, as has happened before, we’ll be forced to buy expensive new technologies rather than being able to supply them worldwide.’

So what is the government doing to safeguard long-term investment in sustainable technologies? A major tool to boost the share of renewables in power generation is the incentive for sustainable energy production SDE+, according to the economic affairs ministry. This incentive was introduced by the previous government and is being continued by the current administration in the interests of consistency, the ministry says. It parries complaints about stop-start subsidies said to have discouraged investors by saying that many of the policy changes in the past were implemented in response to demands from the sector and weren’t initiated by government.

Energy is too important to be left to politics, the highly critical transition report seems to be saying. And employers and unions seem to agree. True to Dutch form, the social partners have got round the table to figure out a realistic transition to a sustainable energy system. Greens, corporates, government ministries, employers, employees and scientific researchers have all joined the deliberations. The talks are being chaired by the Socio-Economic Council SER, the government’s leading advisory body.
As long as the talks continue, no-one is hazarding a guess on their outcome. SER chairman Wiebe Draaijer has however outlined the principal goals: a responsibly managed reduction in Dutch dependence on fossil fuels and to profit through innovation from a sustainable system. ‘In Germany around 400,000 people work in the sustainable energy sector, while we employ a scant 10,000’, Draaijer said. ‘We have a great deal of expertise, but when you ask what the truly smart investments are, there’s no answer.’ Draaijer sees the government’s role first and foremost as a reliable director of the transition process.

In the Dutch consensus economy, political parties tend to adopt any agreements reached by the SER almost without question. In a letter to MPs, minister for economic affairs Henk Kamp, whose brief includes energy transition, welcomed the SER’s initiative. But at the same time he emphasised he would view the outcome with a critical eye to assess whether it fitted with government policy. In other words: it mustn’t cost too much money. Asked whether a SER agreement would take precedence over the coalition accord, the economic affairs ministry was non-committal. ‘In the process of reaching an energy accord we will continue to implement the coalition accord’a ministry spokesman said. ‘Only once an accord has been reached will we be able to see whether it differs in certain aspects from the coalition accord. But at this stage it is far too early to speculate on that.’

But not everyone is pleased about the SER talks initiative. The more parties round the table, the greater the chances of the talks resulting in a lacklustre compromise, fears

Instead the country will be forced to buy in the new technology rather than sell it

Jan Rotmans, professor of Sustainable Transition at Rotterdam’s Erasmus University. A broad support base will end up preserving the status quo, he argues in a column on the politically/socially engaged Internetsite Joop. ‘In the short term, Greenpeace and Shell are incompatible: Greenpeace asserts that the Netherlands can be fossil free by 2050, while Shell’s stance is that fossil will remain dominant until 2050.’

Consensus could lead to congestion

Consensus talks won’t succeed in breaking the mighty industry lobby for fossil, Rotmans predicts. ‘Inevitably the compromise will be that radical intervention will be pushed back, beyond 2030. As such the predictable outcome of the whole SER process is that gas and coal remain dominant until 2030 and only after that will there be any leeway for radical change.’

Wiebe Draaijer, being the SER Chairman welcomes the talks, as could be expected, but like Andre Faaij, he warns at the same time the country needs to break with current trends. To achieve the targeted 16% sustainable energy by 2020, renewables’ existing share of national power generation needs to almost quadruple from the 4,4% level it’s been languishing at for years. According to the ministry of economic affairs, the government has set aside ‘sufficient means’ to hit the 16% target. But Faaij reckons it will be impossible to reach goal and keep all the interested parties happy. In the short term the transition is bound to hurt a national economy dependent on fossil fuels, and critics believe that in its policy-making the government has already pandered too long to the power companies and other major vested interests such as industrial heavy users.

‘It’s difficult for the government to respond to these kinds of generalized criticism’, the economic affairs ministry says. ‘It’s important that energy policy has the support of all the players involved. We let everyone have their say and weigh all the interests as carefully as possible.’

Resist the lobby of the major players, however important they may be to the treasury, is the advice of many of those involved.

Asked whether a SER agreement would take precedence over the coalition accord, the economic affairs ministry was non-committal

Climate professor Piet Vellinga, for example, who designed his own transition model, sees industry as the biggest obstacle to change. ‘The model shows that industrial power use is triple that of households’, he notes on website Energieoverheid.nl. ‘Previously I thought that energy consumption was equally divided over transport, households and industry, but the model shows that industry accounts for two thirds of power use and the other two sectors one sixth each. That means that all those in favour transition – and I see myself in this group – come up against industry.’

Illustrative of the diverging views and interests regarding transition policy is that Vellinga’s data is itself a source of dispute. Faaij, for example, points to figures given by the country’s national statistics office CBS, using the data to support his argument that much can be gained by focusing on energy use in the built-up environment. ‘Of course industry is a heavy user, but don’t disregard the opportunities for energy savings by household consumers,’ he says.

The latest CBS statistics show that in 2011 total Dutch energy consumption fell by a provisional 6.7% compared to the previous year. The biggest fall was in household consumption, which declined by 15%, mainly due to a relatively mild autumn and winter in 2010/2011.
Industrial energy use declined by nearly 5% (provisional figures) over the same period. In 2011, notes CBS, various industrial sectors used less power but there were also various sectors where energy consumption rose. The cyclically sensitive petrochemicals industry required significantly less oil as raw material for plastics manufacture. In almost all sectors of industry natural gas consumption in 2011 was lower than in 2010.

But whatever the numbers, Faaij and others believe that a managed transition to sustainable energy – whereby vested interests will inevitably have to give ground – is more necessary than ever. Faaij: ‘There’s no alternative: the transition to a sustainable system is inevitable and offers many economic opportunities. But it’s up to the Netherlands to make sure it grabs those opportunities, rather than letting them slip through its fingers as in the past.’

In the past three years the contribution of renewables to Dutch energy supplies has remained virtually unchanged. According to CBS statistics, the percentage of green energy consumed by end-users grew by 0,4 percent per year in the period 2003 to 2009. Subsequently the growth rate declined to a scant 0.1 percent a year. Currently just 4.4% of all energy use in the Netherlands is sustainably generated. The current government’s coalition accord stipulates that this should increase to 16 percent in 2020 [Note 1].

Biomass biggest source

Nearly three quarter of all renewable energy comes from biomass. This includes the production of electricity and heat in waste incinerators, the co-firing of biomass in power plants and the use of bio fuels for transport. In 2012 the energy production by waste incinerators rose, but the co-firing of biomass in electricity plants fell.
Wind energy accounts for around 20 percent of power generation from renewable sources. Other renewables include solar power, hydro, geothermal and ambient heat. Together these generate around 8 percent of the total renewables production.

Note