Renewable energy and Climate policy incentives in the Netherlands

1. Renewable energy and Climate policy incentives in the Netherlands Michel Verhagen Willem van der Heul Energy production directorate Ministry of Economic Affairs Koomen05

2. Topics • incentives for renewable energy • Investment schemes EIA and EPR • energy tax (REB) • new MEP scheme • incentives for climate policy

3. Investment schemes • Stimulate investments in energy saving and renewable energy • EIA: energy investment deduction scheme for enterprises (55% of investment is deductible from profit tax); • EPR: investment scheme for households. RE investments 50% subsidy

4. Energy tax (REB) • on gas and electricity consumption • ceiling of 1 mln m3 and 10 mln kWh • total revenue in 2002 over € 3 bln • All REB is returned to target groups, i.e households and SME’s. • For example: REB exemption for green electricity

5. REB on electricity (€ct/kWh)

6. MEP scheme (environmental quality of electricity production) • subsidise national production of green, CHP and “Clean fossil” electricity • Reason for introduction: • present demand oriented scheme ran out of hand (massive green electr. Imports) • poor development of RE in NL • harmonise with RE schemes in other EU-member states

7. RE Schemes in EU in 2003

8. MEP scheme (2) • inspired on German EEG scheme • budget € 258 m (2003) tot € 316 m (2006) • RES € 141mln, CHP 94 mln, CF 23 mln • 10 year contract with fixed kWh subsidy • Every NL electricity connection pays 34 € • 100% compensated in REB energy tax • Start MEP foreseen in July 2003

9. MEP scheme (3) kWh subsidies: • Wind on land 4,9 €ct/kWh (max. 18000 hr) • Wind offshore 6,8 €ct/kWh • Biomass co-firing 4,8 €ct/kWh • MSW + mixed biomass streams 2,9 €ct/kWh (only biomass comp.) • Hydro + solar-pv 6,8 €ct/kWh • CHP 0,57 €ct/kWh • Clean fossil electricity 6,8 €ct/kWh

10. Eligibility of RE imports • Imports are eligible under REB 36i (fiscal demand subsidy). Restrictions: • Hydro electricity and MSW are exempted • No foreign subsidy • Biomass co-firing must meet NTA 8003 • Electricity must be imported physically • PM: reciprocity?

11. Guarantees of origin • Present green certificate system is transferred into GOO system • We will comply with planning in EC directive (Oct. 26, 2003) • We are presently investigating consequences for import green electricity (refuse certificates from non-complying countries?)

12. Grid system issues (art 7 RED) • No priority for RE electricity (for now) • The MEP law requires Tennet to subsidise RE electricity at a fixed tariff; • In practice at this time not many problems because NL has a dense electricity network • Problems may arise with implementation of wind off shore (6000 MW?)

13. Progress RE Targets • 10% in 2020, 5% in 2010 (primary energy) • 9% of RE electricity in 2010 (RED) • Results in 2001: 1,2% primary energy, 2,8% electricity (almost 10% when imports were included) • Prospects 2010-2020: 10% of primary energy can be done, but with 1-2% imports • priority on wind (off shore) and biomass

14. Dutch Climate Policy • reduction target 2008-2012: -6% from 1990 levels • 40 Mton a year • 50% flexible mechanisms: JI and CDM • Extra: EU emission trading directive

15. Dutch JI Programme • Budget: € 34 mln per year • government purchases ERU’s • Four tracks • 1. ERUPT • 2. multilateral financial institutions • 3. private banks • 4. bilateral agreements

16. 1. ERUPT • public procurement for private companies • status • ERUPT-I and -II: max 9 Mton • price: € 5-9/ton • ERUPT-III: selection phase

17. 2. Multilateral Financial Institutions • Participation in Prototype Carbon Fund • Negotiations to sign contracts with EBRD and Worldbank to deliver emission reductions (expected: summer ‘03)

18. 3. Private banks • Contract private banks to sell emission reductions from projects in their portfolio • Banks will be selected through public procurement (expected: summer ‘03)

19. 4. Bilateral agreements • Interesting option, but may be superseded by ET directive • Credits have to be project-related (no “hot air”)

20. EU Emissions Trade Directive • Start in 2005 (-2007 and 2008-2012) • Direct CO2-emissions only • Participating sectors: electricity prod.+ CHP installations > 20MW , steel industry, chemistry, paper  50% of Dutch CO2-emissions • ‘Grandfathering’ of allowances by National allocation plans

21. ET scheme and electricity • Electricity production sector major player in emissions allowance market • Electricity sector charges customer for extra marginal costs allowances • Grandfathering implies a subsidy to electricity producers • With allowances of 5 euro, electricity price increases 7% • Change in merit order electricity production

22. ET scheme and renewable energy • Renewable electricity shifts in merit order • Position renewables improved by scheme • Estimated allowance prices (5 - 20 euro) not high enough to make renewables profitable • No need anymore to support renewables from perspective of climate change policy • Other policy goals may ask for extra instruments to support renewables

23. More info • www.emissionstrading.ez.nl • www.ji.ez.nl • www.cdminfo.nl • Thank you