Energy Sector Unhappy with Dutch Subsidy Decision
Date: 23-Jan-00
Country: NETHERLANDS
Author: Anna Mudeva
The government decided to permanently freeze subsidies for new renewable energy projects from Aug. 18. It said it had already reached a European Union target set for 2010 and it should cut down on spending before November general elections.
"This was a very unexpected decision. In the worst case scenario, it would threaten the future of renewable energy in the Netherlands," said a spokesman for power utility Essent, the biggest Dutch producer of renewable electricity.
A spokeswoman for power utility Nuon said: "It sends a negative signal to investors. Energy companies make long-term decisions and need predictable and stable government policy."
The Netherlands introduced subsidies for renewable electricity in 2003 to help the green sector expansion, cut expensive crude oil import bills and reduce pollution.
It was anticipated at the time that the subsidy plan would stay in place for about 10 years and be gradually phased out.
The subsidies helped boost the share of renewable energy production out of total electricity output to 9 percent this year from 6.2 percent last year from 4.3 percent in 2004.
The EU, struggling to meet its climate change commitments under the Kyoto protocol, has set a target of 9 percent of renewable energy production by 2010.
The new Dutch Economics Minister Joop Wijn, who replaced Laurens Jan Brinkhorst in a caretaker government in early July, said the Netherlands had reached that target and it was up to the new government to decide whether to resume the subsidies.
NEED FOR STABILITY
Industry officials said they were amazed with the minister's arguments.
"Why stop at 9 percent, why not be more ambitious and reach 10, 12 and more?" said Essent's spokesman.
"In several years the renewable energy sector would not need government support but right now it needs it to be able to compete with energy from fossil fuels," he said.
Analysts said the government's decision would put investors off the Netherlands and make them choose countries with more predictable energy policy.
"Government policy has to be consistent -- you can't have 100 percent subsidy one day and then zero the next day. Investors will just put their money elsewhere," said Ton Hoff, head of the leading Dutch energy research institute ECN.
"Germany is a good example for consistent renewable energy policy. I haven't heard of any drastic decisions taken overnight there," he told Reuters.
Essent, which has a total production capacity of 4,700 megawatts, said it will would abandon an option to use palm oil for a planned expansion of its 1,280 MW Clauscentrale.
The utility has planned to expand the capacity to 1,560 MW and was considering using biomass for part of the expansion.
The gas and biomass-fired Clauscentrale accounts for half of the Netherlands' renewable electricity production.
The country has a total net generation capacity of 22 gigawatt hours.