Renewable energy market?

Without additional policy, renewable energy targets will not be met

After a period with virtually no newbuild of power plant in the Netherlands, in the years ahead capacity is set to surge. Although some of the new gas- and coal-fired plant will replace older facilities, on balance it there will be a major increase in installed capacity, which by 2020 will up by 70% to 40 GW. Dutch electricity demand is expected to grow from 120 TWh in 2008 to 145 TWh in 2020, an increase of 20%.

Dutch generating capacity must be assessed in the context of the north-west European electricity market, as some of the country’s output can be exported to neighbouring countries. As things stand at the moment, there is sufficient technical capacity for exporting 20% of current output, a figure that is even expected to rise. But because substantial new generating capacity is also being built in neighbouring countries, which also have ambitious targets for renewable energy, opportunities for export are economically constrained.

With installed capacity set to rise by 70% and domestic demand by only 20%, with only limited scope for export (i.e. limited foreign demand), overcapacity will result. This will have an adverse impact on the investment climate for renewables. Although the subsidy scheme in place for renewables means generators can produce this electricity competitively, the arrangements in force are still too non-committal. As energy companies have no say in the Netherlands’ renewable energy targets, with overcapacity in conventional capacity looming they cannot be expected to invest in renewables, too. Generators have no direct interest in such investments, because the incentives (prices, subsidies, obligations) are still insufficiently aligned with the government’s energy and climate programme (‘Clean and Efficient’). As a result, these industries see investment in conventional plant as more appealing than developing renewables.