Renewable Energy Policy and Regulation
Europe has committed itself to a target of 12% renewable energy in 2010. This European target has been translated for the Netherlands into 9% renewable energy in 2010. To meet this target and stimulate investments in renewable energy, the Dutch government has introduced a number of instruments, including the Environmental Quality Electricity Production (MEP) subsidy scheme and the Energy Investment Allowance (EIA).
Environmental Quality Electricity Production (MEP)Energy Investment Allowance (EIA)
Renewable Energy Guarantees of Origin
Environmental Quality Electricity Production (MEP)
In July 2003 the Environmental Quality Electricity Production (MEP) subsidy scheme was launched with a view to stimulating the environmental quality of electricity production. This scheme compensates producers of renewable energy for the cost difference between renewable and conventional energy. The subsidy is given because environmentally-friendly methods of generating electricity are more expensive than conventional coal- or gas-fired generation.
The scheme is applicable to, for instance, installations for the production of renewable energy from wind, sun, hydro and biomass. CHP (Combined Heat and Power) installations also fall within this scheme. Specific rates of compensation have been set for the various generation techniques.
In 2005 the Ministry of Economic Affairs decided to set the MEP compensation at zero for new production installations in the large-scale biomass and marine wind categories. On 18 August 2006 the Ministry extended the zero rate to other new renewable energy projects with immediate effect. MEP subsidy commitments for existing projects will be honoured. The MEP was set at zero for new projects because of the expectation that the projects that have already been awarded an MEP subsidy are sufficient to meet the Netherlands’ target of 9% renewable electricity in 2010. This remains to be seen, however.
The sudden policy changes unleashed a renewed wave of protest in the sector. Meanwhile the Ministry of Economic Affairs is working on a new MEP or other incentive scheme for the period from 2008. This recent sequence of events reemphasises that the Netherlands needs a government policy that is consistent and looks beyond 2010. Long-term objectives will ensure that the sector can undergo structural development instead of the current ad-hoc growth caused by constantly changing (MEP) subsidies.
Energy Investment Allowance (EIA)
The Energy Investment Allowance (EIA) is intended for entrepreneurs who are prepared to invest in energy-saving technologies and in the application of renewable energy within their business. This tax incentive is offered annually on the basis of a fixed budget. The number of applications was so large that the scheme was already closed for new investment commitments on 12 October 2006. On 22 December the government presented the new scheme which took effect from 1 January 2007.
Renewable Energy Guarantees of Origin
Renewable Energy Guarantees of Origin (REGO) have been the standard certificate for green energy in Europe since October 2004. A REGO represents a certain amount of electricity (MWh)that has been generated from a renewable source and which is freely tradable in Europe without being tied to the produced electricity. To supply green power, energy suppliers must buy REGOs in the market or generate their own renewable electricity.
At present only REGOs of renewable power produced in the Netherlands contribute towards the attainment of the Netherlands’ European target of 9% renewable electricity by 2010. Imported REGOs only contribute towards the Dutch target if specific arrangements have been made between the Dutch government and its EU counterparts. The Netherlands has not yet committed itself to any arrangements in this respect. As indicated last year, Nuon has urged the Ministry of Economic Affairs to initiate a discussion between the Dutch government and countries that are rich in renewable energy (such as the Scandinavian countries). The consequence of the absence of such arrangements between countries is that the produced renewable energy exclusively contributes towards the target of the country in which the energy is produced.
In addition, to ensure the reliability of green energy, Nuon considers it important that a transparent and uniform policy is put in place for all businesses and consumers who opt for green power. This means that the options for buying Renewable Energy Guarantees of Origin must be clear to customers while Nuon must know what products it is allowed to sell. This concerns e.g. the sale of certificates separately from the physical flow or the sale of certificates for part of the volumes to be purchased. These various ‘offsetting scenarios’ of REGOs for green products have consequences for the claims that the customer is entitled to make in relation to the purchased products.
In 2006 Nuon conducted various talks with CertiQ, the Dutch issuer of Renewable Energy Guarantees of Origin, about the various offsettings scenarios for certificates.
