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20/10/2017

The Dutch political agreement: challenges and chances for the energy sector

Quantity does not always lead to quality. While the negotiations for the most recent political agreement lasted 208 days, the results regarding sustainability fall short of being groundbreaking. The new government has tried to come up with a new business model to counter global warming by resurrecting an old idea and providing a definite date for an already dying industry. Although the negotiating parties are to be praised for their political will to raise sustainability goals, their resort to old methods and goals that are self-evident, will not lead to a radical change in Dutch society. In order to counter the challenges that are ahead, a radical overhaul is needed with the already tried ideas on one side and a confident choice for new solutions on the other. 

Increasing the stakes in sustainability

Sustainability is one of the main areas of concern in this political agreement with approximately a quarter of the pages of the document dedicated to it. The subject of greenhouse gasses and the reduction of it appeared for the first time in the agreement of 2007 after the election of that year. Since then, sustainability has remained in every political agreement with variations in scope and solutions depending on the importance of the subject to the concerning parties. However, without a doubt, the goals and solutions written down in the current agreement, are one of the most ambitious and it builds on the spirit of previous political agreements. It even exceeds the goals of the highly ambitious “Energy Agreement” of 2013 between the industry and government. 

The main focus of the agreement between the governing parties concerning sustainability is the reduction of greenhouse gasses where the energy sector is the main instigator. The new government wants to increase their commitment to reduce the emission of greenhouse gasses to 49% compared to 1990 levels from the EU agreed level of 40% in 2030. Within the EU framework, the Dutch even have the ambitious goal of raising the level of reduction of greenhouse gasses to 55%. 

                The intended policies are spread out over multiple sectors, but obviously, the energy sector will take the brunt of it due to the nature of the processes that produce harmful greenhouse gasses. Also, opportunities will show themselves as a result of this agreement, which we will discuss later on. The intended reduction in emissions of 49% equals to a yearly amount of 57 megatons of CO2, which is dispersed over multiple sectors (see chart ). However, 32 megatons or 56% of the total amount of reduction needs to come from the storage of CO2 underground and the closure of coal powerplants. Furthermore, 7 megatons or 12,3% needs to come from additional offshore wind energy, solar power, and biofuels.

Chart: Indication distribution 49% reduction by 2030

Domain

In mega ton (Mton)

Measures

Industry

 

 

Total

1

3

18

22

Recycling

Improving process efficiency

Storage of CO2 underground

Transport

 

Total

1,5

2

3,5

More efficient tiers, European norms, electric vehicles

Biofuels

Built environment

 

 

Total

3

2

 

2

7

Optimization energy use offices

Insulation buildings, integrated systems to improve efficiency for heating buildings 

Efficient techniques constructing new buildings

Electricity

 

 

 

 

Total

1

12

2

4

1

20

Efficient lighting

Closure coal power plants

Storage CO2 from waste incineration plant

More offshore wind energy

More solar energy

Land use and agriculture

 

Total

1,5

1

1

4,5

Smarter use land

Less methane emission

Greenhouses as a source of energy

Total

               57

 

Pitfalls and Possibilities

Although the cooperating parties have set high goals for themselves and possibly also in the EU, achieving the goals depends mostly on two solutions: a yet to be signed agreement on closing the five coal powerplants in the Netherlands until 2030 and development of the technology to bury CO2 underground. The first solution has more chance of succeeding due to the introduction of a CO2 tax in 2020 on the basis of the emission of greenhouse gasses: the polluter pays. Coal is the most polluting source of energy and therefore it will pay the highest tax and thus the closing of the plants will be stimulated. However, the new government has not set any short-term goals for itself regarding the closing of the remaining coal powerplants until 2030, which creates a risk in itself. While numerous new goals have been set past the current governing period, working towards smaller milestones can increase the success rate of achieving those long-term goals.

The storage of CO2 under the ground, however, is the biggest bet of the new government. Over 20 megatons or 35% of greenhouse gasses need to be stored permanently underground with a technology called carbon capture and storage, CCS. Besides being an expensive technology, twelve experiments across Europe have been executed and failed for various reasons. Currently, you need 70 to 80 euros to bury one ton of CO2 underground. This figure needs to significantly decrease in order of being a viable option to counter climate change, which is possible but according to experts will take 10 to 20 years of innovation. The result is that either costs need to decrease, a CO2 tax ensures higher costs for the emission of the greenhouse gasses, or a combination of the previous.

The intended policies also provide massive opportunities and challenges for both producers and grid operators in the energy sector. CCS technology will be necessary for the future irrespective whether the current or future governments go through with it due to the necessity of fossil fuels for certain industries for decades to come. Furthermore, coal powerplants produced 50% of all Dutch electricity in 2017. Although currently, the Netherlands owns enough excess capacity in gas-powered plants, investment in alternative sources will be required to replace the energy from these sources on the long term for a CO2 free future in 2050. The announcement of opening more lots for offshore wind energy is another investment potential.

 

Masking and Solving a Problem

Although the government has set for itself quite a task and considerably raised ambitions, reaching these goals will be much harder due to the conservative approach and not so creative way of finding alternative solutions. In all forecasts for the future, there is no room for coal. Although it is to praise that the government has shown political will by announcing the closure of the remaining five coal powerplants by 2030, it is not hard to surprise one with the obvious.

                Furthermore, the intended policy to choose for CO2 storage underground is a big bet. Especially considering that the idea has been tested and abandoned in both domestic and foreign environments. The new agreement could and should have opted for solutions which promise more long-term results. The new government should have shown more wisdom in betting on a multitude of horses. This government is not investing in the solution of a problem but the masking of symptoms. After 2030 the industry still has to change to create a carbon-free society. The money would be better spent if solutions would be developed where polluters could make use of in the future.

 

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