It’s not easy being green

The Netherlands has been slow to adopt an energy transition programme compared to other European countries. The Climate Plan, released by the government in late-June 2019, marked a clear turning point as it aims to reduce Dutch carbon emissions by at least 49% by 2030 compared to 1990. This ambition would turn the country from laggard to frontrunner. Energy transition plays a pivotal role as emissions from the energy sector need to be reduced by as much as 73% by 2030.

The Dutch government aims to phase out coal in its energy mix by 2030 and natural gas by 2050 in order to meet the targets. It also calls for a strong increase in renewables. We forecast this share to reach 25% in 2020 with the number expected to be 74% in 2030.

The transformation to a low carbon economy requires increasing investments in the energy system from around €10bn a year in 2010 to an estimated €16bn a year in the period 2020-2030. Total investments in solar panels and wind farms will continue to fall as the assets become cheaper and cheaper.

DSOs will spend between €700m and €900m in 2020

On the other hand, investments in grids will continue to rise in order to accommodate the increasing share of renewables coming into the Dutch network systems. For the Transmission System Operators (TSOs) and the Distribution System Operators (DSOs), the change to a low carbon economy translates into exponential capital expenditure plans.

Already, a number of Dutch network operators cannot cover operating costs and required investments by the cash flows they generate. Some network operators want their shareholders to inject new capital. While this can provide temporary relief, it needs to come with higher tariffs from the Dutch regulator ACM in order to finance investments with operating cash flows.