Scrutinizing the economics of the clean energy transition

Looking at the electrification of transport, she pointed out that the Netherlands was the sixth country in the world to reach 100,000 electric vehicles (EVs). “The long term plan is that, from 2035, only clean-fuel cars can be sold – a target that is more than achievable and will provide a substantial reduction in carbon emissions. At Royal HaskoningDHV, we’re piloting an EV fleet of 26 cars – saving up to 100 tonnes of CO2 every year,” she said.

However, this move towards EVs means a huge rise in electricity demand. The European Environment Agency estimates that EVs could account for 9.5% of European electricity demand by 2020 – up from 0.03% today.

“Governments are aware of this – perhaps it’s why many are reluctant to accelerate the phase-out of coal. It’s up to the renewable industry to step forward with solutions and campaign for change,” Zwickels commented.

As for the electrification of heating, she outlined the Dutch government initiative to scrap gas for domestic heating and cooking by 2050 under its recent energy strategy. At the moment, the plan is thwarted by a legal requirement for DNOs to connect new housing developments to the gas network. Two political parties have submitted a bill stating that this requirement must be removed, allowing developers to save on costs and build cleaner, electric-only, gas-free neighbourhoods for the first time.

It is still open how the renewable industry will respond to this, but Zwickels hope that the industry will step in with bold propositions for distributed energy, so that the extra demand can be met by clean sources. Bringing in partners from the smart technology space could also help.

“The opportunity exists to show the world that a gas-free future is possible, and that it can benefit consumers,” she said, calling on the industry to “be part of these major changes from the outset – the challenge is to identify, then give our backing to the most important ones.”

Renewable finance

Subsidies have been hugely successful in getting renewable sources off the ground. In the Netherlands, the Stimulation of Sustainable Energy Production (SDE+) scheme has been “a great triumph”; so much so that last year’s €9 billion funding has been increased to €12bn in 2017.

“Subsidies are, however, not the only answer and weren't designed to be long-term. What’s more, they are vulnerable to political changes and can have negative, unpredicted side effects on the transition,“ Zwickels commented.

Despite its overall success, the SDE+ scheme currently favours the most profitable technology. This has led to increased funding for biomass substitutes in coal fired plants, meaning that solar and wind energy is competing with subsidised fossil fuel plants, which is a step in the wrong direction.

There are other ways that governments can provide support:

·         Tax on renewable energy production could be cut to give suppliers a competitive advantage.

·         Alternatively, fossil fuel industry tax revenues could be used to fund renewable energy projects, as well as schemes to mitigate the negative effects of non-renewable energy generation.

“The challenge is to move away from public funding. But when developing new financing methods, we should be aware of the challenges – renewable energy projects have higher risk profiles, longer-term ROI and relatively complicated division of profit,” she said, with reference to a number of innovative sources of finance that are used in the Netherlands, e.g. revolving funds, crowdfunding and financial participation.

The province of Overijssel, for example, has experimented with issuing equity and debt in renewable energy schemes, raising funds without subsidy and has now started an arrangement for measures at a domestic level.

Ms Zwinkels works as consultant at Royal HaskoningDHV and is also on the advisory board for POWER-GEN Europe and Renewable Energy World Europe that will be held in Cologne, Germany, from June 27-29, 2017.