Part 5: The Dutch National Environmental Plans

Dutch encouragement of renewable energy dates to the oil crises of the mid- and late 1970s.²⁴ Interest in renewables quickened with rising concerns over ozone and other local air pollution problems in the 1980s, leading the government to prepare its first National Environmental Policy Plan (NEPP). This was later supplemented by an update, National Environmental Policy Plan-Plus, and as of February 5, 1998, a Third National Environmental Policy Plan.²⁵ The latter plans explicitly address climate change and establish the fundamentals of Dutch policy. They include stricter energy efficiency standards for new buildings, voluntary agreements with manufacturing sectors, and accelerated use of combined heat and power, as well as development of renewable energy.

The Dutch national plans have effectively altered the behavior of business and industry. The only other nation with such a national program is New Zealand, which, unlike the Netherlands, is an essentially rural and agrarian country. The Netherlands, in contrast, is an industrial nation with steel mills, refineries, and a wide variety of other manufacturing facilities that produce goods for the international market.

By establishing overarching national environmental objectives—which are developed with trade implications in mind—the plans have provided a framework within which both government and industry can develop compatible policies. Yet the details adopted to flesh out the objectives of the National Plan are, in many respects, less important than the document itself. Its mere existence provides incentives and structure for government, industry, and the public. Thus within the context of the plan, policies can be developed that are consistent with national objectives. One area where this has happened is renewable energy, where other smaller-scale innovations have been adopted.

Under its energy policy framework through the year 2020, the Dutch government intends to increase renewable energy's share of total energy supply from 1 to roughly 10%—about 6% from electricity generation (meaning that renewables will supply roughly 17% of the national electricity supply); about 3% from heat production, principally from solar hot water systems and heat pumps; and less than 1% from the transportation sector. With the adoption of this plan and the development of specific efforts to support the Kyoto Protocol to deal with climate change, programs to spur the use of renewable energy—especially wind power and solar hot water—have been reinvigorated.

In 1997, the government identified three specific areas of focus for the following four years: improvement in the price/performance ratio of renewable energy through improvements in technologies, stimulation of the market demand for renewables, and elimination of administrative obstacles to the deployment and integration of renewables. To achieve these long-range goals, the government adopted a wide range of specific measures:

• Accelerated depreciation on environmental investments (VAMIL): Equipment on the "VAMIL list" of renewable energy and other environmentally friendly technologies can be depreciated at a rate faster than normal, thus increasing profits by reducing taxes.²⁶

• Tax deductions for investments in renewable energy: Since January 1997, companies investing in specific renewable energy applications have been allowed to reduce their taxable profit by a percentage of the amount invested. The reduction ranges from 52% for small investments (which must be at least 3,600 guilders, or $1,695) to 40% for those larger than 475,000 guilders ($223,000).

• Green funding: Loans for so-called green projects, which includes virtually all renewable energy systems, are available at rates 1—2% lower than the prevailing rate. In addition, investment income (such as interest or dividends) derived from green funds are exempt from income tax.

• Mandated purchases: Electricity distribution companies are required to purchase excess power from independent producers of electricity at rates that include avoided fuel and power (that is, capacity) costs.

• Household and business energy tax: Small households and small- to medium-sized businesses are required to pay an energy tax on electricity of 0.014 ECU/kWh (1 ECU = $1.04) and on natural gas of 0.49 ECU per gigajoule (GJ) (increasing to 1.41 ECU/GJ in 1999) when consumption exceeds a minimum demand. The tax on nonrenewable energy is transferred from utility companies to the Dutch government, but the income from renewable electricity is instead paid to the generators.

• Green electricity: Some utility providers sell green electricity at a premium rate of 0.02—0.03 ECU/kWh (2—3¢/kWh) above the normal price. The additional income is dedicated to the construction of renewable energy projects or the subsidization of renewable electricity.

• Green label for electricity: Those who generate electricity from renewable energy are entitled to a use a "green label." The generator can also authorize the use of this label by distribution companies, thus establishing a market for renewable electricity.

• Green mortgages: For two years starting in November 1996, "sustainably built" houses could be financed in part with lower interest rate loans. Houses costing 400,000 guilders ($188,000) or less could qualify for a green mortgage. A buyer could get a loan of up to 75,000 guilders ($35,000) for 10 years at a rate roughly 20% below the prevailing market price (at about 4% instead of 5%). The so-called green mortgage let a buyer recoup roughly 75% of the additional costs of environmental extras. A total of 5,000 mortgages could have been issued for two years, after which the program was suspended for evaluation.

The Netherlands has also adopted a program designed to stimulate competition and create a market for solar hot water heaters. Starting in 1996, energy consumption in new homes was regulated by the energy performance coefficient, which requires that in certain circumstances houses must incorporate either a heat recovery system or a solar domestic hot water system. This is intended to promote both of these as well as the competition between them.

As of this writing, it is too early to tell how the latest Dutch National Environmental Policy Plan has affected renewables development in the Netherlands.

Renewable Energy Policy Outside the United States

1. Abstract
2. Message from REPP Staff
3. Why Are They Doing it?
4. Introduction & Overview
5. Danish Wind
6. German Encouragement
7. Non-Fossil Fuel in Britain
8. Dutch National Plans
9. Japanese Efficiency
10. Successful PVs
11. Lessons for the U.S.

copyright © 1999 by Renewable Energy Policy Project