June 13, 2018 - 10:00 AM EDT
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Ambitious Decarbonisation Targets Will Radically Transform the Dutch Power System by 2040 With Knock-on Effects for European Neighbours

BERLIN, June 13, 2018 /PRNewswire/ --

  • The recent Dutch coalition agreement and the Klimaatakkoord 2019 set out an ambitious decarbonisation roadmap for its electricity system, in which the generation mix faces a radical realignment. Renewable capacities almost triple, while thermal capacities halve
  • Wholesale power prices will increase due to reduced baseload capacities across Northwest Europe, rising commodity prices and demand created by electrification of transport and heating
  • The mandated coal phase-out halves annual emissions by 2040 compared to 2018 levels. Gas plants in Netherlands, Germany and, Belgium will benefit most, but also German coal. Consumers could be impacted by higher wholesale power prices
  • A unilateral carbon price floor (CPF) alone is not enough. A CPF with coal exit can improve savings a little, yet with high spill-over (71%) and value transfer to Germany (100 mEUR in 2025)
  • A multilateral CPF could significantly reduce the share of spill-over and favour Dutch plants

New analysis on the Dutch power market and policy frameworks from leading European analytics firm Aurora Energy Research, highlights enormous opportunities for accelerated generation of low carbon technologies in the Netherlands, as well as impacts on Dutch consumers through proposed policy changes in the energy market. The research also reveals significant impacts on related economies and power systems in NW Europe, in particular Germany, raising new issues for policy makers.

Aurora's research finds that rising commodity and EUA prices, increasing power demand from the electrification of the transport and heating sectors as well as phase-out of baseload capacities across Northwest Europe drives up power prices. Dutch Government intervention, including renewables auctions with 1 GW offshore wind per year and a mandated coal phase-out by 2030, will drastically transform the current power generation fleet.  Subsidy free photovoltaic and wind installations could add even more from mid-2020's. Renewable capacities would almost triple, while thermal capacities would halve by 2040. If the price increase will be passed down to household bills or taken over by the state via tax reduction is still unclear.

A mandated coal phase-out achieves substantial emission reductions with limited spill-over, meaning additional CO2 emission of power plants in neighbouring markets. From 2018-40, emissions of 127 Mt CO2 (equivalent to the annual emissions of the Philippines) could potentially be saved, while 41 Mt are additionally emitted abroad. For the Dutch system this comes down to abatement costs of 42 EUR/t, mostly caused by higher wholesale prices for consumers and lost profits by coal plant operators. Operators of gas-fired plant benefit from higher utilisation and prices, in the Netherlands as well as Germany, Belgium, Great Britain and Denmark, but also dirty German coal-fired plants.

Aurora's research indicates that uncertainties persist relating to policy developments in neighbouring countries. Outstanding decisions regarding a coal exit timeline in Germany will have a significant impact on the efficiency of Dutch measurements towards a carbon free economy.

Commenting on this, Benjamin Merle, project leader for Renewables Europe, said:
"A unilateral carbon price floor in a highly interconnected power system can have undesirable effects on emission spill-overs as well as value shifts to neighbours, driving up abatement costs and risking acceptance by consumers and power producers."

The Dutch Government's proposed carbon price floor would add a top-up to the Europe wide carbon price, to trigger the desired switch from dirty coal to cleaner gas. However, a carbon price floor for the Dutch market without a mandated coal exit is not sufficient to significantly close coal plants, according to Aurora. A combination of both measurements results in additional emission reductions of 59 Mt from 2018 to 2040, yet this is compromised by high spill-overs (71%), including revenue loss for Dutch power producers to Germany of roughly 100 mEUR in 2025.  

Merle says:
"A multilateral CPF across Northwest Europe in comparison to a national approach could significantly reduce the share of spill-overs to 52% and favour Dutch power plants, while reducing coal-fired generation in Germany. This would bring more environmental and costs benefits to consumers and businesses in both the Netherlands and neighbouring countries in Europe."


Media contact
Dr Rachel Roffe, Media & Marketing Associate
E: [email protected] M: +44-(0)7584-254-232
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Source: PR Newswire (June 13, 2018 - 10:00 AM EDT)

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