Energy Report Transition to sustainable energy Energy Report Transition to sustainable energy
Table of contents Summary 5
1 Introduction 12
2 2050 Ambition: Low CO2, safe, reliable and affordable 18 2.1 Low CO2 energy 19 2.2 Safe, reliable and affordable 24 2.3 Economic opportunities for innovative business 26
3 Starting points of the energy transition 28 3.1 Be active across all geographic levels 29 3.2 All low CO2 energy options are open to consideration 33 3.3 Developing flexible markets and infrastructures 37 3.4 Strong dedication to innovation 45 3.5 Integrating the energy transition in spatial planning 50 3.6 Careful risk management without overregulation 55 3.7 Everyone will have a clearly-defined role to play 58
4 Energy functions in an integrated energy system 62 4.1 Energy as a system 63 4.2 Space heating 67 4.3 Industrial process heat 79 4.4 Transport 90 4.5 Electricity 103
5 The availability of energy in the future energy supply 116 5.1 The future energy supply in an international and system perspective 117 5.2 Considerations per energy technology and source 122 5.3 Infrastructure and cost reduction: important preconditions 133
6 Energy Dialogue 136
Appendix: concessions and motions in the Energy Report 140 A Concessions in letters to parliament 141 B Concessions in parliamentary debates 143 C Motions 143 Notes 144 4 Transition to sustainable energy
Preface
It is our pleasure to present the Energy Report of the Netherlands. This Energy Report, published in January 2016 by the Ministry of Economic Affairs, provides a long term and comprehensive vision of the energy system of the Netherlands.
The Dutch cabinet is taking part in a global effort to develop a low CO2 energy economy that is safe, reliable and affordable. The society-wide Energy Agreement for Sustainable Growth that was concluded in September 2013 in The Netherlands with industries, non-governmental organisations and governments was a major first step. The Energy Agreement included targets for energy efficiency savings to 1.5% of our final energy consumption and for an increased share of renewable energy (14% by 2020 and 16% by 2023).
This Energy Report focusses on the phase after the Energy Agreement, beyond 2023. Key issue is how to achieve a CO2 neutral energy supply system by 2050. In our energy policy, we will work on three main principles: 1) focus on CO2 reduction; 2) make the most of the economic opportunities that the energy transition offers and 3) integrate energy in spatial planning policy.
How to realise this transition is analysed by distinguishing the way we use energy in four energy functions: energy for space heating, energy for industrial process heat, energy for transport and energy for power and light. The Energy Report describes in detail our views on current and future developments of these energy functions within the context of our ambition towards 2050. Through this new approach we can focus our efforts for the energy transition.
The Energy Report also announced the Energy Dialogue. This was an extensive public consultation, started in April 2016 and formally lasted for three months. During this consultation all parties shared their views on the future energy system. Findings from this consultation will be presented by the end of the year and will contribute to design of the energy policy. The Energy Dialogue will also be instrumental in fostering the awareness of the energy transition in the Netherlands.
The international context of our energy (and climate) policy is a central theme in this report. The Netherlands is fully committed to the European agreements for 2020, 2030 and 2050 and to the international climate change agreement. Our energy supply is strongly linked to the energy markets in Europe and the rest of the world. Well-functioning energy markets and international agreements are key to a successful energy transition. 5 Transition to sustainable energy
Summary
The cabinet is taking part in a global effort to develop a low CO2 energy economy that is safe, reliable and affordable. This is a major challenge that will require many sacrifices, but the Netherlands is well positioned to make this transition successfully, and it is also a chance to create opportunities for innovative businesses. High CO2 emissions1 are a worldwide problem. On 12 December 2015, 195 countries signed an important climate change agreement under the umbrella of the United Nations (UN). This climate deal has set targets, such as the reduction of global warming to well under two degrees, and achieving a balance between greenhouse gas emissions and capture and storage by the second half of this century. The European Council has welcomed the climate deal, among others because it is a legally binding global agreement. The climate deal has implications for Dutch energy and climate policy, the European agreements on this deal have our priority. The current Energy Report is based on the existing European climate ambitions. The climate deal may result in more stringent requirements with regard to these ambitions, which has implications for all the member states, including the Netherlands. By cooperating and reaching strong agreements, Europe can make a significant contribution to the reduction of greenhouse gases. An efficient European energy market will improve the affordability, reliability and sustainability of our energy supply.
The cabinet is fully committed to the European agreements for 2020, 2030 and 2050 and the Energy Agreement that was reached with non-governmental organisations, industries and governments. At the same time, we need to guarantee a high level of safety and facilitate the use of new forms of energy.
This Energy Report provides an integrated vision of the Netherlands’ future energy supply. To achieve the transition to sustainable energy, the cabinet will work on three main principles: 1) we will focus on CO2 reduction; 2) we will make the most of the economic opportunities that the energy transition offers; and 3) we will integrate energy in spatial planning policy.
1 Focus on CO2 reduction In line with international developments, the Netherlands faces the challenge to drastically reduce global emissions of greenhouse gases. In the international climate change agreement, the world has agreed to achieve a global balance between greenhouse gas emissions and capture and storage (i.e. climate neutrality) by the second half of the 21st century. The Netherlands’ energy supply is strongly linked to the energy markets in Europe and the rest of the world. The cabinet wants to see a reduction of greenhouse gases at the European level of 80-95% by 2050, and to this end it is committed to the European agreements, such as the Emissions Trading System (ETS). This is required in order to make far-reaching reductions in CO2 as effectively and efficiently as possible.
1 The term “CO2” may also be understood to mean “greenhouse gases” or “CO2 equivalents”. 6 Transition to sustainable energy
By cooperating at the European level we can profit from local opportunities for renewable energy generation, such as solar energy in Spain, hydropower plants in Norway and offshore windfarms along the Dutch coast. The Netherlands is committed to strengthening the ETS, for example by reducing the surplus of emission allowances and tightening the emissions requirements.
The transition will need to provide time and opportunity for technological breakthroughs that we cannot yet foresee today. The cabinet also wishes to provide opportunities for local solutions, such as the use of industrial residual heat in existing residential areas. The focus on CO2 reduction will require flexibility. The cabinet has formulated a target that envisages the optimum use of technological progress and local solutions, but it has not set down precisely how this is to be achieved.
Alongside the ETS, which is designed to reduce industrial and commercial greenhouse gas emissions, in 2016 Europe will also set down binding agreements for the Member States to realise the reduction targets for sectors not covered by the ETS, such as the built environment. In keeping with the European decision making, the cabinet will set down agreements on how the targets set for 2050 can be met in the Netherlands.
Based on the currently available knowledge, practically all low-CO2 energy sources and technologies will need to be deployed in order to achieve the desired CO2 reductions. Energy conservation, biomass, clean electricity production and the capture and storage of CO2 (CCS) are likely to be robust elements in the energy mix on the road to 2050. The extent of deployment will depend on the energy demand, the availability of the various energy solutions (some still under development) and how affordable they are. In light of the uncertainties, the cabinet will not rule out any low-CO2 solution, as long as it contributes to a safe, reliable and affordable energy supply. Under the current market conditions, there is no demand for a new nuclear power plant, however the cabinet does not rule out new nuclear technologies being deployed in the future, as long as they are safe.
We are currently dependent on fossil fuels for almost 95% of our energy supply. During the coming decades, fossil fuels will continue to play a role in the energy system, but they will decrease in importance. The electricity market is transitioning towards renewable energy sources. In eight years’ time, offshore windfarms will generate enough electricity for five million households. There will be no place for new coal-fired power plants in this transition and it is important for the electricity market to intensify the focus on the least polluting technologies. An effective price incentive provided through the ETS will ensure that the operators of coal-fired power plants take measures to reduce their emissions, for example by implementing CSS or shutting their plants down. The cabinet will get together with the sector and other stakeholders to flesh out alternative plans for phasing out the coal-fired power plants.
As the least polluting fossil fuel, natural gas will continue to play an important role for a long time. Gas extraction activities will focus on the safety of the local inhabitants first. 7 Transition to sustainable energy
As long as the Netherlands needs natural gas, the safe extraction of gas at socially acceptable costs will contribute to our energy independence.
On 10 July 2015, the Dutch cabinet decided to place a five-year moratorium on the commercial exploration and extraction of shale gas. We do not yet know whether the commercial exploitation of shale gas will be needed in the longer term. This will depend, among others, on the pace and the direction of the transition, and the use of natural gas will in any case be reduced as much as possible by means of implementing energy conservation measures and replacing it with renewable sources. Geopolitical and market developments will also play a role in the longer term, and technological developments can change the method of extraction and hence influence factors such as safety and the effects on natural and living environments. For all these reasons, we cannot rule out the shale gas option for the longer term. It is currently unclear how much extractable shale gas there is in the Dutch subsoil. Many years of research will be required to facilitate a judicious decision-making process for licensing the commercial exploitation of shale gas, particularly in light of the potential risks and the social unrest caused by the shale gas debate. The research will also need to explore opportunities to reduce these risks. The consequences for spatial planning following from the decision making on shale gas will be incorporated in the National Policy Strategy for Subsurface Activities (Structuurvisie Ondergrond). A careful socio-political assessment will need to be conducted as soon as the results of the research become available. This assessment will need to consider whether, and under which conditions, shale gas could be considered a viable energy option. The local authorities will be actively involved in these deliberations.
2 Making the most of the economic opportunities The energy transition offers opportunities for the maintenance and development of the Netherlands’ earning potential. Dutch offshore businesses are already involved in the construction of offshore windfarms at the global level. The cabinet wants the Netherlands to make the most of these opportunities by developing and implementing innovative solutions, which would also enable the Dutch business community to contribute to the global energy transition.
The worldwide transition to low-CO2 energy sources, production processes, products and services will change the Netherlands’ economic structure. Innovative solutions will be required in many sectors, involving both existing and new businesses, if the transition is to succeed. The greatest challenge for existing businesses is to respond to the transition through innovation and where necessary by adapting their earning models. CO2-intensive businesses who fail to make the transition will eventually find that there is no longer a place for them in the low-CO2 economy.
To promote innovation, the cabinet will focus first and foremost on creating a healthy climate for entrepreneurship and innovation. A precondition for the transition on the road to 2050 is the provision of a clear, consistent and conducive framework. 8 Transition to sustainable energy
The cabinet will also encourage innovation by strengthening the organisational capacity of the national and international networks of businesses, knowledge institutes and government authorities. This will also improve our understanding of foreign markets for our products.
In the third place, the business community and the government will need to include all the various phases of the innovation process; from fundamental research and development to pilot projects and implementation. This will enable technologies that are ready or almost ready for market to be implemented in the shortest possible time and at the same time provide a basis for technologies that could break through in the longer term.
3 Energy will become an integral part of the public space The transition to a renewable energy supply will transform the appearance of housing developments, business parks and rural landscapes. This applies both to large-scale production (such as windfarms), energy transport through high-voltage powerlines, underground storage of CO2 (CCS) and small-scale initiatives, such as solar panels. For the energy transition to succeed, the public, businesses and NGOs must be constructively involved at an early stage in the discussion on the spatial accommodation of the energy infrastructure. Wherever possible, all stakeholders should be involved in weighing the benefits of an energy supply initiative against the hindrance or risks it involves for the local people and businesses. This will require all parties to help with identifying spatial alternatives for energy generation, storage and transport. Agreements can then be reached with these parties on the accommodation of these initiatives in the region and the division of the responsibilities, benefits and burdens. This process requires a clear division of roles in the development of energy projects. The relevant province or municipality will bear the main responsibility for the spatial planning process, while the national government is the competent authority for initiatives in the North Sea. The initiator has primary responsibility for the cooperation with the public, businesses and NGOs, and is supported to this end by the competent authority.
Four energy functions This Energy Report distinguishes the way we use energy in four energy functions: energy for space heating, energy for industrial process heat, energy for transport and energy for power and light. This helps to pinpoint where an energy demand comes from and so focus our efforts for the energy transition. It will enable us to determine which sectors need to take action to facilitate the transition to a renewable energy supply.
The way CO2 is reduced (the transition path) will be different for each energy function. For example, household heating requires other renewable solutions than the transport sector. This is related to the availability of the requisite innovations, the degree of dependence on energy from abroad and the numbers and types of parties that play a role. So each energy function requires a different approach. 9 Transition to sustainable energy
1 Space heating Currently, Dutch natural gas is the primary source of energy for heating homes, buildings, greenhouses and tap water. The use of this gas will need to be drastically reduced in order to make our energy supply more sustainable, in the first place by focussing on energy conservation.
According to European agreements, the Member States must ensure that all new buildings are practically energy neutral by the end of 2020. The Energy Agreement specifies that, by 2030, the target for buildings will be the A-label for energy (as an average score of all buildings). We can currently see a positive trend in this direction. More and more citizens and businesses are implementing energy-saving measures, such as installing thermal insulation or solar panels. But there is still plenty of room for improvement in the coming years. The plan is also to meet the remaining demand for heat as much as possible via local heat generation (using heat pumps and solar boilers, among others), district heating (based on residual heat or geothermal energy), or biogas.
The heat transition will require changes in the infrastructure. Decision making on a more sustainable heat supply should be coupled to plans for installing new or phasing out existing infrastructure or plans for restructuring residential areas and business parks. Decisions on the organisation of the heat supply can best be made at the local level based on the local conditions and preferences. So in order to facilitate made-to-measure solutions for residential areas, decision making on the heat transition will have to become more of a regional concern than it is today, with a greater role for local authorities, building managers, property developers and residents. The starting point will be a regional heating plan. The government will support the joint efforts and local decision-making process where possible, among others by reviewing the policy and market rules for the supply of energy and the maintenance of the infrastructure.
2 Industrial process heat The Netherlands has a strong and extensive industrial sector. The main consumers of energy are the refineries and the chemicals, metallurgical and paper industries. The current state-of-the-art does not allow for large-scale energy conservation in these sectors. Often, a complete overhaul of technological processes is required, which takes a lot of time. Technological breakthroughs will likely only be applied in a later phase on the road to 2050. The first challenge is to organise processes so that less heat or lower-temperature heat is required. Other options include electrification, more efficient use of steam production and the use of residual heat in industrial clusters. However, fossil fuels will still be required for the production of some high-temperature heat for the foreseeable future. In time this will be combined with CCS.
The businesses in these sectors often compete in global markets, where there is sometimes overcapacity, and often with companies from countries with structurally lower energy costs and where the European labour expenses and environmental requirements do not apply. 10 Transition to sustainable energy
We cannot ignore this international context, which is why the Netherlands is committed to strengthening the Emissions Trading System and the global implementation of the UN Climate Change Agreement of December 2015. However, the best way to increase our competitive edge is by leading the way in technological innovation. So in addition to the international plans, the Netherlands will implement a national policy for a transition in the supply of process heat. A considerable innovation drive will be required both in organisational and technological terms in the lead-up to 2030, so that breakthrough technologies can be rolled out between 2030 and 2050. Strengthening targeted innovations and providing support for pilot projects will form the core of the joint efforts of the government, the business community and the knowledge institutes. Of course we will welcome system innovations that combine energy solutions with alternative raw materials and CCS systems. Finally, the cabinet expects businesses to take their responsibility, taking into account existing agreements and plans to tighten these, by investing in those energy-saving technologies that are already economically viable.
3 Transport Transport by road, water, rail and air is of great economic importance for the Netherlands. We are currently strongly dependent on fossil fuels for all modes of transport. The Energy Agreement includes long-term agreements for reducing transport emissions in 2050 to at least 60% of the emissions of 1990.
There are only limited opportunities to improve energy conservation in transport by means of sustainable driving habits, car sharing and using lighter materials and more efficient engines. More far-reaching energy savings can only be made by changing the types of vehicles and fuels we use. Electric motors are already available for smaller vehicles and relatively short distances. Liquid biofuels and biogases are the best alternative for heavier and longer distance transport by road, water and air. More innovative solutions are required to facilitate the deployment of these fuels at a greater scale. Moreover, there is a limited supply of biomass due to the fact that the raw materials used also have other economic applications, such as the production of food. The Renewable Fuels Long-term Plan (duurzame brandstofvisie) is based on an adaptive vision and action programme. It was created with the involvement of many organisations and will be continued in the coming years. In the European arena, the Netherlands is committed to the implementation of stricter CO2-emissions requirements for road transport. Furthermore, the Netherlands is a proponent of stricter international requirements for shipping and aircraft emissions.
4 Power and light European electricity generation for power and light will need to become much more sustainable in the lead-up to 2050. Devices and lights will need to be made more efficient so that the demand for electricity is reduced. The transition will result in a sharp increase in use of low-CO2 electricity sources, such as the sun, wind and water.
These renewable sources are intermittent because they are dependent on the weather. This means that both the demand and the supply will need to become more flexible. 11 Transition to sustainable energy
More and more parties, including small users, will play a role in the provision of flexibility. The cabinet will welcome and support local initiatives. The large-scale production of electricity will remain important to meet the energy demands of the public and businesses.
The current market and regulatory policies provide a strong starting point for guaranteeing a reliable electricity supply for both the short and long term and taking into account a higher percentage of flexible electricity production. Flexible electricity production also places greater demands on the infrastructure. The cabinet will determine the best way to deploy the infrastructure in order to profit from the available flexibility in consultation with the grid managers, market parties and energy users.
The Energy Dialogue The transition to a low-CO2 energy supply that is safe, reliable and affordable is a challenge for the Netherlands, Europe and the rest of the world. The challenge affects us all: the public, businesses, government authorities and non-governmental organisations.
The Energy Report invites everyone to join the Energy Dialogue, in which all parties will have the opportunity to explain their own vision on the future supply of energy. Parties may also be asked to suggest which steps they think are needed, in particular in relation to the different energy functions, and what they think will be necessary to achieve this. As such, the Energy Dialogue will contribute to the further design of the energy transition. The dialogue will play an essential role in setting the policy agenda. In the formulation of this agenda, the cabinet will evaluate the ideas, steps and stricter controls suggested by the various parties for their contribution to a low-CO2 energy supply in 2050, their compliance with the requirements of a safe, reliable and affordable energy supply, their contribution to strengthening the economic structure and their integrability in the environment. Furthermore, the dialogue will also aim to foster the awareness of the energy transition. The cabinet will publish the policy agenda simultaneously with the evaluation of the Energy Agreement in the autumn of 2016.
The Energy Dialogue will dovetail as much as possible with the existing initiatives. We will also actively invite government authorities, businesses and non-governmental organisations to organise activities that contribute to the dialogue and together decide on what form the dialogue is to take. Introduction The 2015 Energy Report provides the cabinet’s integrated vision of the Netherlands’ future energy supply. The Energy Report is partly based on the recommendations 1 provided in the document ‘CO2-free nation: towards a renewable energy supply in 2050’ (Rijk zonder CO2, naar een duurzame energievoorziening in 2050) that was published by the Council for the Environment and Infrastructure (Rli). Consultations with stakeholders in the field have led to some fine-tuning of these recommendations. With the publication of this Energy Report, the cabinet invites the public, the business community, knowledge institutes, other government authorities and NGOs to participate in a societal dialogue on the energy issue throughout 2016. All parties are welcome to contribute ideas on suitable strategies for making our future energy supply sustainable. The results of this dialogue will play an essential part in the cabinet’s Policy Agenda that will be published in late 2016 together with the evaluation of the Agreement on Energy for Sustainable Growth. As such, this Energy Report can be seen as a starting point for the further development of our future energy infrastructure. Transition to sustainable energy 13
The Netherlands faces a major energy challenge The Netherlands is faced with the challenge of drastically reducing emissions of greenhouse gases. In the international climate change agreement, the world has agreed to achieve a global balance between greenhouse gas emissions and capture and storage (i.e. climate neutrality) by the second half of the 21st century. We do not face this challenge alone: the whole world needs to take action if we are to succeed. The Netherlands is committed to ambitious targets for the reduction of European greenhouse gas emissions and is operating as part of a global effort to this end, with regard to which we share the same interests as the rest of the world.
We are moving away from a fossil economy and towards a renewable, low CO2 economy. This transition is already underway, and will increase in intensity over the coming decades. This means that we will see major changes in various sectors: the built environment, the electricity supply, but also in industrial processes and transport. This report describes what the transition to a renewable energy economy will entail for the various domains.
Our current fossil-driven economy and society generates huge amounts of greenhouse gases (CO2 and equivalent gases such as methane). Too many greenhouse gases in the air cause the temperature on Earth to increase. This causes climate change, which will affect the living environments of various population groups. These environments will become harsher and less supportive of human life and extreme weather conditions will occur more frequently. International reports on the prevention of climate change reveal that the benefits of the energy transition far outstrip the costs at the global level2. A temperature increase of 4 degrees by 2100 would have a negative impact on the global economy amounting to 2-10% of global annual GDP3. This is why the recent climate conference in Paris has resulted in ambitious agreements on the prevention of global warming. Greenhouse gases are produced by various means: alongside energy production, emissions are also caused by livestock farming and other agriculture, industrial production processes and fossil materials incineration. It is important that all these domains are committed to a strong reduction of their emissions. This Energy Report focuses on the energy supply and will only refer to other domains if there is overlap in the developments.
At the same time, the energy policy has a broader goal than the contribution to the fight against climate change. The principle goal of the energy policy is to create a safe, reliable and affordable energy supply for the public and businesses.
The worldwide transition to a low CO2 energy supply will affect the economic structure as well. This will provide many opportunities for Dutch businesses to develop and export solutions for the new energy economy. This is another reason why the Netherlands needs to play a distinctive role in the global energy transition.
2 Recent example: The Global Commission on the Economy and Climate, Seizing the global opportunity: Partnerships for Better Growth and a Better Climate,2015. 3 OECD, The Economic Consequences of Climate Change, 2015. 14 Transition to sustainable energy
The fossil-driven components of the Dutch economy will need to change. The cabinet will aid businesses in this transition, resulting in sustainable and innovative companies that will strengthen the economy and provide new employment opportunities.
A world in transition At the time of writing of this Energy Report, steps are being taken to achieve the targets set down in the Agreement on Energy for Sustainable Growth on the road to 2020 and 20234. This entails an irreversible step within the energy transition. The cabinet and the other partners in the Agreement on Energy for Sustainable Growth are committed to the targets and agreements it sets out, namely a considerable increase in the share of renewable energy and increased energy conservation over the coming years5. The Dutch energy supply is also characterised by a high level of reliability and affordability, among other things due to Northwest Europe’s competitive and market position. At the global level, the International Energy Agency (IEA) has seen the first signs that the link between economic activity and CO2 emissions is being severed. Renewable energy is on the rise, especially in the electricity generation sector. In 2040, half of the EU’s electricity will be generated using renewable sources. At the same time, however, CO2 reduction in industry and transport is lagging behind at the global level. The IEA anticipates relatively low oil prices in the coming years, which entails a risk of increased gas consumption, a light increase in coal consumption and a lack of investment in new sources of production6.
Many stakeholders play a role in the current and future energy markets. There are more and more community energy initiatives, network operators are making the infrastructures more reliable, energy companies and knowledge institutes are developing innovations and the municipal and provincial councils are stimulating both short and long term renewable energy initiatives. However, it is important to realise that we will continue to be dependent on fossil energy for a long time yet. Conflicts such as those in the Middle East and the Ukraine threaten our energy security of supply.
However, there are also other issues that demand new solutions: earthquakes in Groningen and the safety of the inhabitants; price discrepancies between Europe and other countries and our competitive position; the goal of a European Energy Union versus the Member States’ individual energy policies; the increased use of intermittent energy
4 The partners in the Agreement on Energy for Sustainable Growth are committed to achieving the following goals: • An average reduction of final energy consumption of 1.5% per year. • A 100 petajoule reduction of final energy consumption in the Netherlands by 2020. • An increase in the share of renewable energy from the current 5.6% to 14% in 2020. • A further increase of this share to 16% in 2023. • A least 15,000 full-time employment positions, the majority to be realised in the next few years, and a top ten position in the global Clean Tech Ranking by 2030. 5 ECN and PBL, Nationale Energieverkenning 2015, 2015. If any partners are failing to meet the targets, they jointly take measures to pick up the shortfall. The implementation of the Urgenda verdict also plays a role. Reviews that are currently in progress, such as the Interdepartmental Policy Review on cost-efficient 2CO reduction measures, will serve as building blocks for the implementation of additional measures. 6 IEA, World Energy Outlook 2015, 2015. Transition to sustainable energy 15
sources and the pressure on the electricity infrastructure; the spatial accommodation of high voltage power pylons, wind turbines, gas storage and mining operations and the societal resistance this entails. These are only some of the themes that require concrete policy responses and each will have its own effect on the long-term situation. These examples demonstrate how important it is to consider under which conditions we want to use energy.
Another trend set to be broken The transition to a low CO2 energy supply that is safe, reliable and affordable is a challenge for the Netherlands, Europe and the rest of the world. In the Netherlands this challenge affects us all. All activities based on fossil sources will gradually be replaced by renewable alternatives. Many of the sectors in which the Netherlands excels will need to go through a transformation, such as the greenhouse industry, the chemicals industry and logistics sector. The Netherlands’ energy position in the world will change, in the first place because our own gas production is falling, but also due to the changes in our neighbouring countries and the rest of the world. The energy transition will demand major investment and involve changes to the economy too.
The commitment to renewable energy also applies to the buildings we live and work in. The energy conservation goals will affect how houses, offices and other non-residential buildings are constructed and renovated and how our energy consuming equipment and devices are used (with the aid of ICT solutions). Local energy sources will need to be integrated in the energy infrastructure, combined with other spatial functions and accommodated in our living environment. A new infrastructure will be required for the electrified transport network. Natural gas for heating will gradually be replaced by other sources of heat, such as electricity, ambient heat, geothermal heat and district heating. The energy transition is also a unique opportunity to improve local communities. Local interests, such as the improvement of air quality, will motivate the stakeholders to get involved in the transition in their own communities.
The Netherlands can and will take up the energy challenge further. Over the past decades we have already broken several energy trends: in the 1950s and 60s we switched from coal to oil and gas; in 1978 we invested in energy conservation in the ‘national insulation programme’; in the 1970s and 80s we diversified by reintroducing coal; in 1986 there was the decision not to invest heavily in nuclear energy, and in recent decades there has been the growing awareness of the need to switch to renewable sources. When viewed in this light, the energy transition can be seen as a continuous process. However, some of yesterday’s solutions turn out to be part of today’s problems. Our vision on energy is in transition too. The goal is clear, but the road is strewn with uncertainties and dilemmas. However, by forming a broad coalition of members of the public, businesses, knowledge institutes, government authorities and NGOs, we can make important steps.
16 Transition to sustainable energy
The Energy Report is a guideline for the energy transition on the road to 2050 This Energy Report focuses on the period following the signing of the Agreement on Energy for Sustainable Growth7. The ultimate target is set for 2050. This may sound like a long time from now, but this date has deliberately been chosen in the knowledge that this is a major challenge with far-reaching implications and that this lengthy period will be needed to achieve the transition to a low CO2 energy supply that is safe, reliable and affordable. Because a considerable part of the task can only be achieved in the long term, in part with technology that has not yet been developed, it is also important to define a vision for the medium term in order to ensure a decisive follow-up. The transition to a sustainable economy involves more than just increasing the share of renewable energy and implementing energy conservation measures. The biggest challenge will be to transform the current energy system and develop the requisite new energy options. This will affect both the energy functions (surface and subsurface) and other interests related to the spatial planning of our living environment. This Energy Report describes the vision of the future energy supply, and sketches the starting points for the transition, as kick-off to a broader public dialogue .
Contents of the Energy Report This Energy Report contains five sections: • Section 2 sets outs the cabinet’s ambitions for the energy economy. • Section 3 describes how we think to achieve these ambitions: by actively taking action at various geographic levels, by keeping various low CO2 energy options open, by working towards a flexible market and infrastructure, by making the energy transition an integral part of spatial planning, by implementing careful risk management without overregulation and by involving all stakeholders. • Section 4 describes what the new energy system will look like and sets out the transition for each separate energy function: space heating, process heat, transport, and power and light. • Section 5 discusses the Netherlands’ energy options and the considerations that play a role, and includes the themes of natural gas, CCS and the perspective for mining. • Section 6 describes the contours of the Energy Dialogue.
We have also provided background information on the current state of the energy functions described in Section 4. This information will serve as basis for the Energy Dialogue. The appendix includes an overview of the concessions made to Parliament that are to be met within the framework of this Energy Report or later as part of the Policy Agenda.
7 This answers the need for a foundation in support of a long-term and consistent framework for the energy policy and, more importantly, a strategic vision on the role of natural gas in our energy supply (Parliamentary Document 29 023 no. 176) Transition to sustainable energy 17 2050 Ambition: Low CO₂, safe, reliable and affordable
Climate change is an international problem and demands an international solution. Europe is responsible for 10.5% of global greenhouse gas emissions, 2to which the Netherlands contributes 0.5%8. We are working together with the European and international communities to ensure a transition to a low CO2 energy supply by 2050. The cabinet chooses to aim solely for reduction of CO2 emissions. Energy conservation and the use of renewable energy sources will naturally follow from this goal, but they are not long-term goals in themselves. Alongside reducing CO2 emissions, the energy supply also needs to be safe, reliable and affordable. Furthermore, the energy transition needs to provide opportunities to innovative Dutch businesses. By reaching European-wide agreements on CO2 reduction we can make the most of the advantages offered by individual countries, such as local opportunities for generating renewable energy, and so make the transition as cost-effective as possible. The transition will also provide opportunities to make technological breakthroughs. Transition to sustainable energy 19
2.1 Low CO2 energy 8 Focusing on European-wide CO2 reductions In order to achieve the targets for 2050, the cabinet plans to consolidate its focus on CO2 reduction at the European level. The cabinet is fully committed to the binding European agreements for 2020, 2030 and 2050 and the agreements for 2020 and 2023 set down in the Agreement on Energy for Sustainable Growth. This needs to be translated to the national situation and they demand a strong commitment to further tightening of the European Emissions Trading System (ETS). A cohesive package of measures will need to be drawn up per energy function (space heating, industrial process heat, transport and electricity) in line with the European targets. The application of CO2 reducing technologies and innovation has to be assured. An effective ETS is also essential for industry and for the production of electricity. An additional innovation impulse will be required on the road to 2030 and 2050 in order to achieve the required CO2 reduction at an affordable cost, which will include the sectors affected by the ETS. During the meeting of the European Energy Council of 26 November 2015, all the Member States agreed to draw up national energy and climate plans for 2021-2030. The Netherlands will set out the contours of this national plan, including the follow-up to the Paris climate deal, on the basis of the Energy Dialogue. The Netherlands will also set down measures in this plan in line with the targets for the reduction of greenhouse gas emissions.
The European ambitions The European plan is ambitious in comparison with most other major global economies, involving a far-reaching emissions trading system and targets for 2020, 2030 and 2050.
• 2020: 20% reduction The European targets for 2020 are a reduction in greenhouse gas emissions of 20% in comparison with 1990, a 20% share of renewable energy and energy savings of 20%. Part of the emissions reductions are subject to the ETS (in particular the energy intensive industry and the energy production sector). The remainder (the non-ETS emissions reductions) are distributed between the Member States. The capacity of each of the Member States played an important role here. The Netherlands also has a binding target to produce 14% of its energy from renewable sources and achieve average energy savings of 1.5% between 2014 and 2020.
• 2030: 40% reduction The European targets for 2030 were set down in October 2014. These are a reduction in greenhouse gas emissions of 40% in comparison with 1990 and a 27% share of renewable energy. An indicative target of 27% was set for energy efficiency. The climate target of a reduction in greenhouse gas emissions of 40%
8 European Commission, Edgar – Emission database for global atmospheric research, data for 2012, http://edgar.jrc.ec.europa.eu/overview.php?v=CO2ts1990-2013 consulted on 15 December 2015. 20 Transition to sustainable energy
was translated into a binding target for the non-ETS sectors of the Member States. A decision on this is expected in 2016. These European goals were used as a basis for the climate negotiations in Paris.
• 2050: 80-95% reductions Europe has set an ambitious target of an 80-95% reduction in greenhouse gas emissions by 2050 for the entire European energy economy (in comparison with 1990 levels)9. This target is based on the international agreement that the global temperature must not to be allowed to increase more than 2°C. Europe has not yet reached agreements in relation to the implications of the new worldwide climate targets (see next paragraph).
In accordance with the agreements on governance up to 2030, the European targets for renewable energy and energy conservation will not be translated to the national level, but instead the Netherlands and all other Member States will need to draw up their own national energy and climate plans for 2021-2030, which will describe the national policy measures that will contribute to the European targets. The Netherlands will also set out what this plan will mean for renewable energy and energy efficiency in relation to the reduction of greenhouse gas emissions.
Ambitious international climate change agreement During the climate conference in Paris, the Netherlands and the other European Member States made every effort to ensure that good and feasible international agreements were made. On 12 December 2015 an important climate agreement was reached that will be able to serve as a new starting point for an effective global climate policy for the 21st century. In this climate deal, 195 countries (the signees) agreed to a set of global climate targets and the national contributions required to achieve these. The average global temperature increase is to be limited to well below two degrees in comparison with the pre-industrial level and the signees will endeavour to limit this temperature increase to 1.5 degrees. This is more ambitious than the earlier agreed target of limiting global warming to two degrees. In order to achieve this target, it has been agreed to reverse the increase in global greenhouse gas emissions as soon as possible so that these emissions can quickly be reduced. By the second half of this century there must be a balance between greenhouse gas emissions and capture (i.e. climate neutrality). The Intergovernmental Panel on Climate Change (IPCC) of the United Nations (UN) was asked to calculate the reduction in emissions required to limit global warming to 1.5 degrees.
The signees have also agreed to review and update their nationally determined contribution every five years, or to review and reconfirm their contribution if it concerns a 10-year timescale. This will be done in a transparent manner, in compliance with agreed guidelines and using accepted methods.
9 Brussels European Council, Presidency conclusions (15265/1/09 REV 1), confirmed on 4 February 2011 (EUCO 2/11). Transition to sustainable energy 21
The signees may enhance their existing contributions in the intervening period, while new contributions for a subsequent period must be more ambitious than the contributions determined for the previous periods. The EU will make a joint climate contribution on behalf of all EU Member States. The target for 2030 is a reduction of minimum 40% in comparison with 1990 levels. The review of the nationally determined contributions will be preceded by a periodic global evaluation by the UN, which is committed to inform the signees of the progress of the long-term climate targets and the efforts required in the future to achieve these. The first global evaluation is scheduled for 2018. Based on this evaluation, in 2020, the signees must provide information on new 5-yearly (or in some cases increased 10-yearly) nationally determined contributions. Alongside the nationally determined contributions, the signees must also strive to submit a long-term low emissions strategy in 2020.
The signees are also called on to implement the earlier agreements made during the climate negotiations. These concern the previously agreed national contributions and the commitment to enhance the pre-2020 ambitions. The signees are also called on to encourage the voluntary cancellation of the emissions allowances under the Kyoto protocol by both the signees and non-signees. In 2015, the Netherlands decided to contribute extra reductions by means of cancelling their current surplus of Kyoto emissions allowances that are available to sectors that fall outside the scope of the ETS10. The climate deal will become effective if a minimum of 55 signees ratify the agreement, these countries having to represent a minimum of 55% of the global greenhouse gas emissions. The signees can ratify the climate change agreement between 22 April 2016 and 22 April 2017.
The Netherlands and the other European Member States wanted to forge an ambitious and legally binding agreement that entails a responsibility for all signees to prevent global warming. With this climate deal, this goal has been largely achieved. An important result is the global system of 5-yearly reviews that is to hold the signees to their responsibility to increase their contribution to the prevention of global warming. The climate deal also offers economic opportunities to Dutch businesses and knowledge institutes to apply their knowledge and expertise in sectors such as water management and agriculture in countries that are effected by the consequences of climate change. The climate deal has implications for Dutch energy and climate policy11, the European agreements on this deal having our priority. The European targets will therefore continue to form the starting point for the Netherlands. In December, the European Council welcomed the climate deal, among others because it is a legally binding global agreement12. The European Council asked the Council and the European Commission to study the climate change agreement, particularly in the light of the climate and energy framework for 2030. The European Council will probably undertake this study in March 2016.
10 Parliamentary Document 31793, no. 116. 11 The Minister for the Environment sent a letter to Parliament on 18 December 2015 in which she set out the main results of the Paris climate conference (Parliamentary Document 31793, no. 112). An assessment of this letter will be submitted to Parliament on behalf of the cabinet in early 2016. 12 European Council, Conclusions of the European Council meeting of 17-18 December 2015, 2015. 22 Transition to sustainable energy
The European Commission has decided to focus on the implementation of the current targets for 2030. The discussion on enhancing the ambitions for both 2050 and 2030 will be conducted as part of the preparations for the 5-yearly review of the nationally determined contributions in 202013. Any enhancement of the European ambitions will have consequences for all Member States, including the Netherlands.
The CO2 ambition leads to lower energy consumption and more renewable energy In order to take account of specific conditions and preferences and to be able to incorporate future developments in the policy, the cabinet has decided to focus only on CO2 emissions, and not to additionally take account of the share of renewable energy or the level of energy conservation. The cabinet also emphasised the importance of focusing on the reduction of greenhouse gas emissions during the discussions on the European targets for 2030.
13 Speech by EU Climate and Energy Commissioner Cañete on 14 December 2015.
Figure 2.1 80% reduction path for EU-wide greenhouse gas emissions emissions in 2050 in comparison with 1990 (situation in 2011)
100
90 Energysector Housing and services 80 Manufacturing 70 Transport 60 Non-CO₂ agriculture Non-CO₂ other sectors 50 Current policy 40
30
20
10
0 1990 2000 2010 2020 2030 2040 2050
Source: European Commission, Roadmap for moving to a competitive low-carbon economy in 2050, 2011. Transition to sustainable energy 23
According to the European Commission, the European target of reducing greenhouse gas emissions by 40% in 2030 (in comparison with 1990 levels) will result in lower energy consumption and a greater share of renewable energy in comparison with the situation without additional policy measures after 2020.
EU final energy consumption savings will increase to 25% by 2030 (in comparison with 21% without additional policy measures). The share of renewable energy in the EU will increase to 27% by 2030 (in comparison with 24% without additional policy measures). By 2050, this share will have increased to more than 51%. According to the European Commission, the share in the Netherlands would increase to 19-24% by 2030 (in comparison with 18% without additional policy measures). Furthermore, the climate target has a beneficial effect on air quality and it will reduce imports of fossil fuels from outside the EU14. The Netherlands will report to the EU on its contributions to the European targets for renewable energy and energy efficiency between 2020 and 2030. Figure 2.1 provides a rough overview of the contributions of the various European sectors to CO2 emissions reductions. These contributions will obviously be subject to change, for example due to new insights on emissions levels and the opportunities to decrease these. Should the results of global negotiations require it, then the final ambition for the EU can be enhanced in new European administrative agreements.
The outcome of the European ambition for the Netherlands The Netherlands is fully committed to making its contribution to limiting climate change as part of the international climate agreement. On the basis of the European target (a reduction of greenhouse gas emissions of minimum 40% by 2030), we can break down our ambitions into separate targets for industrial process heat (high temperature heat), space heating (low temperature heat), the energy sector (power and light) and transport. In Section 4 we will describe how we can achieve this transition for each of these four energy functions. A cohesive package of measures will be drawn up per energy function in order to meet the targets for reducing greenhouse gas emissions, in which other emissions (such as sulphur, nitrogen and particulates) and environmental aspects (such as loss of biodiversity loss and damage to the landscape) will also need to be taken into account. Moreover, the measures will need to ensure an affordable, reliable and safe energy supply and provide sufficient guarantees of investment security.
14 European Commission, Impact assessment on energy and climate policy up to 2030, 2014. 24 Transition to sustainable energy
Greenhouse gases
In 1990, the Netherlands produced 221 megatonnes of CO2 equivalents of greenhouse gases. The main contributor to these greenhouse gases was CO2, although other gases such as methane, nitrous oxide and some fluorinated gases also make a significant contribution to greenhouse gas emissions15. Approximately three quarters of the current Dutch emissions are related to the supply of energy, in particular CO2 that is released during the combustion of fossil fuels. Another contributor is methane gas that leaks out during the extraction, transport and combustion of natural gas. The remaining quarter of the current emissions of greenhouse gases is caused by non-energy related sources. These include agricultural emissions (such as CH₄ emissions from manure and N₂O emissions produced by the soil following fertilisation), industrial emissions (such as N₂O produced during the manufacture of fertilisers and fluorinated gases produced by the aluminium industry) and emissions caused by the incineration of waste containing fossil raw materials such as petroleum or natural gas. Decreasing the emissions caused by these non-energy related sources can make an essential contribution to achieving a low CO2 economy, however this is not the subject of the present Energy Report. In this report, the term “CO2” may also be understood to mean “carbon”, “greenhouse gases” or “CO2 equivalents”.
2.2 Safe, reliable and affordable
Guaranteeing safety level Safety during the extraction, storage, transport, production and consumption of energy has high priority. The oil spill in the Gulf of Mexico, the nuclear disaster at Fukushima, the environmental effects of shale gas exploitation, the earthquakes in Groningen and concerns about the high voltage power lines in the Netherlands – these examples all demonstrate how important it is to ensure that safety is carefully secured in energy policy.
Safety and uncertainty about the risks are therefore important themes for the energy transition. We need to be open regarding innovations and technology in the energy domain of which the risks are partly not yet known. The government is tasked with guaranteeing a high level of safety, allocating the relevant responsibilities, and at the same time facilitating new forms of energy. Energy extraction, storage, transport, production and consumption all require much innovations to happen. Some of these innovations are ready to be implemented, some are still in development, while others have yet to be conceived. We need to know more about the opportunities and risks of technological innovations for users and local communities.
15 RIVM, Loket emissieregistratie, Nationale Broeikasgasemissies volgens IPCC, http://www.emissieregistratie.nl/erpubliek/ erpub/international/broeikasgassen.aspx, consulted on 2 November 2015. Transition to sustainable energy 25
Safeguarding reliability Reliability concerns the security of the energy supply in both the short and long terms. This involves various aspects: • Security of supply concerns the availability of the energy sources in the long term. • This includes aspects such as the extent of the global energy reserves in relation to the production capacity, the consumption level and the geographical distribution. • Security of supply is also the degree to which users can rely on the energy supply under normal foreseeable conditions. • Guaranteeing reliability also involves the prevention of national and international energy crises and – if these crises should occur – the management of the consequences of these crises.
The reliability of the Dutch energy supply is in part dependent on the reliability of the connections with the countries around us. We import energy carriers such as gas, oil, biomass and coal from Europe and other countries. Our electricity network is strongly interconnected with the networks of our neighbours. The technology for the extraction, storage and transport of energy is under continuous development by companies around the world. Adequately functioning markets and the availability of multiple supply routes ensure that the Netherlands is not dependent on a limited number of suppliers in countries and regions that may be politically or economically unstable. Energy conservation and an increasingly sustainable energy supply will lead to a decreasing dependence on fossil energy carriers in the longer term. However, a point of concern is the incorporation of forms of renewable energy, such as solar and wind energy, that are not continuously available, or in fact cause energy peaks. Renewable energy could be incorporated more simply and more efficiently in an integrated European energy market (due to scale advantages). For this reason, the further integration of the energy market in both the European and the regional (Northwest European) contexts is a priority of the security of supply policy.
Guaranteeing affordability An affordable energy supply is one that is economically efficient. The aim is an energy bill for both consumers and businesses that is as low as possible. Another aim is to ensure fair competition: international businesses must be able to compete with each other on a similar footing.
This means that the affordability of our energy supply is strongly influenced by the international context. We can guarantee affordability by ensuring competitive, international energy markets so that the buyer has a choice and by ensuring more efficient use of energy by the industry and consumers. Due to scale advantages and the benefits of a competitive market, integrating the energy market at the European and, more importantly, the Northwest European level will ensure that energy becomes more affordable. Moreover, market integration can lead to more efficiency, and hence affordability, if the comparative advantages of the various countries are put to better use (such as generating solar power in hot countries). But market integration must also involve careful consideration of the differences between countries, regions and users. 26 Transition to sustainable energy
User requirements can differ widely and energy systems are often dependent on local conditions, such as the availability of space.
2.3 Economic opportunities for innovative business
The energy transition is an economic opportunity The energy transition will cost money and require many investments, but it also offers opportunities for the safeguarding and development of the Netherlands’ earning potential. The Netherlands will grab these opportunities to strengthen its economy by investing in innovation, by profiting from regional and local dynamism and by vigorously promoting Dutch solutions on the international energy market.
The energy transition entails a fundamental change for Dutch industry, which to date has profited from the energy transports that run through the country and the proximity of the ports for the import of fossil fuels. We have to make large-scale energy savings and find alternative sources to the current fossil fuels and raw materials. The current state of the art is sufficient to achieve the short term goals, but innovations will be needed to develop the technologies that will enable us to achieve the targets for 2050. This is why the cabinet chooses to focus on innovation for reducing the emissions of the industry.
Transition to sustainable energy 27 Starting points of the energy transition
We have strong ambitions for 2050. The energy transition that will be required to 3 achieve these ambitions will have an impact on society. This is why it is important to formulate clear starting points for this energy transition. We have defined seven starting points that we will explain in detail in this section: 1. Be active at various geographic levels 2. All low CO2 energy options are open to consideration 3. Develop flexible markets and infrastructures 4. Strong dedication to innovation 5. Integrate the energy transition in spatial planning 6. Careful risk management without overregulation 7. Select and allocate clear roles to all layers of society Transition to sustainable energy 29
3.1 Be active across all geographic levels
International, European, regional, national and local The energy supply is an international, European, regional, national and local concern. This means that to achieve our energy ambitions we will have to act at various geographic levels. The Netherlands will constantly need to consider the level at which an agreement or action should most logically be applied:
• International or European-wide markets and effects will preferably be responded to with agreements at the international or European level. This will ensure that the agreements are effective and efficient and that the rules are the same for everyone.
• Regional and national decision-making processes allow specific preferences and conditions to be taken into account, which is particularly important when these differ by region or by country.
• Finally, local decision-making will become increasingly important, particularly where it concerns the incorporation of sustainable energy solutions (in the already limited space available in the Netherlands) and local heat supply solutions.
International developments affect our energy infrastructure and supply The Dutch energy supply is fully integrated in the international infrastructure The Dutch energy supply is strongly dependent on the European and global energy markets, and so a safe, reliable and affordable low CO2 energy supply can only be achieved as part of an international effort. This is illustrated by the Emissions Trading System (ETS), for example, that links CO2 reduction by the Dutch energy sector and industry directly to European-wide developments. The Netherlands will become more dependent on imports of energy from abroad in the future, primarily because our national gas production is on the decline.
Economic benefits are dependent on international developments Our economy profits from the fact that it is strongly integrated in the international markets. The Netherlands is a leading player in the Northwest European energy market thanks to the key storage and transhipment functions of the Dutch ports (for oil, coal and, increasingly, LNG and biomass), an extensive and innovative petrochemicals complex in the Rijnmond region and the still considerable production of gas. This also means that global developments are keenly felt in our country – in the prices we have to pay, the choices we make and the costs that these choices bring. Over the past years, these developments have had a strong influence on the energy domain.
Oil and gas markets The oil and gas markets have changed drastically. Until only a few years ago, fossil fuel production was only increasing in countries outside the OECD. In recent years this tide has turned; where the Middle East and Russia were the dominant producers of petroleum, the 30 Transition to sustainable energy
US has now become the world’s biggest producer of petroleum and natural gas, thanks to its exploitation of the oil and gas in shale layers. The production of oil and natural gas is also increasing in other countries outside the OECD such as Canada and Australia, and this production is expected to continue to grow16. Although natural gas production is gradually declining in the European Union, it is increasing fast in other regions, such as the US, but also non-OECD countries such as China, Brazil and countries in the Middle East. The production of coal is decreasing in all OECD countries with the exception of Australia. In Asia, coal production is still increasing strongly. It is anticipated that the prices for coal, petroleum and natural gas will remain low for the coming years. Traditional producing countries will thus be faced with a budget deficit which will lead to internal and regional tension. However, the consumer countries welcome the low energy prices as a boon.
Geopolitical tension Although there is more behind geopolitical tensions than only energy issues, they do have a major influence. The many conflicts in the Middle East and North Africa make these important oil and gas producing regions unstable. In Europe, the conflict between Russia and the Ukraine is causing instability. This conflict contributes to the concerns about our security of supply and the response is an even stronger commitment to European integration under the umbrella of the European Energy Union.
Increasing investment in renewable energy Global energy intensity is increasing rapidly by more than 1.7% per year. This is a clear indication of increasing energy efficiency, caused by the globalisation of the economy. The main driver of the improvement is better energy efficiency in the industry and transport domains in wealthy countries, but also the economies of countries like Indonesia and South Africa17. Moreover, the worldwide investments in renewable energy have increased sixfold in the past ten years. The global investments in renewable energy are now at the same level as the investments in fossil electricity generation. Where this growth was initially mainly limited to Europe, this is now an international phenomenon. The costs of producing energy from wind and, to an even greater extent, the sun are decreasing thanks to innovations and scale advantages. Today, China is the world’s biggest investor in renewable energy. We anticipate that the international trend towards renewable energy will accelerate in the coming years18.
Benefits of international agreements In light of the importance of energy for our economy, the Netherlands can only benefit from adequately functioning energy markets and international agreements. These agreements arrange for properly functioning and interconnected energy markets, crisis policies in case of market disruptions, arbitration in case of conflicts and, of course, the reductions in greenhouse gas emissions, because the world can only fight climate change if it works together.
16 IEA, World Energy Outlook, 2015. 17 SE4ALL, Global Tracking Framework report 2015, 2015. 18 UNEP & Bloomberg, Global trends in renewable energy investment 2015, 2015. Transition to sustainable energy 31
The climate conference in Paris resulted in a global and legally binding climate change agreement. This agreement sets down ambitious climate targets and agreements on the contributions of the signees to the agreement to reduce their CO2 emissions (see paragraph 2.1).
Decision-making in our neighbouring countries Closer to home, the political decision-making in our neighbouring countries will have major implications for our energy infrastructure and supply. For example, the Fukushima disaster was reason for Germany to phase out its nuclear power stations and increase its commitment to renewable energy. The subsequent strong increase in the supply of cheap wind energy from Germany has in turn had a major influence on the Dutch energy market.
International cooperation in practice
Our energy supply will be dependent on fossil fuels for some time yet, which is why it is important to maintain good relationships with existing and future energy producing nations. These include countries in Africa, the Middle East, Central Asia and the regions surrounding Russia and the US. Countries that are strongly dependent on the income from oil and gas must be encouraged to diversify their economy and make it more sustainable. The relationships with the suppliers of systems and technologies for renewable energy and energy conservation will become increasingly important. The cabinet wishes to develop these relationships in missions together with businesses, knowledge institutes and NGOs. This does not only concern the trade in energy-related products for industries and consumers, it is also about energy governance, which involves working together to connect the energy markets, harmonise the legislation, prevent market disruptions, ensure investment security, assure the unimpeded transport of energy, harmonise the measures for climate change prevention and the promotion of renewable energy and prevent energy being used as a geopolitical weapon. The Netherlands can contribute its own knowledge, but also learn from other countries. In this context, the Netherlands opts to actively participate, particularly in the international networks of the IEA (knowledge sharing and oil crisis policy), the International Renewable Energy Agency (IRENA) and the Energy Charter (energy governance and investment security).
The energy transition is a joint European effort The transition to a low CO2 economy with an 80-95% reduction in greenhouse gas emissions by 2050 is a joint and uniting goal for the European Union, for which the Netherlands is giving priority to the European agreements for both the sectors that fall under the ETS and the non-ETS sectors. Europe, represented by the European Energy Union, is strongly committed to reducing CO2 emissions. The most important manifestations of this commitment are the ETS, the source-based policy for transport and the guidelines for energy efficient devices (Ecodesign). However, the Energy Union goes further than this, 32 Transition to sustainable energy
also encompassing improvements in energy security of supply, the fulfilment of the internal energy market and research and innovation in the energy sector. The Netherlands welcomes this development. An effective and competitive internal energy market forms the basis of the Energy Union, including its energy security of supply. The continued development of cohesive and consistent markets by the European partnership continues to be an important goal of the Netherlands19. The Energy Union must reverse the current, disturbing trend in the Member States of carrying increasingly fragmented energy policies. During the Dutch EU presidency in the first half of 2016, alongside supervising the current European agenda, the Netherlands wishes to focus on the implementation of further cooperation in the energy market, with the Energy Union as the most important pillar, paying special attention to a bottom-up approach based on regional cooperation.
Concrete results sooner with regional approach Although the differences at the European level can be huge, at the regional level things get easier and concrete results can be achieved sooner. The Netherlands has had good experiences with the ‘pentalateral’ energy forum consisting of the Netherlands, Belgium, Germany, France, Austria, Luxembourg and Switzerland. Since 2005, this forum has played a major role in strengthening the integration of the electricity and gas markets and developing a joint approach to security of supply. This forum does not only involve various ministries, there is also an important role for network operators (Transmission System Operators), regulators, market parties and the European Commission. There are also successful regional partnerships in other parts of Europe, such as the Scandinavian and Baltic regions.
Neighbouring countries Finally, the relationship with our immediate neighbours deserves special attention. The developments in these countries have a direct impact on the Dutch energy supply, in particular in relation to the security of that supply. In 2014, the Netherlands signed an agreement with Germany to intensify their cooperation in the field of energy. The intention is also to sign a Memorandum of Understanding with Belgium in the short term. Agreements with neighbouring countries in bilateral and preferably regional partnerships can help to prevent inefficient, market-disrupting and fragmented national policy, facilitate cross-border coordination and serve as a stepping stone to the fulfilment of an internal European energy market.
National and local input still needed European agreements, national implementation As described above, the Netherlands is strongly dependent on international and European developments. However, the Netherlands itself is responsible for implementing the international agreements and European legislation. European agreements are typically set down in the form of guidelines rather than rules. This means that there is often scope to implement the agreements at the national level so that specific national conditions
19 IEA, Energy policies of IEA country: The Netherlands, 2014. Transition to sustainable energy 33
and preferences can be taken into account. There is thus often a degree of freedom in the implementation of the various guidelines. The Netherlands is also itself responsible for determining the emissions reductions of the non-ETS sectors. A good example of a non-ETS domain is the heating of homes, buildings and greenhouses.
Effect on public spaces The international and European developments will set the stage for the major trends, yet the increasing sustainability of energy supply will also result in a fundamental change in the way our energy supply works, with spatial implications that will affect every citizen. Whereas the energy supply was formerly centralised, the sustainable alternative will entail more small-scale and localised energy production that will be more visible in the public space. This is why the involvement of the public and other stakeholders is essential for the successful implementation of the policy at the local level.
Profit from regional and local advantages The Netherlands will facilitate entrepreneurship and innovation and help businesses to capitalise on the regional and local advantages in order to profit from every opportunity the energy transition offers. The role of the national regions will become increasingly important, especially where it concerns pilot projects and innovative regional clusters. The incorporation of various infrastructures for the production, transport and storage of energy will also primarily be a national challenge. A comprehensive comparison of the societal costs and benefits, including safety, will be of major importance.
3.2 All low CO2 energy options are open to consideration
The transition to low CO2 energy sources In order to realise a sustainable, safe, affordable and reliable energy supply, we need to make a transition from a system based on a small number of fossil fuels to a system that deploys many different, often local, low 2CO sources of energy. Based on the current insights, we will need to deploy practically all the low CO2 energy carriers and energy saving measures available to us. Fossil fuels will gradually decrease in importance.
Energy conservation is crucial In order to realise a low CO2 energy supply, energy conservation measures will be required across the full spectrum of this supply. Many of the scenarios for a low CO2 energy supply in 2050 result in final energy consumption levels that are between 10 and 40% lower than the present levels20. Without these energy savings it will be difficult and expensive to meet the energy demand with low CO2 energy production. The more energy is saved, the less needs to be produced, which means less investments, less space needed for the requisite infrastructure and less effects on the environment. The right balance between energy conservation measures and the use of low CO2 energy carriers will depend on specific
20 PBL and ECN, Naar een schone economie in 2050: routes verkend, 2011. 34 Transition to sustainable energy
local and commercial conditions. In a low CO2 energy system, every energy unit saved means that an equivalent unit of an energy carrier will not be needed.
The best ways to save energy include insulating buildings, designing new buildings to profit from sunlight, improving the energy efficiency of devices and vehicles, avoiding travel, more efficient production processes, clustering and integrating industrial installations and drastically reducing the use of materials and reusing materials, in particular energy intensive materials. There is still a huge potential to save more energy at low or in any case acceptable costs21. Technologies that can lead to more far-reaching energy savings, particularly in the industry and transport domains, are often either still lacking or still in the experimental phase. Energy saving measures often go hand in hand with matters such as depreciation terms and periodic renovations. This can make the societal costs of far-reaching or accelerated energy saving programmes high.
Diverse range of low CO2 energy solutions already in place The Netherlands has various advantages that will help it to achieve its energy targets: • Due to its long, exposed coastline, there are excellent opportunities for wind energy, particularly at sea. • We are a water-rich country with a strong offshore industry. This means that there are opportunities to further develop water-based technologies such as hydropower, tidal energy and osmosis/blue energy. • The many square meters of roof space on houses and other buildings offer an opportunity for installing solar panels for solar energy. • Heat is available in the subsurface and can also be obtained from biomass, solar boilers and as residual heat from the industry, which is also a means of conserving energy. • With its ports, infrastructure and industries, the Netherlands is in a strong position to process and trade in biomass. • There will soon be opportunities for large-scale CO2 capture and storage (CCS) in empty gas fields. The infrastructure and knowledge required are already there. • The Netherlands has its own natural gas reserves, ample knowledge of gas technology (including LNG and green gas) and, in part thanks to the infrastructure, an excellent position in the Northwest European gas market for the deployment of gases for energy. • New nuclear technologies are not ruled out, but there is currently no need for a new nuclear power plant.
All these solutions involve both advantages and disadvantages in terms of sustainability, reliability and affordability and these aspects need to be taken into account in the future energy system.
21 PBL and ECN, Quickscan mogelijke aanvullende maatregelen emissiereductie 2020 ten behoeve van Urgenda klimaatzaak, 2015. Transition to sustainable energy 35
Options need to be kept open There are many uncertainties surrounding the energy demand on the one hand and the potential and costs of various low CO2 solutions on the other. Many energy solutions need to be developed further before they can be implemented to their best potential and at a societally acceptable cost. This means that we cannot rule out any options out of hand, because we will need to deploy practically all the currently available low CO2 technologies to meet our targets. In order to be able to utilise the future energy resources to their best potential, the energy functions should be further integrated and a suitable infrastructure, including storage options, should be provided.
Fossil fuels will decrease in importance Although fossil fuels will continue to play a role in the future energy supply, they will gradually decrease in importance22.
Coal There will be no place for new coal-fired power plants in the transition, and it is important for the electricity market to intensify the focus on the least polluting technologies. An effective price incentive provided through the ETS will eventually provide a sufficient economic impulse for the operators of coal-fired power plants to reduce their emissions, for example by implementing biomass co-firing, CCS, a combination of both, or by shutting their plants down.
Natural gas As the least polluting fossil fuel, natural gas will play an important role in the transition, but the consumption of this fossil energy source will also have to be drastically reduced in the long term. Over the coming decades, the use of natural gas to heat buildings and greenhouses will gradually be reduced. By 2050, natural gas will still be used to a limited extent for transport and high-temperature applications. Natural gas will be combined with CCS in order to meet the flexibility demands in the electricity market. In the transport domain, LNG and bio-LNG will play an increasingly important role in shipping and heavy road transport. There are thus enough reasons to keep using natural gas as the cleanest available fossil fuel, and as long there is a demand for natural gas, the safe extraction of this gas in the Netherlands will continue to contribute to our energy independence.
22 Rli, Rijk zonder CO2, 2015; PBL and CPB, Welvaart en Leefomgeving – lange termijn ontwikkelingen rond klimaat en energie, 2015; PBL and ECN, Naar een schone economie in 2050: routes verkend, 2011. 36 Transition to sustainable energy
The mining industry and petroleum The mining industry will not only continue to play a role in fossil fuels extraction, but also in the development of geothermal heating solutions. This will require surveying the deep subsurface and shale layers, as well as studies of mitigating measures to reduce the risks. Petroleum will probably continue to play a role in the heavy transport, aviation and shipping domains, but will become less important for normal road users.
Deploy uncertain solutions only if there are no alternatives Biomass and CCS appear to be attractive solutions for various energy functions, but it is far from clear what the costs and yields of these systems will be23. In order to keep the costs of the future energy supply down, these low CO2 solutions should be reserved for situations in which cheaper or better alternatives are not available24.
Biomass Renewable biomass can be used to provide process heat for the industry and fuel for heavy transport, aviation and shipping, since no alternatives have yet been found for these applications. In some cases, biomass for energy use competes with biomass for foodstuffs and animal fodder, so that it is unclear how much biomass will actually be available for energy applications, making it all the more important to set clear sustainability requirements. Much knowledge has been developed in recent years on the certification of renewable biomass. There are now also sustainability criteria for biofuels. This will help to assure that the use of biomass will really lead to a reduction of CO2 emissions, that no undesired land use change takes place and that ecosystems remain intact. We also need to take account of an increasing demand for biomass as a replacement for fossil fuels such as oil and natural gas. This will also involve a transition towards 205025.
CO2 capture and storage (CCS) As with biomass, CCS should only be deployed if no other options are available. CCS can be a suitable solution for permanent sources of CO2 emissions, such as industrial process heat, for which there are few low CO2 alternatives. CCS involves capturing CO2 and storing it underground, for example in empty gas fields. These fields could also be used to store energy buffers to be able to meet peak demands.
23 PBL and ECN, Naar een schone economie in 2050: routes verkend, 2011; ECN and SEO, Kosten en baten van CO2-emissiereductiemaatregelen, 2012. 24 PBL, Biomassa: wensen en grenzen, 2014. 25 Parliamentary Document 33 043, no. 33. Transition to sustainable energy 37
3.3 Developing flexible markets and infrastructures
Transition presents new challenges The transition to a low CO2 energy supply will involve new challenges for both the energy markets and the managers of the energy infrastructure. The markets will need to ensure that the energy prices sufficiently reflect the societal costs. Network operators will need to make sure that the networks remain reliable while keeping down the costs of installation and management, while in the meantime there will be increasingly large peaks and troughs in energy supply and demand. The flexibilisation of supply and demand can facilitate this.
An energy market in transition demands consistent and cohesive regulation Framework for energy markets The energy transition demands a consistent, flexible and cohesive framework for the energy markets. The goal is a future-proof and flexible energy system that will facilitate innovation, enable new parties to join the market and allow energy carriers to be used to their best effect. More than ever before, this will require an integrated approach, which will offer more flexibility and will produce more optimum results, both societally and economically, than if the individual components of the system are optimised separately.
The government has formulated the following starting points for this framework: 1. It must be clear and consistent and ensure that the market incentives contribute to the goal, being the transition to a low CO2 energy supply, in an effective and efficient manner. It must also improve the perspectives of low 2CO solutions, such as CCS. 2. The rules will be formulated as goals wherever possible so that there is room for flexibility and innovations and new market developments can easily be incorporated. 3. It must be cohesive and system-oriented (rather than submarket-oriented), because the transition requires an integrated approach.
Clear and consistent It is important for the transition that the market frameworks and incentives are consistent. These must facilitate the transition, or in any case not impede it, which is sometimes the case in the current situation. For example, local decision-making on low CO2 heating solutions is hindered by the Heating Supply Act (Warmtewet), which does not function optimally yet. There are also various rules and incentives, including tax incentives, for components of the energy system, such as the energy tax on electricity and gas.
The government will provide clear frameworks in advance and where necessary, so that the public interest is assured. Unambiguous frameworks are also good for investors, ensuring that they know where they stand and that they are not impeded by regulatory uncertainty. One of these frameworks is the target for reducing greenhouse gas emissions, as derived from the binding European agreements. At the same time, the availability of energy and the energy infrastructure is safeguarded. 38 Transition to sustainable energy
Goal-oriented regulation In order to make the transition to a low CO2 energy supply, we will need to deploy goal-oriented regulations more often than currently. With goal-oriented regulations, the regulator only indicates which interests must be served by a certain measure, but does not describe precisely how these interests should be safeguarded. Developers of new concepts and applications for specific goals can thus gain access to the energy markets without being hindered by existing laws, regulations and institutions. Because the existing legislation does provide the stakeholders with clear guidelines, and may be intended to protect certain parties (such as consumers), it is obvious that the various interests will need to be balanced carefully.
Facilitating innovation The market must facilitate new and innovative products and services, such as charging stations for electric vehicles, smart meters to encourage energy conservation and energy service companies (ESCOs) that provide energy to groups of users. New products and services may require laws and regulations to be changed. The recently introduced ‘experimental leeway’ provides an opportunity to discover the best way to do this and what the costs and benefits will be. This offers a suitable ecosystem for innovations that can reduce CO2 emissions: • Consumers and other market parties get to test their ideas first, and if the test is successful they can roll out new initiatives that are not covered by the existing legislation. • Network operators can efficiently manage and future-proof their infrastructures.
Emissions Trading System is a cornerstone European Emissions Trading System The European Emissions Trading System (ETS) is a cornerstone of the European Union’s climate policy. The main goal of the ETS is to reduce CO2 emissions. By setting an absolute cap on emissions and allowing ETS businesses to trade emissions under this cap, a price is attached to these CO2 emissions and so the system can find the most cost-effective ways to reduce the emissions. As such, the ETS also forms the cornerstone of an effective policy for the Dutch industry and electricity producers on the road to a low CO2 economy. For this reason, the Netherlands is committed to strengthening and also simplifying the ETS (see box). Agreements can be reached with neighbouring countries in support of this policy, for example on the harmonisation of market rules and joint efforts to make the submarkets more sustainable. At the same time, it is important to keep sight of how our current policy fits in a strategy that is primarily focused on CO2 reductions by means of the ETS26.
26 In conjunction with the recommendations of the OECD and IEA, Aligning policies for a low-carbon economy, 2015. Transition to sustainable energy 39
Strengthening the ETS: The Netherlands’ commitment
The ETS must be strengthened in order to make it more effective and harmonise with the agreed targets in the climate and energy agreement for 2030. In Brussels hard work is going on to achieve this. The first step was the postponement of the auction of 900 million emissions allowances in 2014 (this is known as ‘backloading’). This will lead to a healthier balance between supply and demand in the current market, with its overabundance of emissions allowances.
Furthermore, in 2019 the market stability reserve will come into effect. This is a buffer that is meant to prevent imbalances between the demand and supply of emissions allowances by automatically withdrawing allowances from the auction if there are too many unused allowances on the market. Conversely, if there is a deficit then allowances can be taken from this buffer and added to the system.
However, the market stability reserve on its own is insufficient to bolster the ETS. For this reason, the Commission has proposed improvements to the ETS in the period following 2020. The decision-making on these improvements is expected to take place before 2017.
The Netherlands believes that the improvements should be aimed at finding a balance between tightening the ETS cap, safeguarding the international competitive position of the industry that is sensitive to carbon leakage, and simplifying the system. The Netherlands supports the proposed tightening of the emissions cap from 1.7 to 2.2%. This ties in nicely with the target to reduce EU greenhouse gas emissions by at least 40% by 2030. The ETS provides industries that are susceptible to carbon leakage free emissions allowances, allowing the European industry to continue to compete on the international market. In the current proposal, the free allocation of allowances for industries susceptible to carbon leakage is continued and improved. The Commission proposes tightening the benchmarks on which the free allowances are based and updating them more regularly. The Netherlands supports this proposal, but also sees room for improvement. For example, the Netherlands would like to focus more on the sectors that are actually affected by carbon leakage for the allocation of the free allowances. This can help prevent generic free allowances for the industry as a whole. The Netherlands also recommends strengthening the relationship between production level changes and the allocation of allowances, so that the ETS can take more account of growing businesses. The Netherlands will also urge simplification of the monitoring, reporting and verification requirements, so that the administrative burden is decreased for both the regulators and the businesses. 40 Transition to sustainable energy
Figure 3.1 How does the ETS work? Emissions trading is the trade in emissions allowances that enable the owner to emit a certain amount of CO2. The EU ETS is based on the cap and trade principle.
Emissions allowance A ceiling on the available emissions allowances within the EU ETS applies that is equivalent to the total allowable CO emissions; this is called the cap. An emissions allowance is the right to emit 1 tonne of CO2. 2 Every year, each EU ETS business must surrender the same amount CO2 emissions are reduced by tightening the cap. The allowances under the cap are distributed of emissions allowances as the amount of CO2 it emied. as follows in the 2013-2020 period:
Emissions 1 tonne per year per year is traded on the allowance of CO2 market in auctions
is provided to businesses for free (see the explanation of carbon leakage)
is reserved for new installations or expansions of existing installations
The trade takes place through emissions transactions
If a business has insu cient If a business emits less CO2 Due to the supply and demand of emissions allowances, allowances it must purchase than expected then it can CO2 emissions are coupled to a price. Businesses can decide these. sell its surplus allowances. which alternative is the cheapest for them: Shortage of emissions Surplus of emissions Use the allowances Take measures to reduce allowances allowances the emissions
Emissions allowances
Because each company is making this assessment, the Auction cheapest reduction measures are being implemented rst. Transition to sustainable energy 41
Emissions allowance A ceiling on the available emissions allowances within the EU ETS applies that is equivalent to the total allowable CO emissions; this is called the cap. An emissions allowance is the right to emit 1 tonne of CO2. 2 Every year, each EU ETS business must surrender the same amount CO2 emissions are reduced by tightening the cap. The allowances under the cap are distributed of emissions allowances as the amount of CO2 it emied. as follows in the 2013-2020 period:
Emissions 1 tonne per year per year is traded on the allowance of CO2 market in auctions
is provided to businesses for free (see the explanation of carbon leakage)
is reserved for new installations or expansions of existing installations
The trade takes place through emissions transactions
If a business has insu cient If a business emits less CO2 Due to the supply and demand of emissions allowances, allowances it must purchase than expected then it can CO2 emissions are coupled to a price. Businesses can decide these. sell its surplus allowances. which alternative is the cheapest for them: Shortage of emissions Surplus of emissions Use the allowances Take measures to reduce allowances allowances the emissions
Emissions allowances
Because each company is making this assessment, the Auction cheapest reduction measures are being implemented rst. 42 Transition to sustainable energy
Focus on flexibility and efficient markets Network operators need to work together with the market An important starting point of the market mechanism is that the transport and distribution networks for gas and electricity can be managed independently. This independent network management will ensure the security of supply and help match the supply to the demand. The appointed network operators have clearly defined tasks, powers and obligations.
Network operators are legally required to install new network connections if the market demands it. The required network capacity depends on the expected peaks in supply and demand and the electricity supply in particular will be subject to more frequent and greater peaks. The cause is the increasing share of solar and wind energy and new user requirements, such as heating with electric heat pumps and charging electric vehicles. In accordance with the current statutory provisions, the network operators are required to anticipate these increasing peaks by increasing the capacity of their infrastructures. However, these infrastructure enhancements could hamper the affordability of the energy supply, which is why it is important that producers, suppliers, users and network operators work together to prevent unexpected peaks in demand. Again, flexibility will play an important role here.
Competition is possible The market for energy users functions adequately. The Independent Network Management Act (Wet onafhankelijk netbeheer) guarantees independent network management, which facilitates fair competition in the supply and wholesale markets and increases the reliability of the system. Healthy competition between the various providers of energy will make the energy supply more affordable. Furthermore, the system of ‘programme responsibility’ encourages suppliers and users to balance the supply and demand in the energy market themselves, because there is an economic incentive to supply or purchase the actual amounts agreed on in the energy contract. This system, in combination with a properly functioning market-based imbalance market27, will guarantee a balanced supply and demand. This system will continue to form the foundation of the Dutch energy market mechanism and is an example to the rest of Europe. In addition, the Dutch market system does not apply regulated price ceilings and the technical price limits for the imbalance market are so high that the market parties have every incentive to maintain the balance. Researchers of both Frontier and the IEA have concluded that this is an effective market system28.
The above-described market system has also proved reliable. We have an extremely reliable energy infrastructure (the national electricity network scores 99.994% for reliability and the national gas network more than 99.9995%).
27 Imbalance market: a market whereby market parties restore temporary discrepancies in the supply and demand of electricity caused by an imbalance between the agreed and the actual production or consumption. The imbalance market is about 1% of the total electricity market in the Netherlands. 28 Frontier Economics, Scenarios for the Dutch electricity supply system, 2015; IEA, Energy policies of IEA countries: The Netherlands, 2014. Transition to sustainable energy 43
Focus on coupling with neighbouring countries The cabinet is committed to strengthening the links between the Dutch electricity market and foreign electricity markets. Coupling the electricity markets will help with the formation of an internal European market for energy. It will lead to more efficient price formation on the electricity market and provide market parties with the opportunity to trade electricity across the national borders. The Netherlands is currently focused on strengthening the coupling between the Dutch and German electricity markets.
29 Market coupling leads to less price disparity
On the basis of research by Berenschot, it is anticipated that the difference in electricity prices between the Netherlands and Germany will decrease from approx. €14 per megawatt hour in 2013 to €2 per megawatt hour in 2023. The reason for this is that less natural gas will be produced (which is relatively expensive in relation to coal). The price disparity will also be decreased thanks to the improved coupling between the Dutch and foreign electricity markets. This coupling has already been improved thanks to the recent introduction of the flow-based market coupling system. This system allows for more efficient use of the existing interconnection capacity between the Netherlands and its neighbouring countries, which leads to additional trade opportunities and so the price disparity between the Netherlands and Germany is reduced accordingly. The flow-based market coupling system came into effect on 21 May 2015. The price disparity between the Netherlands and Germany is expected to be reduced by about €4 per megawatt hour29.
In addition to the introduction of the flow-based market coupling system (see box), in the coming years, TenneT, the Dutch electricity Transport System Operator (TSO), will be investing in new interconnectors with Germany, Belgium and Denmark, as well as an expansion of the existing interconnector with Germany. The expected effect of this investment is that the disparity between Dutch and German prices (among others) will decrease even further.
29 Berenschot, Bevordering integratie Nederlandse elektriciteitsmarkt, 2015. 44 Transition to sustainable energy
Table 3.1 New interconnectors30
Border Interconnector Capacity (megawatt) Operational Germany Doetinchem-Wesel (new) 1500 2017 Germany Meeden-Diele (expansion) 500 2018 Denmark COBRA 700 2019 Belgium Kreekrak-Zandvliet 700 2016-1931
Smart infrastructure investments Investing in a flexible infrastructure The way the energy infrastructure is regulated and financed will be reviewed in the light of the energy transition. The availability of infrastructure strongly influences the freedom of choice of the energy providers and users. In order to facilitate the transition, in the coming years all new infrastructure will need to be flexible enough to absorb unexpected changes in the market. This applies particularly to maintenance, for example of gas networks, where the replacement, maintenance and expansion of local infrastructure needs to take account of the rise of flexible services. The network operators will need to develop a more active and user-oriented work scheduling system. Simply replacing the existing infrastructure is no longer sufficient. We will need to be more aware of the substantial benefits of providing flexibility.
Efficient versus flexible Efficiency is also a key-word in the energy transition. The current regulations are based on maximum utilisation of the networks. This has brought us huge benefits in recent years; network management has become considerably more efficient, which has led to marked cost savings for the end users. For the transition to be successful however, when networks are maintained or expanded, it may make sense to increase their capacity above what would normally be considered efficient, so that extra loads caused by the ‘electrification’ of heating systems for homes, buildings, greenhouses or vehicles can be absorbed. It may also be worthwhile to maintain several networks in parallel in order to create extra flexibility and reduce ‘lock-in’. Clearly, this can only be done if the extra costs are plausibly offset by the extra benefits of this flexibility. We will be engaging the question of how to value flexibility and dynamism in network management during the coming years. We will need to develop a framework that can guarantee transparency, enable us to compare the various solutions (to help us decide between capacity expansion, decommissioning and/or providing flexibility services) and set out how the decision-making should be carried out and by whom.
30 Parliamentary Document 29023, no. 196. 31 The plan is to make 700 MW of capacity available on the market for electricity flows from the Netherlands to Belgium in 2016 and make the same capacity available for flows in the reverse direction in 2019. Transition to sustainable energy 45
3.4 Strong dedication to innovation
Innovation is necessary and economically beneficial Innovations required across the board Innovations will be an essential part of the transition to a low CO2 energy supply that is safe, reliable and affordable. These will often be small innovations or the improvement of existing technologies and methods. In other areas, more radical innovations will be required, or indeed complete system overhauls. The cabinet aims to facilitate the requisite system approach in the Netherlands such that the transition can be implemented effectively, efficiently and adequately. However, the energy transition does not stop at our national borders. All over the world, people are working towards the creation of a low CO2 energy supply. The cabinet wants to make the most of the economic opportunities this creates for the Netherlands by developing and demonstrating innovative solutions and deploying our competitive advantages to their maximum effect. This will enable us to contribute to the global energy transition, while at the same time helping the Netherlands to develop economically and ensuring a more sustainable energy supply.
New technologies and societal integration The energy transition is a system transition. Alongside the development of new and the improvement of existing technologies with new financing structures, it also involves implementing and incorporating these in society. We can achieve a cost-effective energy transition only if we commit fully to innovation. With regard to the requisite technology, many low CO2 solutions cannot currently be implemented economically without market interventions. This applies to, among other things, offshore wind farms, geothermal energy, nuclear power, solar panels, innovative energy conservation measures, various biomass conversion solutions, CCS, energy from water and storage technologies. Further development will ensure that the price-performance ratio of such products and services continues to improve32. Furthermore, innovation is important for finding new solutions for those energy functions that currently offer little potential for far-reaching 2CO reductions. This applies particularly to mobility and transport and industrial process heat33. The commitment to technological innovations applies to the entire chain, from fundamental research, through development and demonstration, to the roll-out of the product, with the aim of ensuring that promising new applications really find their way to the market. It is also important to ensure that the innovation phases follow logically from each other and that the new innovations are suitable for the methods of production, transport, storage and consumption envisaged as part of the transition. Innovations could serve to support or even drive the necessary societal changes.
The societal integration of the new technological solutions will require many new societal relationships and roles, new earning models and institutional changes. For example, the integration of increasingly localised electricity production, the far-reaching flexibilisation
32 ECN and PBL, Nationale Energieverkenning 2015, 2015. 33 Rli, Rijk zonder CO2, 2015. 46 Transition to sustainable energy
of the electricity system and the large-scale implementation of electric transport will require changes to the infrastructure, to the way information is distributed and to the way the users behave.
Contributing to the Netherlands’ competitive position Innovations also provide new opportunities for the Netherlands. Businesses, financiers and research establishments can respond to worldwide trends and demands with the help of new technologies and smart solutions. For example, Dutch companies are world leaders in designing, developing and building high tech installations, machines and micro and nano- components for renewable energy34. The innovative business community and an excellent knowledge infrastructure also contribute to the Netherlands’ competitive position.
Guidelines for the transition In an open innovation system, many innovations are the result of cooperation and competition between small and large and public and private parties. Above all, this requires an excellent climate for entrepreneurship and knowledge development that enables entrepreneurs and researchers to reach their full potential35. Looking to 2050, it is our job as the government to ensure that there are clear, stable and stimulating guidelines for the energy transition. This is the best way to encourage innovation. The starting point for these guidelines is the realisation of a low CO2 energy system that is reliable, affordable and safe, with sufficient regulatory flexibility to this end.
Organisational capacity is an important factor Practice has shown that innovation accelerates when you make it easier for innovators to find and inspire each other, for example in networks and clusters. This facilitates more cross-pollination and innovators can adapt to each other’s needs. Innovation takes place at the interface of various sectors, which is why there must be sufficient organisational capacity for the innovation networks to function properly. This requires investment in manpower and the regional clusters play an important role here. Several regions have produced cutting-edge innovative developments which have been supported by specialised knowledge institutes and businesses and regional funding schemes. Good examples of this are Solliance in the Eindhoven region, gas expertise in the northern Netherlands and the biomass-centred knowledge clusters in the eastern Netherlands.
Everybody has a role to play Diversity of stakeholders All stakeholders will need to participate if the opportunities for innovation are to be realised. Investors, financiers and providers of risk capital will be needed to help new technologies actually find their way to the market. Knowledge institutes and universities provide a solid knowledge foundation through their fundamental and applied research, while the training institutes provide training programmes for employees. ICT businesses
34 Topsector HTSM, see http://topsectoren.nl/high-tech. 35 Parliamentary Document 32637, no. 201. Transition to sustainable energy 47
such as Google are also contributing to the transition with ICT solutions. But SMEs and university spin-offs can also make a major contribution by developing breakthrough technologies.
Investment The Rli recommends that both the government and the business community invest more financial resources in innovation. The government will use the Energy Dialogue to form a reliable overview of the investments required by the government, knowledge institutes and the business community. We will also commission the Advisory Council for Science, Technology and Innovation (AWTI) to provide an advice. In order to make the most of the earning potential of the energy transition, the cabinet believes that sufficient commitment is required throughout all the phases of innovation, from research, development, demonstration and initial roll-out to the large-scale implementation of the solution. This will require paying attention to both the short and long-term goals. An adequate commitment to fundamental research and development will be essential for the later phases of the energy transition. Demonstration projects and the removal of market barriers to new solutions will ensure that they can actually be implemented and can contribute to the energy transition in the short term. Demonstrations and initial roll-outs are of essential importance for learning how innovations can be integrated in the system and they will also ensure the desired level of interaction in the innovation process.
More intensive international cooperation Due to the global character and huge extent of the innovation challenge, it is important to increase the involvement of international programmes alongside the Dutch stakeholders36. The Netherlands is faced with the major challenge of positioning Dutch solutions in a strongly globalised energy market. The government will need to prioritise those clusters that offer the most competitive advantages.
Investing in bilateral, multilateral and international partnerships will accelerate the development of innovations, the risks being spread and the costs potentially shared37. Furthermore, international cooperation provides opportunities to build on the innovations of other countries and the improved knowledge of foreign markets creates opportunities for trade and foreign investment. In order to strengthen its Strategic Energy Technology Plan (SET), the European Union has identified challenges in the area of research and innovation for the entire energy system and has defined clear priorities (see box). Private parties and knowledge institutes need to participate in international consortiums both in and outside Europe. This is already happening in various EU programmes, such as Horizon2020 and the programmes of the International Energy Agency.
A successful energy policy will find the right balance between profiting from the Netherlands’ competitive strengths, international developments in innovation, regional opportunities and cooperation at every level.
36 Rli, Rijk zonder CO2, 2015. 37 IEA, Energy technology perspectives 2015, 2015. 48 Transition to sustainable energy
Ten priorities of the European Strategic Energy Technology Plan
1. Maintain leadership in renewable energy technologies 2. Reduce the costs of a number of key technologies 3. New technologies and services for smart homes 4. Security of supply in a smart energy system 5. Energy conservation in the built environment 6. Industrial energy conservation 7. Leading position in battery technology for sustainable mobility 8. Roll-out and acceptance of alternative fuels for sustainable mobility 9. Carbon capture, use and storage 10. Efficiency and safety of nuclear power plants
Profiting from the innovation opportunities for the Netherlands To facilitate the energy transition in the Netherlands, we wish to deploy both the technologies developed here as well as the technological developments made in other countries. The cabinet will strengthen its commitment to innovation in areas where Dutch knowledge institutes and businesses can provide real added value. In terms of the Dutch energy transition, it is important to clearly identify what is being done internationally and find connections with the activities that Dutch businesses excel in or could excel in. After all, many of the new technologies will be developed abroad and Dutch businesses are a part of global value chains. This is why we need to be constantly aware of where the added value of Dutch businesses and knowledge institutes is or could be required in the chain. For example, the Netherlands contributes added value to the offshore wind industry with its expertise in foundations and construction technology. The Netherlands does not play an important role in the manufacture of solar panels, but Dutch companies do supply the technology and machinery for the production of solar panel components. In other fields, Dutch businesses are good at organising related services, such as payment systems that enable consumers to settle with various suppliers of charging stations. It is important to underpin the innovation opportunities in the innovation policy, such as the Top Sector Energy.
We will need to continue to invest in the initial application of new technologies and solutions in order to meet the needs of the Dutch situation, with its specific characteris- tics, requirements and obstacles. Pilot projects are an ideal way to test these technologies and solutions. In the coming years, the cabinet wishes to facilitate experimentation in pilot projects and invest in the actual and large-scale roll-out of the successes.
Extra commitment to the Top Sector Energy to achieve the long-term ambitions The foundation of the current innovation policy is formed by the combination of generic stimulation in the form of tax breaks and guarantees and the specific innovation programmes of the Top Sector Energy (see box). The Top Sector Energy provides important added value because the programmes are demand-driven and focus on the Transition to sustainable energy 49
Netherlands’ competitive strengths. In order to help achieve the cabinet’s vision of the energy supply in 2050, the Top Sector Energy will have to focus even more strongly on the long-term goals.
Top Sector Energy
The Top Sector Energy stimulates new initiatives that contribute to accelerating the transition to sustainable energy and Dutch entrepreneurship. To this end, it focuses on a limited number of concrete innovation challenges that offer opportunities to profit from the Netherlands’ competitive advantages and the strengths of Dutch knowledge institutes and businesses. On the basis of these strengths, the Top Sector Energy has identified seven themes where the Netherlands plays – or could play – a leading role. These themes are energy conservation in the built environment, smart grids, solar energy, industrial energy conservation, gas, offshore wind farms and bioenergy. The first three themes are combined under the title ‘urban energy’. In so-called ‘Top Consortiums for Knowledge and Innovation’, the key stakeholders cooperate on the innovation challenges linked to these themes by developing a shared knowledge and innovation agenda and by working together on actual innovation projects from the research phase through to the demonstration phase. An export agenda and human capital agenda have also been developed as part of the Top Sector Energy.
The Rli also sees further opportunities in innovations for the longer term, including all phases of innovation from fundamental research to roll-out. We also need to critically examine whether the current programme ties in with the starting point or if adjustments are required. The Top Sector Energy will also seek cooperation with the other Top Sectors, such as Agribusiness, Logistics and Chemicals. This cooperation will focus, among others, on sustainability of the raw materials flows and the development of new technologies.
Cross-sectoral cooperation
The Top Sector Chemicals cooperates with public and private parties, and with the support of the Top Sector Energy, on the establishment of the Advanced Research Center Chemical Building Blocks Consortium (ARC CBBC). The ARC CBBC brings together the Netherlands’ strengths in the field of catalysis, synthesis, macromolecular chemistry, process technology and mass and heat transport. The cooperation between leading academic researchers and the business community will focus on breakthroughs in the production of renewable materials and energy carriers (such as rubbers, plastics, coatings, CO2 and bio-based building blocks, fuels and fertiliser). 50 Transition to sustainable energy
3.5 Integrating the energy transition in spatial planning
Accommodating the infrastructure in the limited space available The Netherlands is a heavily populated delta. We have to use the limited space available for a wide range of functions. Energy generation, transport and storage are an integral part of our environment, both above and below ground. We can only break the trends in the domains of transport and energy generation if we can incorporate the requisite infrastructure in the physical environment and with the support of the public. Cooperation and dialogue will be necessary in order to surmount the tough dilemmas that exist or will emerge later. At the same time, the integration of renewable energy also offers opportunities for employment, the economy and the living environment. The challenge is to make the most of these opportunities by taking an open approach and applying a suitable spatial planning policy. This demands an integrated approach that takes account of the policy goals of the energy transition.
More space required in the coming decades Visible influence A low CO2 energy supply will require more space than the current energy supply. New and clean forms of energy generation, storage and transport will need to be incorporated in the areas where we live, work and recreate. A combination of energy efficient technologies and low CO2 energy generation solutions will change the appearance of neighbourhoods, business parks and the countryside. In the coming decades, we anticipate a substantial increase in the number of energy production locations and expansion of the infrastructure for transport and storage. This will apply both to large-scale production, transport and storage and to smaller, local initiatives. Alongside the actual space that is required to house the installations and infrastructure, this will also affect the appearance of the landscape and have additional impacts in the form of noise, odours and shadow38.
Rough estimates of the impact It is not yet fully known what the spatial impact of the energy transition will be on the road to 2050. The current rough estimates of the required production capacity, on the basis of the existing technologies, describe two to eight thousand land-based wind turbines, two to twenty thousand offshore wind turbines, more than one hundred thousand solar boilers and solar panels, more than one hundred thousand geothermal heat sites and more than one thousand bioenergy plants39. In addition, we will need space for the transport infrastructure, including many kilometres of high and medium voltage cables, district heating networks and energy storage locations.
38 Rli, Rijk zonder CO2, 2015. 39 PBL, Ruimte en energie in Nederland: een korte verkenning, 2013. Transition to sustainable energy 51
Local projects on the increase Only a portion of the energy can be generated and stored at the same location where it will be used (e.g. heat pumps for homes and solar panels on roofs). A substantial part of the energy supply will need to be generated regionally or even further away. The number and extent of local energy projects will increase. These are valuable projects. Small and large local projects will not only contribute to making the energy supply more sustainable, they will also be able to meet the preferences of the local communities, contribute to local social and economic development and provide more insight into the energy supply and demand. Community participation will help ensure that alongside the burden, the benefits of the transition will also be passed on to the local people.
However, we know that not every city and region in the Netherlands will be able to meet its own energy demand. Some locations have limited options, such as historic town centres, or a heavy demand, such as major industrial complexes. This means that some regions will become net energy producers while others will consume more than they produce. In addition, we will always need to have a mix of centralised and local energy generation, in any case for the generation of electricity.
Factors that influence the spatial impact The spatial impact will depend on a number of factors. The most important of these are: • The level of energy conservation determines the amount of energy that needs to be generated and determines the amount of flexibility that local and regional governments have in managing their own energy supply. • The level of innovation in energy generation, storage, transport and conservation. Innovations allow functions to be combined, limiting the amount of space required. Examples are integrating energy saving functions in the design of a building, making energy generation and transport systems more compact or making them more easy to integrate in the living environment by combining functions in the infrastructure. • The cost price development of the various forms of renewable energy generation, and hence the ultimate energy mix. • The import opportunities, both from the European Union countries and further away. The more we import, the less energy we will need to produce in the Netherlands. • The consideration of the spatial consequences of renewable energy in relation to other functions and public interests, such as the protection of biodiversity, safety, national security and water safety and quality. • Careful consideration of all ambitions, responsibilities and interests of government authorities, NGOs, the public and the business community in various sectors in the Netherlands. This includes the question of how the energy transition will affect the ambitions and opportunities for growth of various sectors, such as aviation and the energy-intensive industry. 52 Transition to sustainable energy
Smart use of space The energy transition offers opportunities to combine functions in smart systems, improve living environments and it can provide economic and spatial impulses. The Netherlands has many surfaces, such as roofs on homes and car parks, that could be used much more efficiently. The spatial incorporation of renewable energy does not need to be limited to single functions; it is also possible to combine multiple functions in the same space. Energy dykes make use of space that already has a function, without detriment to the existing function. Wind turbines and solar panels can be installed alongside each other in combined wind and solar farms and offshore wind farms could also incorporate wave or tidal energy systems. These developments will decrease the amount of space required for renewable energy generation, so that more energy can be generated using less space.
Analysing the benefits Businesses and services can be made more viable by coupling their functions in smart systems. Various businesses, such as farms, have the capacity to generate renewable energy and so improve their operating result. Energy conservation measures also reduce the amount of space required, for example because of the decreased demand for heating. The employment opportunities that will go hand in hand with the development and maintenance of installations for the production, transport and storage of energy can help to revitalise regions, particularly those declining regions where services are vanishing. There may also be ways to couple landscape restoration and nature development projects to the production of renewable energy.
Participation and effective decision-making are essential Early consultation The energy transition can only be a success if the public, businesses and NGOs are consulted at an early stage. The opportunities and pitfalls should be explored as much as possible in participatory consultation. The decision-making on the use of space and the incorporation of the energy infrastructure will need to be transparent and well-considered. Environmental risks and effects will need to be systematically identified and discussed with all affected stakeholders.
The aim will be an objective balance between the benefits of installing systems for energy generation, transport or storage for the Netherlands (or a certain stakeholder group or region) and the burden or risks that these systems entail for local communities. It must be made clear why these burdens or risks are necessary and proportional, who is to enjoy the benefits and who will carry the burden40. All stakeholders must be made aware of the applicable international and national agreements and which agreements must be complied with at the regional and local levels.
40 Parliamentary Document 33 529, no. 123. Transition to sustainable energy 53
Spatial planning Because space is scarce, the spatial plans (spatial planning visions and land use visions and plans) will play an important role. These documents describe current land use, designate areas for development and areas for protection and assign or indeed prohibit certain activities and functions. Spatial plans must provide the public and energy innovators with a clear idea of the spatial capacity and opportunities for energy production, transport, storage and conservation and, where necessary, provide a foundation to facilitate these developments. Facilities for generation, transport and storage must be incorporated in the plans as early as possible, not only at the national level, but also at the provincial and municipal levels. The government, provinces and municipalities will have a joint responsibility to facilitate the energy transition in spatial planning.
Four steps to an effective spatial integration strategy There are four steps to a successful spatial integration strategy41:
Step 1: Estimate the energy demand at the local, national and international scales for a number of years, then identify which spatial and other advantages the various regions have to offer and if and how these advantages can be combined. This is a joint process involving government authorities, the business community and NGOs.
Step 2: Reach agreements with the same group of stakeholders on the implications of the findings for the regional challenges. This includes agreements on the decision-making process and the responsibilities and a financing schedule for the energy transition, including the relevant mitigating and compensatory measures (if applicable)42.
Step 3: The involved government authorities set down the agreements in spatial visions and spatial plans.
Step 4: The involved government authorities make concrete decisions, for example on land use permits and project development plans. These decisions will mostly be made at the regional level and in a number of cases at the national level (e.g. concerning maritime issues).
These four steps are characterised by three important elements: 1. Early involvement of stakeholders in every phase of the decision-making, including regional integration, spatial planning visions, spatial plans and concrete decisions. 2. Involving the public as closely as possible in decision-making. 3. Ensuring a clear division of roles.
41 Starting points are, among others, the Energy Supply Structure Plan (Structuurschema Energievoorziening), the National Policy Strategy for Subsurface Activities (Structuurvisie Ondergrond) and the National Policy Strategy for Land-based Wind Energy (Structuurvisie Windenergie op land). 42 The direct benefit principle will apply, meaning that the applicant will reimburse any damages that the competent authority pays out as a result of a decision or project development plan. 54 Transition to sustainable energy
Because so much about the energy transition is still unclear, the steps will have to be repeated periodically. It is important to keep sight of the end goal and ambitions throughout, for which adaptive programming may be a useful instrument.
Identifying needs, potentials and opportunities The starting point is an inventory of needs, potentials and opportunities, for which it is important to make the most of specific regional characteristics. Links with the local goals and ambitions, national challenges and international interests should be sought and opportunities for combining functions and innovations spatially must be included explicitly. This inventory will culminate in choices at both the national and regional levels, which choices must help ensure a reliable and affordable energy supply. This inventory will be carried out together with the local authorities, the business community and NGOs.
Division of roles in concrete project development plans The division of roles in concrete project development plans will be quite clear: • If the development only affects one province, this province will have main responsibility for the spatial planning process, and hence the consideration of the various spatial and societal interests, while if only a single municipality is concerned then this municipality will have primary responsibility, even if the government is the competent authority. This can have consequences for the application of various instruments43. We will be exploring these consequences during the Energy Dialogue, which will also involve the evaluation of the Government Regulation on Policy Coordination (Rijkscoördinatieregeling). • The national government is the competent authority for initiatives in the North Sea. However, regional and local authorities also have a role to play in renewable offshore energy, on the one hand to connect this energy to the network on land, and on the other to deploy the energy transition to stimulate regional area development and employment opportunities. • Project initiators have primary responsibility for the consultations at the project level. They are the party that decides to invest in or actually build the relevant energy infrastructure, after all. They cooperate to this end with the competent authority.
43 In the current situation, these concern national or provincial zoning plan amendments, while in future these will be project development plans. This can also lead, for example, to a review of the Government Regulation on Policy Coordination, depending on the results of the coming evaluation of this instrument. Transition to sustainable energy 55
3.6 Careful risk management without overregulation
Risk management with room for innovation Careful management of safety and risks is a precondition for the success of the energy transition. All stakeholders must be open to innovations and technology in the energy domain, even if all the risks are not yet known. The government is tasked with combining regulations that guarantee a high level of safety with room for innovation, allocating the relevant responsibilities to the right stakeholders, and refraining from overregulating every time an incident occurs. Risks need to be managed carefully, but there must always be a place for innovation.
Safety is important Safety during the extraction, storage, transport, production and consumption of energy is an important topic. Safety plays for instance a role in the societal acceptance of nuclear energy, high voltage power lines and CO2 storage underground. This was highlighted in the debate on gas extraction in Groningen. The recommendations in the Dutch Safety Board report on gas extraction have been ratified, not only with regard to Groningen, but also concerning mining in general44.
Key principles of the risk management approach The lessons learned in Groningen have contributed to an overarching risk management approach. This approach can be underpinned by the insights in the reports of national and international advisory bodies45. The ministries of Infrastructure and the Environment46 and Internal Affairs and Kingdom Relations47 have drawn up guidelines and assessment frameworks. These insights form the basis of the first two key principles for risk management in the energy domain. 1. The government’s decision-making will be proportionate to the risks, both in relation to innovations and the response to incidents. 2. The government will support a dialogue with society based on facts, in which they will justify their decisions and recognise the emotions and opinions of those who are immediately affected by the decisions.
First key principle: proportional policy Scope of the government’s core responsibility One measure of good public administration is the way in which the government manages risks48. When seen in the light of the public interest, the government’s core responsibility in the area of safety is to protect people from risks that they cannot protect themselves against. The question is how far this core responsibility reaches. It is impossible to completely rule out all risks of human and technical failure. However, this clearly does not discharge the government from its obligation to set high standards for safety.
44 Parliamentary Document 33 529, no. 143. 45 WRR, Evenwichtskunst, 2011. 46 Parliamentary Document 32 862, no. L. 47 Parliamentary Document 34 300-VII, no. 15. 48 Parliamentary Document 29 362, no. 218. 56 Transition to sustainable energy
Proportional risk management The first key principle in the management of uncertain risks is that the government’s decision-making, including its response to incidents, must be proportional to the risks. This involves finding a balance between the material and immaterial costs and benefits. The acceptability of a risk is also connected to the degree in which a certain activity (e.g. the extraction, storage, transport, production or use of energy) contributes to the energy transition. A societal cost-benefit analysis can be a useful instrument here.
‘The polluter pays’ principle The party responsible for the risk is also primarily responsible for managing the risk. Instead of conceiving and implementing risk mitigating measures itself, in some cases the government can meet its core responsibility in the area of safety by setting ground rules and requiring the involved parties to take responsibility for their own actions within the framework of these rules.
Due diligence instead of prohibition The energy domain demands a form of due diligence that focuses on reducing the uncertainties, so it does not mean that all conceivable risks must be identified or even ruled out in advance. Responsible and diligent management of uncertainties can entail that further research is required and that targeted monitoring is carried out, in which case an activity will only be prohibited if all else fails. Risks must be identified and managed as much as possible as part of the innovation process. This ‘hand on the tap’ approach requires a certain degree of risk acceptance by both the public, the business community and the government.
Danger of risk-overregulation reflex Incidents cannot be ruled out, because they are, to a degree, an unavoidable consequence of the complex new technological and societal developments. Of course, if severe incidents occur, the government will need to find out exactly what went wrong. It will be important to carefully determine whether a structural tightening of the policy is required, or that it concerns an unlucky incident that does not require any policy changes. Administrative overreaction in the form of hasty interventions (the ‘risk-overregulation reflex’) should be avoided if these disproportionately affect the room for innovation.
Second key principle: more public participation and dialogue Recognising the public emotions The interaction between the government and society involves many different facets: the facts about demonstrable safety, perceptions of safety, concerns about justification and the public’s experience of how they are informed and involved. The issues that will be addressed in the dialogue concern the societal implications of energy activities and innovations and the manner in which the risks are limited and managed. It is important to recognise the emotions and opinions of the direct stakeholders in the dialogue. This will provide room to discuss other matters that concern the stakeholders, alongside that of safety, such as whether a plan is justified, transparent or reciprocal and how it affects freedoms. Transition to sustainable energy 57
Explaining the reasons why Another new element in the dialogue is that we are addressing the ‘why’ question. The fact that something meets the safety requirements does not necessarily mean that the inherent risks and potential hindrances are acceptable. Instead of primarily pointing to the limited extent of the residual risk, it is much better to explicitly talk about why it is justified that a certain group of citizens is exposed to this risk, and how the costs and benefits will be distributed. It is the government’s responsibility to answer this question of ‘why’.
Compensation In considering the costs and benefits of energy projects, we also need to consider whether we need to compensate the affected communities for accepting the new risks or for the hindrance they experience. If the public should be compensated in all fairness, this could take the form of a public service or financial compensation. Normally speaking, the party that is responsible for the risk or hindrance will primarily be responsible for granting any compensation. Compensation may never take the place of adequate safety measures.
The key principles in practice and the division of roles The key principle of proportionate decision-making will play a role in defining the energy policy objectives, in decision-making on concrete projects and in the spatial implementation of various policy documents, such as the Spatial Planning Visions. After all, risk assessment plays a role in every stage of development. The second key principle (the dialogue with the public) is addressed as part of land use planning. Land use planning concerns the manner in which the interests in an area affected by a project are considered in the decision-making on that project or the spatial planning thereof.
It is important to ensure an appropriate division of roles in the development and application of these key principles. The government is one of the actors in risk management, but it is not the only and all-decisive actor. Risk management in the energy transition entails a role for all of us. • Initiators and operators are learning that they cannot succeed without a ‘social license to operate’, which they can earn by informing the affected communities of their plans in complete detail and well in time. • Local authorities play an important role in the energy transition, with regard to which it is important to keep acting as one government. • The national government is tasked with drawing up proportionate risk policy, for which they need a ‘social licence to license’. This entails gaining community acceptance for the fact that the government issues licenses that burden them with risks, regardless of how small and manageable the risks may be. • Local communities will be given ample opportunity to voice their opinions and contribute their ideas to the proposed initiatives and new technologies. 58 Transition to sustainable energy
3.7 Everyone will have a clearly-defined role to play
The cabinet invites everybody to participate The cabinet appreciates that the national government is only one of the actors in the complex energy transition. The effort to ensure far-reaching CO2 reductions and guarantee a safe, reliable and affordable energy system will need to be made on several fronts. The cabinet wants the whole country to participate in this challenge and together consider what opportunities are available to make the transition happen. Agreements will need to be reached on how to organise our joint responsibilities and how to address the various actors. The 2013 Agreement on Energy for Sustainable Growth demonstrates that the stakeholders have already taken the first steps together on the road to the energy transition.
Investment, innovation, application and use The energy transition will require creativity and commitment. End-users such as consumers, businesses, associations, foundations, government authorities and public services will need to take a fresh look at their energy demand: which activities need energy, where can renewable energy be deployed and where can energy savings be made? This will entail changes to some things that have become completely habitual, such as the way buildings and vehicles are used and production processes are carried out. It will also require an open attitude to low-energy technologies and acceptance that energy will become part of the Dutch landscape. The energy transition is a challenging and economic opportunity for all creative minds to develop innovative solutions that will make the transition easier. All these activities will require substantial investments, both in the implementation of low CO2 and energy-efficient technologies and in the research and innovation required to develop these technologies. This means that a conducive investment climate will be of essential importance.
The government will provide a framework and stimulate the transition Systemic responsibility for progress The national government has complete systemic responsibility for the progress of the energy transition in the Netherlands and the careful assessment of the interests and opportunities. This entails that the government is responsible for ensuring that the Netherlands complies with the international agreements. This will require binding agreements on CO2 emissions that fall outside the ETS, including the translation of these agreements into the various energy functions. The national government also supports and monitors the sustainability measures aimed at those components of the energy functions that do not fall under the ETS. Furthermore, the national government is responsible for ensuring that adequate frameworks and incentives are in place to ensure the safety, reliability and affordability of the energy system. Transition to sustainable energy 59
A network partner that provides support and reinforcement The cabinet wants all parties to be able to participate in the transition. As the network partner in the energy transition, the government will remove restraints wherever possible and share or transfer certain tasks and responsibilities. The government will support and reinforce the organisational capacity of the various parties involved wherever possible and desirable, and carefully monitor the processes for bottlenecks and issues that require government intervention.
Various ways of providing support The government can provide support in various ways. For example, they can bring NGOs together and they can help stakeholders to develop a joint ambition. They can also provide assurance for agreements between NGOs, such as the Green Deals, where promising and innovative initiatives of local stakeholders are facilitated by the government. The government can also help ensure that important information is more easily available, for example for assessments of sustainable low-temperature heat initiatives by local communities. This information could include a summary of the advantages and disadvantages of the alternatives and experiences of other cities and regions. The government also has a responsibility and opportunity to define the transition through the management of its own real estate. By deploying its real estate and property as a platform for the transition (in cooperation with other parties), the government will be able to set the right example and help to drive the transition. In light of the diversity of roles, the government will need to clearly define its perspective of the dialogue and indicate in which phases it will take part49.
Strategic shareholder As a strategic shareholder in state holdings, the government can contribute to safeguarding the public interest where this is not already arranged in legislation and regulations, so that the state holdings can help pave the way for the energy transition. Examples are the infrastructure managers TenneT and Gasunie, which are crucial for the supply of safe, reliable and affordable energy. The government may also be required to play a role in the development of new infrastructure, for example for district heating or for CCS. Other examples of state holdings are EBN, which plays a role in ensuring the efficient use of subsurface resources as part of the Dutch mining policy, and GasTerra, which is responsible for trading gas extracted from the Groningen field and smaller fields.
In the case of the latter two holdings, the cabinet has announced that it is working on restructuring the ‘Gas Building’ of which both GasTerra and EBN form a part. This restructuring is intended to bring the existing structure more in line with the new increased focus on safety and transparency. The cabinet will determine what this restructuring will entail on the basis of the vision on the role of gas that is set out in this Energy Report. To this end, the cabinet will consult with the other partners in the ‘Gas Building’ (Shell and ExxonMobil).
49 Triarii, R&Dialogue met energie om de tafel, het belang van dialoog in de energietransitie, 2015. 60 Transition to sustainable energy
Safeguards Reaching concrete agreements The primary aim for the government is to draw up preconditions and ensure a system in which the various stakeholders can contribute to the transition. It is important to be aware that some components will be covered by European agreements50 while others will need to be safeguarded by Dutch stakeholders. For this reason, the cabinet wishes to reach concrete agreements on the structure of the various phases of the energy transition, for example on the implementation of heating projects at the local and regional level, on agreements with local authorities and NGOs with regard to the spatial accommodation of the energy infrastructure, and on innovation agreements with businesses and knowledge partners.
Keeping to the path The national government will see to it that the developments in society and the agreements with and between the actors are in line with – or in any case not contradictory to – the path sketched out in this Energy Report. The European agreements for 2030 and 2050, and the emission reductions agreed for each separate energy function on the basis of these agreements, will serve as the reference points. It is important that no blank spots are allowed to occur.
For the Dutch cabinet, effective safeguards will in any case entail that the following conditions are met: • There are clear targets and it is clear who is responsible for which parts of the policy objectives. • The government will support societal initiatives where this is possible, necessary and efficient. • Stakeholders will be listened to and the various actors know where to find each other. The division of the costs and benefits is clear and is perceived to be adequate. • The rules of play are clear, such as the consequences for making insufficient progress towards the energy targets. • The structure is adaptive, allowing new developments in society and technology to be integrated. Innovation is encouraged. • Progress will be adequately monitored. • Responsibility for the implementation and monitoring of the components of the energy transition will be devolved primarily to the level where this can be done most efficiently and effectively, while at the same time links will be sought with other levels. The governance will be in keeping with the Dutch situation and comply with the international and European agreements (e.g. the European agreements on a governance system for the European climate and energy targets).
50 E.g. the ETS, energy efficiency guidelines for devices and a source-based policy for the reduction of the 2CO emissions of vehicles in the EU. Transition to sustainable energy 61
Safeguards per energy function Part of the discussion involves the details of how the safeguards will be implemented. It is the cabinet’s intention to determine the appropriate safeguarding methods, resources and instruments separately for each function. Bottlenecks may need to be removed and legislation and standards may need to be adapted. It will also be important to determine appropriate decision-making levels with regard to safeguards. Finally, it may be necessary to reach societal agreements on specific aspects, for which the deployment of an accelerator or figurehead may be useful. 4 Energy functions in an integrated energy system Transition to sustainable energy 63
4.1 Energy as a system
System changes All forms of energy use and energy production are interrelated. Over time, we as a society have developed fixed patterns for structuring these energy flows, which has helped us to manage the complexity of the system. Our infrastructure, the legislation, the market and the involved organisations have all been structured around these fixed patterns. But in order to achieve the European targets for reducing greenhouse gas emissions, we will need to make radical changes that will probably not fit with these fixed patterns and existing organisations. It will not be sufficient to simply exchange a fossil fuel for a more sustainable alternative. The entire system will have to change.
Technology, innovation and smart use of local energy sources The energy question will need to be approached in new ways in order to make the most of new sustainable and efficient technologies that work differently to the fossil alternatives. In the future, we will continually need to ask ourselves what the best way is to meet our energy needs. To date, for example, we have mainly relied on gas for heating, while in the future we may well be using electricity for this purpose. Moreover, we will need to determine whether there are better local options available for an energy need, such as residual heat from a nearby factory or power plant. This means we will need to look at the energy system in a new light and introduce flexibility into the system of regulation and institutions. The cabinet is fully committed to facilitating this unavoidable system transformation.
From a centralised energy system to a multi-level system The energy system is transforming from a centralised system into a multi-level system. More and more energy is being generated at the individual home or community level. Regional initiatives, such as the installation of district heating or biogas networks, are also increasing. However, the central system continues to play an important role. Electricity produced by offshore wind farms, for example, is transported using a centrally coordinated electricity network.
International, national, regional The international dimension must also not be neglected. We are connected to our neighbouring countries and we exchange electricity and gas with them. For example, the interconnection cable with Norway enables us to temporarily store electricity surpluses (due to high winds, for example) in Norwegian hydropower stations. This electricity can then be used later on. All these levels, from the local situation to the international energy market, are all connected with each other, and this requires coordination. This coordination will also need to be structured in a new way. 64 Transition to sustainable energy
Energy functions: a new way of looking at energy The traditional approach is too limited Smarter use of energy and the coordination between the various levels of the system will require a different way of looking at our energy system. The energy and sustainability dialogue is often still carried out on the basis of established patterns, for example focusing on separate sectors, such as the electricity sector, the gas sector or the industry, and how each can be made more sustainable of itself. This risk is that we may not be able to free ourselves from these established patterns, while what is needed is a complete transformation, for example from gas to electricity for heating homes.
Functional categories In order to change the way in which the Energy Dialogue is conducted, the cabinet will adopt the approach suggested by the Council for the Environment and Infrastructure (Rli)51. In this approach, energy is a means of achieving an objective: we use energy carriers to provide us with heat, light, power and communication. The reason why we use energy for a certain purpose is called the energy function. If we take the energy function as our starting point, then this will enable us to view the requisite energy supply, infrastructure and organisation in a different light. The Rli has drawn up a classification system for energy functions based on the four fundamental needs that we use energy to meet: • low-temperature heating (space heating and tap water) • high-temperature heating (industrial process heat) • transport and mobility • power and light (electrical devices, light and ICT)
In this section we will use this system of classifying energy functions, as this underscores the importance of a new approach to the energy system.
Energy for heat and motion By focusing on the energy function, we can uncouple our analysis from the current economic structure and energy supply that is focused on sectors, energy carriers and energy sources. We want the Energy Dialogue to focus on how the above four fundamental energy needs can be met. This opens up a wide range of options that could be provided by many different sectors. The emphasis on the essence of energy – namely heat and motion – helps to clarify what needs to be done where and by whom in order to achieve our energy objectives.
51 Rli, Rijk zonder CO2, 2015. Transition to sustainable energy 65
Objective: to achieve the European emissions reduction target for 2050 A cohesive package of measures will be drawn up per energy function in order to meet the European target of an 80-95% reduction of greenhouse gas emissions. Figure 2.1 (see Section 2) displays the path to CO2 reduction for the various sectors based on a cost-effective distribution of the CO2 reduction targets between all Member States. It reveals that energy supply emissions will need to be strongly decreased, particularly those caused by electricity and heat supply.
The Member States do not all have the same opportunities open to them for the reduction of their emissions, and this will determine how they approach the European targets. Furthermore, the gradually decreasing number of allowances via the Emissions Trading System (ETS) will be an important driver to reduce CO2-emmisions for the industry and the electricity production sector. Assuming a Europe-wide reduction of 80%, an enhanced ETS52 will result in 87% less emissions in comparison with the 2005 level53. This entails a reduction in non-ETS emissions of 70%. If 95% of the greenhouse gas emissions in Europe were decreased, that would mean that the joint energy functions would cause almost zero or even negative CO2 emissions54.
Table 4.1 CO2 emissions reductions targets in 2050 for the various functions
Energy function CO₂ reductions in 2050 Low-temperature heating Primarily CO₂ free, because there are much more (homes, buildings, greenhouses and industry) cost-effective measures available. There is some room for CO₂ emissions because fossil fuels cannot always be replaced with alternatives (for example during winter peaks). High-temperature heating Far-reaching reduction of CO₂ emissions caused (industrial process heat) by industrial process heat as part of the ETS. At the same time, however, there are fewer alternatives available for this sector than for other sectors. The international market plays an important role here. Transport An emissions reduction of 60% has been agreed within the framework of the Agreement on Energy for Sustainable Growth of the Social and Economic Council. This results in an emissions allocation of 12 megatonnes of CO₂ in 2050. Power and light The ETS provides only very little room for (electrical devices, light and ICT) emissions caused by electricity generation. There are plenty of cost-effective alternatives.
52 Based on annual reductions of 2.2%. 53 European Commission, Impact assessment on energy and climate policy up to 2030, 2014. 54 Rli, Rijk zonder CO2, 2015. Negative CO2 emissions can be achieved through a combination of biomass and CCS. 66 Transition to sustainable energy
Prognosis of CO2 emissions in 2030 ETS emissions reductions of 43% and non-ETS reductions of 30% The EU has agreed to reduce its emissions by at least 40% between 2030 and 1990. This has been divided into ETS and non-ETS emissions. On the basis of a cost-effective distribution and the target of a 40% reduction in greenhouse gas emissions in 2030, this entails a 43% reduction in ETS emissions and a 30% reduction in non-ETS emissions in comparison with the 2005 level55,56. The European non-ETS target (30%) will be divided into an emissions allocation per Member State, based on the wealth level and availability of cost-effective measures in each country. A European decision is expected on this in 2016.
Available emissions allocation (non-ETS) for the Netherlands The cabinet will distribute its share of the European non-ETS emissions reductions between the various functions. The question will be how to distribute the available non-ETS emissions allocation and how to adequately monitor this. The distribution of the emissions allocation could be based on various starting points. The costs of the emissions reduction per function could be taken into account, or the degree of independence from imported energy, or the availability of technological solutions.
Rli proposal for legislation The Rli proposes setting the 2050 target for the reduction of greenhouse gas emissions down in national legislation (80-95% in comparison with 1990 levels). In light of the urgency of the climate problem, the Rli considers it judicious to set down legislation to safeguard the objectives and to appoint a government commissioner who can propel the energy transition forwards. The Rli also points out that, because of the many uncertainties on the road to 2050, the energy transition must be underpinned by a solid political and administrative commitment. The advantage of a Climate Act is that it will emphasise this commitment, it will make compliance with the requirements enforceable and it will mean that the climate plans can only be changed by law. However, the legislation on its own will be insufficient to achieve the targets. The targets must lead to concrete measures. For example, alongside the long-term emissions reduction target, interim targets and transition paths (per energy function) are also required. This will require additional activities and regulatory measures. The commitment of all stakeholders will also continue to be important alongside the legislation and the government commissioner (if one is instated). Nor does the implementation of legislation automatically involve a financing scheme or a solution to the societal cost-benefit dilemmas. The advantage of societal agreement on the final targets, the interim targets, the necessary measures and the responsibilities of the stakeholders is that it can help foster the involvement and commitment of all stakeholders involved. However, it is questionable whether such an agreement will of itself be sufficient to achieve the intended low 2CO energy supply.
55 European Council, Council Conclusions of 23 and 24 October 2014, 2014. 56 The EU has agreed to subject these reduction percentages to a review after the COP21 talks in Paris (see Section 2.1). The reduction percentages may also change if the EU decides to include emissions caused by land use and/or forests. Transition to sustainable energy 67
4.2 Space heating
CO2-free heating The cabinet wants to start the transition to the new energy supply in domains in which the Netherlands can operate independently. The provision of low-temperature heat is such a domain. Low-temperature heating is used to heat homes, buildings and greenhouses in the Netherlands, for which gas is currently the main energy source.
The road to low CO2 space heating in 2050 We want to drastically reduce the CO2 emissions in this category (45 million tonnes in 2012) so that by 2050 the provision of low-temperature heating results in zero CO2 emissions on balance. Concrete measures will be required in the short term in order to achieve this. The discussions as part of the Energy Dialogue will be used to assess whether and under which conditions this objective can be made feasible. We will need to have a good idea of the costs for the users and the infrastructure costs of each of the alternatives, as well as the effects on the existing systems.
Alongside the goal of energy conservation, low temperature heating will need to be produced as much as possible using low CO2 energy carriers: residual heat, biogas and heat and electricity from renewable sources. The use of natural gas will be reduced as much as possible.
Important local and regional role We will use less energy to heat our homes, buildings and greenhouses and we will need to get used to using different energy sources for this purpose. This will entail improving buildings, producing alternative energy carriers and often installing alternative distribution networks or redeploying existing networks. In order to achieve this, we will ask all stakeholders to participate: residents, users, home owners, the construction industry, innovative businesses, municipalities and the energy sector. We want this process to be managed as much as possible at the local and regional levels, so that different local starting points, requirements and opportunities can be fully taken into account.
National government has a facilitating role The national government is responsible for ensuring the implementation of the European obligation to create an energy-neutral built environment by 2050. The government will also support the combined efforts of the stakeholders and the local decision-making wherever possible by modifying the regulations and providing room for experimentation. The government will modify the policy and the market regulations for the supply of energy and the management of the infrastructure in order to facilitate the space heating energy transition. These modifications can be implemented during the reviews of the Heating Supply Act and the energy legislation.
Sustainably heated buildings in 2050
Geothermal heat Residual heat from waste incinerator Solar boiler
Insulated glass
Smart grids Roof and oor insulation
Heat pump
Biogas/green gas from compostable waste
heath source cold source Heat and cold storage
Ministry of Economic Aairs, January 2016 Transition to sustainable energy 69
Heating with natural gas The Netherlands currently uses 790 petajoules of energy to produce low-temperature heat, primarily obtained from natural gas (93%). The gas is being deployed with increasing efficiency in homes, buildings and greenhouses thanks to improvements in the quality of the buildings themselves (insulated walls, roofs and floors and double glass) and by using energy saving devices (such as high efficiency boilers and cogeneration). Thanks to years of energy conservation measures, the average gas consumption in the Netherlands decreased from approx. 2150 m3 in 1995 to about 1500 m3 in 2013. However, the total gas consumption for space heating has increased, from 720 petajoules in 1990 to nearly 800 petajoules in 2012. This is due to the increased number of Dutch households. In the Netherlands, the average size of a household has been decreasing for decades, which trend is likely to continue into the future.
Agreement on Energy for Sustainable Growth: first steps Agreements with the housing construction sector According to European agreements, the Member States must ensure that all new buildings are practically energy neutral by the end of 2020. The Agreement on Energy for Sustainable Growth specifies that, by 2030, the target for buildings will be the A-label for energy (as an average score of all buildings). Currently, the average score for buildings is the C-label. The European agreements stipulate that the built environment must be energy neutral by 2050.
Supply side: energy efficient construction The Agreement on Energy for Sustainable Growth has led to changes on both the supply and the demand sides of the construction sector. On the supply side, we see that construction and utilities companies are learning to couple energy efficiency measures to the aspects of a building that the users think important, such as comfort, space. health, etc. In addition, technological developments such as the reduced costs of solar panels and the increasing availability of home technology (domotics) are making it more attractive to make far-reaching improvements to the energy efficiency of buildings.
Demand side: the energy conscious consumer A positive trend can also be seen on the demand side. The public and the business community are becoming aware of the advantages of conserving energy and generating their own renewable energy. The availability of more solutions and instruments such as the energy label are helping to pave the way. Environmental factors also play a role: the disadvantages of using natural gas, such as the earthquakes caused by gas extraction in Groningen, are becoming more visible.
Developments in the greenhouse industry The greenhouse industry is a good example. The greenhouse industry is an important and internationally competitive Dutch economic sector and a major consumer of energy for low-temperature heating. In 2013 this industry consumed 112 petajoules. Since 2001, this consumption has decreased by 16% thanks to energy conservation measures, compaction of the sector, more intensive cropping systems and the increasing outside temperature. 70 Transition to sustainable energy
Across the board, fuel consumption per production unit decreased by 56% between 1990 and 2013. The Agreement on Energy for Sustainable Growth holds this sector to make another 11 petajoules of energy savings by 2020 in comparison with 2013.
Renewable heat supply Opportunities for sustainability We will have to make far-reaching changes to our heat supply. As mentioned earlier, the Agreement on Energy for Sustainable Growth sets out how the built environment is to be made more sustainable. The approach in the Agreement on Energy for Sustainable Growth ties in as much as possible with existing and scheduled restructuring and improvement plans for the Dutch building stock. In the rental sector, housing corporations and construction companies have taken the initiative to transform existing rental accommodation into energy neutral homes. Wherever possible, home owners will be encouraged to take measures, such as installing new systems (e.g. hybrid heat pumps) in existing homes and buildings. 57
Hybrid heat pump systems in existing buildings
A hybrid system is a heating system based on both electricity and gas: an electric heat pump, a hot water cylinder and a gas boiler. The heat for the building is mainly delivered by the heat pump and any surplus is stored in the cylinder. The gas boiler is only activated when it gets very cold (when there is peak demand). The advantage of this system is that the capacity of the electricity network will probably not have to be increased. According to recent calculations of the Top Sector Energy57 the total peak demand for household electricity in this situation could be limited to 7 gigawatts (currently: 6 gigawatts), while the peak demand for an all-electric system would increase to 23 gigawatts. The installation of a hybrid system is often cheaper than far-reaching insulation and renovations, and more cost-effective in terms of CO2 emissions reductions (as long as the electricity for the heat pumps is generated by a renewable or CO2-free energy source). One drawback is that part of the system has to be installed on the outside wall of the building with pipes running through the wall to the heat pump.
Energy conservation priority The first step to making the heat supply for the built environment more sustainable is to ensure energy conservation measures so that the energy demand per user can be decreased. The demand for heat that remains can be met through local and/or collective generation of electricity and heat using renewable sources, such as district heating networks, biogas networks or geothermal heat pumps. Green gas as a source of energy should be limited to the use of biomass for sectors that have few or no other sustainable options, such as the transport sector.
57 Berenschot, Gasunie, BDH, DNV-GL, Hybride systemen, 2015. Transition to sustainable energy 71
Energy conservation measures There are various effective energy conservation measures that the public and the business community still have not implemented. The Agreement on Energy for Sustainable Growth describes measures in support of the transition to an energy-neutral energy supply in 2050, such as the target to upgrade all existing homes and non-residential buildings to the energy A-label by 2030 (as an average of the total). The pace of the energy conservation programme can be increased through a combination of PR and awareness raising alongside the provision of reassurance and financial incentives, such as making the use of inefficient energy carriers less financially attractive than those based on low2 CO or renewable energy sources.
Making the residual energy demand sustainable Once the energy saving measures are in place, there are various ways to meet the residual energy demand with sustainable solutions: • Direct use of sustainable heat (solar thermal energy) • Geothermal heating, bio-CHP plants, residual heat from industries or power stations provided through district heating networks • Heat production using electricity from renewable sources (heat pumps) • Gaseous energy carriers from renewable sources (green gas, hydrogen) 58
Towards a climate neutral built environment in 2050
CE-Delft58 was commissioned by Gasterra to study the options for realising a climate neutral built environment by 2050. The integrated costs for the production, distribu- tion, consumption and conservation of heat were calculated for fifteen typical neighbourhoods (with different types of housing, building densities and building ages) in order to be able to design a built environment with no CO2 emissions. The study revealed that the most suitable and inexpensive option is different for each different neighbourhood. In areas with high building densities, natural gas will be replaced by heat produced from various sources. In less intensively built-up areas, electric heat pumps will be the most logical alternative to heating with natural gas. In some neighbourhoods, natural gas will gradually be replaced with green gas. Studies like this provide a rough idea of the options. At the local level, the stakeholders will have to consider the available energy saving alternatives and the heat supply and demand in order to decide on the most effective heat supply system.
58 CE Delft,Op weg naar een klimaatneutrale gebouwde omgeving in 2050, 2015. 72 Transition to sustainable energy
Greenhouse Horticulture Following the energy conservation measures, the residual heat demand in the greenhouse industry can be met with renewable sources in the form of: • Seasonal heat and cold storage • Heat pumps • Geothermal pumps • Residual heat • Locally available biomass
Researchers have noted how the horticulture industry and other agriculture sectors have been forming energy clusters, for example in order be able to install district heating networks at an affordable cost. Part of the Energy Dialogue will involve considering whether and how to further this clustering, where the investments in the energy infrastructure will need to come from and what the implications for the sector might be (where is the demand, who has a problem and who will provide the finance?). An additional issue for this sector is that the replacement of fossil energy sources for space heating will mean that an alternative source of CO2 (to be used as fertiliser) will need to be found. In the long term (after 2020), innovations and introduction on the market of innovations in heat supply and energy conservation (such as the fuel cell CHP plant or electrification) are needed.
CO2 neutral alternatives Electric heat pumps We need to make much more use of electric heat pumps, powered by renewable electricity, for heating spaces. In the coming years, more and more renewable electricity will become available (wind and sun), although this electricity will often be available at times when there is no demand for it. One solution is to convert these surpluses of cheap electricity into heat (or cold), which is known as power-to-heat. This heat can be stored for later use. A precondition for the use of heat pumps is far-reaching insulation of the systems.
Residual heat Another option is to use residual heat systems. Residual heat is currently produced by industrial complexes or power stations that use fossil energy. Although the use of residual heat is not a sustainable solution, it does save on the consumption of natural gas. The use of residual heat and the installation of the requisite district heating networks for its distribution can play a role in the transition to sustainable heat consumption. Residual heat producers could be local industries or greenhouse complexes that use renewable energy, or community CHP plants based on bioenergy. We will also be able to use these district heating networks for other heat production, such as seasonal heat (heat stored in the summer for use in the winter) and geothermal heat. Transition to sustainable energy 73
Local gas Some areas may wish to continue to use gaseous energy carriers, for example to handle peak heat demands (as with hybrid heat pump systems). In this case, the existing supply of natural gas may be replaced by biogas (green gas). We will need to take account of the costs of growing and processing biomass and the emissions of particulate and NOx will also need to be taken into account. The production and use of green gas as a source of energy for space heating should be limited to the use of biomass for sectors that have few or no other sustainable options, such as the transport sector.
The heat plan: regional and local management Regional structure of the heat supply As part of the transition, we want each region in the Netherlands to be able to make its own, well-considered decision on the best way to provide its own heat supply. The local discussions will raise many questions and the decisions will strongly depend on the local conditions and preferences. These discussions can only be productive once information has been gathered on the costs and benefits of the locally available alternatives to natural gas.
The heat plan as a new element If we stop using natural gas we will require new equipment for heating and we will need to start cooking with electricity, which is something we in Netherlands are not used to. Decisions on the organisation of the heat supply can best be made at the local level, as there will be no ‘one-size-fits-all’ solution available. Local and regional heat plans will be drawn up whereby the solutions will vary depending on the local opportunities.
Every region its own heat plan The Heat Vision59 introduced the idea of creating regional heat plans, through which local stakeholders can consider the various options and decide which of these to implement. In some ways this is a continuation of the Building Decree of 2012, which gives municipalities an important role in designating suitable communities for the installation of district heating networks. However, the regional heat plans go further, because they take all potential energy solutions into account (energy conservation, sustainability of the energy supply and the requisite infrastructure). The starting point for this local decision-making is the ambition to create a low CO2 heat supply for the communities and other users in the region that is accessible, affordable and reliable.
Information provision Local and regional government authorities will play an extremely important role in the heat transition. However, the choices that need to be made at the local and regional levels are spatially, technically, financially and economically complex. It is important that the stakeholders have access to the right information so that they can make well-founded decisions. The national government will play a supportive role and provide the necessary frameworks.
59 Parliamentary Document 30 196, no. 305. 74 Transition to sustainable energy
Preconditions of the decision-making The debate and the decision-making on local and regional heat plans will be subject to the following limiting conditions: • The energy options under consideration must produce less CO2 than the alternatives using natural gas, which entails energy conservation measures and the application of energy carriers obtained from low CO2 or sustainable sources. • The local dialogue and decision-making process needs to be open and transparent; all stakeholders must be able to contribute to the dialogue at the appropriate times and all results must be adequately communicated. • The stakeholders are asked to submit their plans for the region’s heat supply in an earlier phase and in a more transparent manner than they may have been accustomed to. This does not only apply to the network operators, but also to property developers, housing corporations and the municipalities themselves. • The new heat supply must be accessible to all users and the installation and management of the system must be cost-effective. Part of the local decision-making may involve agreeing on which costs are considered acceptable.
As long as they comply with these preconditions, the stakeholders will be free to choose the low CO2 solutions that best meet their needs. Local government authorities have the freedom to experiment with different forms of participation and decision-making. The options considered, parties involved and partnerships formed will depend on the local conditions. The national government will monitor progress in consultation with the local and regional government authorities. If this working method does not result in sufficient 2CO emissions reductions, then the government may consider drawing up a national framework. Transition to sustainable energy 75
Growth plan for heat
In late October 2015, a number of provinces (Gelderland, South Holland, North Holland, Limburg), municipalities (Amsterdam, Rotterdam, Nijmegen, Delft, Ede), Natuur & Milieu, the Dutch Renewable Energy Association (Nederlandse Vereniging voor Duurzame Energie) and a number of heat producers (Nuon, Eneco, Ennatuurlijk, Purmerend, Alliander) presented a joint initiative for the sustainability of the Dutch heat supply. The focus of this initiative is the development of transport and distribution networks for heat in order to expand the number of district heating users in cities and green- house areas from the current 300,000 to 1.5 million in 2040. The conditions for the fulfilment of this plan include a lower price for heat than the current gas-based price, a joint transport infrastructure (in collaboration with the national government) and local decision-making on the most effective combination of measures (insulation, heat, biogas or all-electric) for the relevant community (existing or newly developed). The combination of measures should be based on an analysis of the most cost-effective and societally desirable energy supply in order to realise the required reduction in CO2 (and other forms of emissions such as NOx and particulate) and the energy conservation and renewable energy targets. This analysis must have the support of the initiators.
Smart use of the infrastructure Installing the new infrastructure The changes in the energy infrastructure – the distribution cables, pipes and conduits – is an unavoidable part of the energy transition. Electrification, for example, may require higher-capacity electricity networks. The installation of heat networks will require major investments. The capacity of existing and new networks will need to be sufficient to meet foreseeable peak demands.
Adapting the infrastructure to the peak demand It is important to find a cost-effective way to meet the peak demand, which is the maximum heat demand during a cold winter. In practice, this will entail a smart combination of demand restraints, the use of suitable energy carriers (that are available when the demand peaks) and a network capacity that is adapted to this demand. By choosing such smart combinations, in many cases extreme peak demands can be avoided and hence also the requisite extra investment.
Timing and coordinating the measures Timing is an important component of the decision-making. Decisions on a more sustainable heat supply for the living and working environment can be linked to plans to build or in fact phase out infrastructure. Another suitable moment to have the dialogue on the new heat supply for an area or municipality is when residential or industrial areas are to be restructured. For example, the replacement of a gas network is clearly an ideal opportunity to install provisions for other, more sustainable heat sources. 76 Transition to sustainable energy
Network operators know when such overhauls are due and so can discuss the implementation of a more sustainable heat supply and the requisite infrastructure with the local users, communities, building managers and local authorities well in advance. This can be detailed in the aforementioned heat plan.
District heating
The use and installation of district heating networks is an important factor in the transition of the heat supply. The market model for heat supply and demand will therefore have to be subjected to a thorough review. Important issues to consider are whether multiple suppliers can contribute to the district heating network (third party access rights) and the security of supply and affordability for the users. The issue on the supply side is whether there will still be sufficient suppliers in the long term. This is by no means always guaranteed, for example in the case of industrial residual heat, if the industries make further energy savings or if thermal power plants are closed down. A long term sustainable alternative could be geothermal heating, or heat from bio-CHP plants.
The role of the energy users Participation and behavioural change Energy conservation plays a key role in the heat transition, which is why the first steps will need to be taken by the energy users. They can conserve energy by changing their behaviour, by purchasing energy-efficient equipment and by actively participating in the decision-making on local heat plans.
Commodity value as a yardstick In rented buildings, it is important to realise that the energy quality – and hence the energy use and the energy conservation options – is not determined by the tenant, but by the building owners and managers. The owner is the party who has to make the investment, while the user benefits from a lower energy bill, so that the investor will not get sufficient return on their investment. This split incentive affects all rental properties as well as mortgaged real estate. In the future, the commodity value (including the energy costs) will have a greater influence on the value of real estate. It is important that the aforementioned actors can find agreement on the distribution of the costs and benefits. They could be brought together as part of the discussions on the heat plan. Transition to sustainable energy 77
The role of the national government Local and regional government authorities will play an important role in the transition to a low temperature heat supply, for which it is important that the national government reviews the existing regulations and agreements and makes the necessary changes in order to stimulate the transition. This could include:
• Coordination The construction sector is a relatively traditional and fragmented sector. Each party is responsible for their own domain, but it is not always clear who is responsible for the whole. A better structured market for renovation and energy conservation is required so that the customer knows what end result they can expect.
• Countering the split incentive The building manager bears the costs of installing the energy saving measures while the building user reaps the benefits in the form of a lower energy bill. This so-called split incentive forms a barrier to achieving the target and will need to be dealt with.
• New structures Other actors than the usual stakeholders (users, building managers, investors, network operators) should be given a role in the future heat supply and the regulations and agreements should facilitate this. These could include Energy Service Companies (ESCOs), cooperatives of users or producers, expertise centres or energy aggregators (organisations that bring together the supply and demand of locally produced electricity and trade in it).
• Market model The market model for heat production and heat supply is currently being evaluated. It will be modified as required in order to be able to meet the aforementioned challenges. This will involve examining the requisite responsibilities of public and private parties and the financing of the heat infrastructure. So-called captive customers (customers who cannot choose between several suppliers) will continue to need protection in the form of tariff regulation.
The transition to a low CO2 heat supply will mean an end to the dominance of natural gas as a source of energy. This means that gas-fired heating will no longer be the reference point as a matter of course, as is currently the case (the ‘no more than otherwise’ principle). This will be fleshed out in new legislation for heat supply and will serve as an important limiting condition for the further development of concrete renewable heat projects.
78 Transition to sustainable energy
Making connections
The heat transition is a complex process, not only because of the many available alternatives to choose from, but also because there are so many stakeholders involved. Organising an effective local decision-making process is therefore a primary condition for the success of the transition, and happily, there are plenty of examples of successful local stakeholder dialogues, both in the field of energy and other domains (such as urban and village renewal, business park restructuring, climate adaptation, sewage works, etc.). The next step is the development of smart energy cities (as part of a Green Deal). The transition process will be supported by information exchanges at the local level, facilitated by the Top consortium for Knowledge and Innovation (TKI) for Urban Energy.
From theory to practice The energy transition is a process of learning in practice. Although there are many technical and organisational solutions available, in practice there is still much to be developed. The national government can contribute by providing room for innovation and experimentation.
Tax measures Another area in which the national government can support the heat transition is through the instrument of taxation. To support this instrument, the rates for natural gas and electricity could be more consistently balanced based on energy content and CO2 performance. In concrete terms, this will entail a relatively higher tax on gas and a relatively lower tax on electricity. To this end, the 2016 Tax Plan proposes increasing the rate for natural gas by about 5 cents and decreasing that for electricity by about 2 cents. Extra encouragement in the form of a subsidy for using sustainable heat (SDE+) can help facilitate the transition.
Transition to sustainable energy 79
4.3 Industrial process heat
Commitment to far-reaching sustainability measures CO2 reduction and a competitive edge The intended reduction in CO2 emissions will require the industry to adopt far-reaching sustainability measures. The fact that the industry is a major producer of CO2 is not the only reason; it is also necessary in order to maintain the Netherland’s competitive edge and stimulate growth and employment opportunities, without the negative effects of CO2 emissions.
New markets, new opportunities The industry is itself responsible for making this transformation happen. They will need to make a transition to more efficient and sustainable processes based on alternative sources of energy. New businesses and sectors will emerge based on innovative technologies or new markets for sustainable products. Some businesses may find that there is no role for them in the sustainable economy and will cease to exist. However, the Dutch industry is strong and flexible and most businesses will have the capacity to make the transition.
Less use of industrial process heat Part of the transition to sustainable process heat will involve a major reduction in the consumption of this heat. If the use of high-temperature heat is unavoidable, this must be done as efficiently as possible. The residual heat demand must be produced as sustainably as possible, by generating heat using renewable electricity sources and by using biomass to generate extremely high-temperature heat and geothermal pumps to supply medium- temperature heat. Residual emissions can be stored underground using CCS and it may also be possible to use residual heat in a neighbouring industry or for another internal process.
Unexplored territory There are clearly opportunities to make industrial process heat much more sustainable. However, this sector has less concrete plans for the transition to a low CO2 energy supply than other sectors. Part of the reason is that the necessary technology is not available yet. We will use the rest of this section to paint a clearer picture of what this transition could look like for the industry, although it remains a less detailed and clear-cut domain than the other three energy functions. This goes to illustrate what a major challenge this is and it also highlights the importance of a constructive dialogue to help pave the road to a low CO2 industrial process heat supply in 2050.
Sustainable industrial processes in 2050
Consumption of electricity
Smart grids
Residual heat
Biogas
CO2 capture
Bio-based economy Raw materials transhipment
Connections with other countries CO2 storage
Ministry of Economic Aairs, January 2016 Transition to sustainable energy 81
Major challenge for the Dutch industry Economic relevance of heavy industry The main consumers of industrial process heat60 are the metallurgical industry, the chemicals industry, refineries, the paper industry, the building materials industry (concrete, asphalt and glass) and the food, tobacco and alcohol industries. These industries all play an important role in the Dutch economy. They employ some 500,000 people and generate some €55 to 65 billion. The Dutch heavy industry contributes about 3% of the Dutch GDP61.
High energy consumption Each part of the industrial sector has its own dynamic. The chemicals industry is the largest consumer of high-temperature heat (60%), followed by the refineries62. These industries typically require extremely high temperature heat (approx. 1500°C). The chemicals industry also deploys many fossil fuels as raw material. The food and tobacco and alcohol industries deploy some 50% of their energy demand for producing heat of 100°C or more. However, this is in the lower segment of the high-temperature heat demand. The various temperature levels used for heat in the industry are displayed in Figure 4.2.
Far-reaching CO2 emissions reductions In 2012, some 670 petajoules (approx. 25% of the Dutch total) of primary energy was deployed to produce high-temperature heat (≥ 100°C), which in turn produced 43 million tonnes of CO2 emissions. With the right commitment, the use of high-temperature heat can be reduced to between 210 and 530 petajoules by 205063. The required heat will need to be generated using low CO2 energy sources. The residual emissions allocation is very limited and only available for those high-temperature heat processes that are the most difficult to make sustainable, i.e. the processes that require extremely high temperatures (> 1600°C), such as steel production.
New technologies Achieving a low CO2 industry will require a long term commitment and the required measures cannot be delayed. Major steps forward are required in the area of innovation, so that in 2030 we will be able to identify the technologies that are required to achieve the targets for 2050. These technologies can be demonstrated and then implemented as soon as they have been developed. The experience gained can be used to develop the new technology further and make it more reliable, affordable and efficient. However, the basic technology will have to be available in 2030 if all this is to be achieved by 2050.
60 Industrial processes use a lot of energy in the form of heat. The Rli primarily refers to the use of high-temperature heat (≥ 100°C), although industrial processes also involve the use of low-temperature heat, which is why we use the term industrial process heat. 61 ECN, Doorbreek de lock-in van het energiebeleid voor de zware industrie, 2015. 62 Rli, Rijk zonder CO2, 2015. 63 Rli, Rijk zonder CO2, 2015. 82 Transition to sustainable energy
Energy transition and international competition The Netherlands in a global perspective Many industrial sectors that use industrial process heat operate and compete in an international playing field. This entails pressure to keep prices low, and investments in Dutch industries have to be competitive with the investments made by the competitors abroad, where the costs of energy and labour and the environmental legislation can be very different. This is an extra challenge for the transition to a low CO2 industry, especially where it concerns sectors in which there is worldwide overcapacity.
Reinforcing the Netherlands’ competitive edge It is important to be aware of this European and global context. However, it does not mean that the global industry has to set the pace of change for the Netherlands. The Netherlands has built and maintained a strong industry by being an international leader. The Netherlands is an attractive country to invest in for industries with technological and sustainable ambitions and the cabinet wishes to strengthen this position.
Figure 4.2 The distribution of low and high temperature heat by temperature and by sector in the Netherlands
600
>1.000 °C 500 750-1.000 °C 500-750 °C 400 250-500 °C 100-250 °C <100 °C 300
200
100
0 Industry Households Agriculture Utilities (includes energy)
Source: CE Delft, Kansen voor warmte: het technisch potentieel voor warmtebesparing en hernieuwbare warmte – updated from 200-200 in 2020, 2014. Transition to sustainable energy 83
Attractive business climate Part of the reason for the success of the industry in the Netherlands has been the availability of cheap and reliable energy and raw materials (natural gas), but there are also other important advantages. The Dutch are highly educated and productive, the country is strategically located in relation to the main trading routes and markets and it has an excellent infrastructure. The Netherlands also has a stable climate and a high-quality education system. This all provides an excellent basis for a healthy and innovative industry. For example, the Netherlands has a high concentration of large-scale manufacturing industries, so that clusters of these businesses can support each other, exchange unused flows of residues and share the same infrastructure.
Cheap energy no longer a matter of course In the past, the low cost of energy in the Netherlands was an important reason for industries to establish plants here. Many industrial processes were developed in an age when there was no reason to be energy-conscious. However, the availability of cheap energy is no longer a matter of course in the Netherlands. The average price of industrial energy in the EU, including taxes, is about one and half times higher than the price in China and twice as high as the price in the US and India64. So if a company’s competitive edge is primarily based on low energy prices then countries in the EU will not normally be an option. The IEA estimates that the substantial regional differences in gas and electricity prices will remain.
Innovative sustainability as an economic advantage Dutch industry will need to compete internationally by promoting other advantages than low energy prices, for example by offering a strong climate for innovation. The Netherlands is committed to the development of an international proportionate pricing system for CO2 emissions. However, even if CO2 prices are proportionate, there will always be international price differences. There is a difficult trade-off to make between ensuring an internationally level playing field and providing sufficient and strong incentives to make the industry sustainable. This is why it is important to focus both on national sustainability measures and an international CO2 policy. The challenge will be to turn sustainability into an economic advantage and profit from this as part of the transition.
The energy transition as economic opportunity The Dutch knowledge economy The international energy transition is an excellent opportunity for innovative industries to open up new markets and lead the way in innovation. Economic growth and the transition to a sustainable economy can go hand in hand. Moreover, the transition will involve an intensive period of economic activity with employment opportunities for people with the right skills.
64 IEA, World Energy Outlook 2013, 2013. 84 Transition to sustainable energy
Leading the way The Dutch energy intensive industry, which is responsible for the consumption of industrial process heat, operates mainly on the international market and so is faced with international competition. The Netherlands cannot function as an island in this transition. This is why the Netherlands is committed to a stronger Emissions Trading System and the global and European implementation of the UN Climate Change Agreement of December 2015. Not all countries will make the transition equally fast. However, it is an unavoidable fact that the whole world will have to take part. For the Netherlands, this is an opportunity to employ its technological know-how and innovative capacity to help maintain its strong economy. This will not be achieved by following the others, but rather requires us to lead the way.
Strong position Alongside the international efforts, we will therefore also implement a national policy to support the transition to a low CO2 industrial process heat supply. The Rli has drawn up various scenarios in which high-temperature heating is one of the energy functions with the lowest CO2 emissions by 2050. There is plenty of potential. The Dutch industry is in a strong position. It has plenty of innovative capacity and the industrial structure is advantageous for the implementation of new projects. For example, the excellent logistical infrastructure and business clusters make it easier to cooperate and exchange technology and raw materials. The best opportunities for major change lie for example in the implementation of innovative and more efficient processes and bio-based applications. Switching to biomass as raw material will open up new markets and niches to which the industrial processes can be adapted. Biotechnology can be deployed to produce chemicals at lower temperatures in comparison with fossil raw materials. This is an opportunity to make the production process as energy-efficient as possible, using a low 2CO source of energy.
Major innovation challenge It will be a major challenge to develop the technologies required to ensure a low CO2 high-temperature heat supply. This is also the reason that high-temperature CO2 emissions will only start to be reduced at a later stage (after 2035) in the transition scenarios sketched by the Rli. However, if this innovation programme is to be a success, we need to take action now. Transition to sustainable energy 85
Technological transformation If we are to achieve a sustainable industrial process heat supply by 2050, we will need to undergo a technological transformation and an acceleration of the current developments. The rest of this paragraph describes various measures that can make the industry more sustainable:
• More efficient use of energy • Smarter use of residual heat • Electrification and sustainability measures for industrial process heat production • Accelerated deployment of the available technology • Long-term commitment to innovation • Broad partnerships facilitated by the government
More efficient use of energy Use industrial process heat only where this is unavoidable In the future energy system, we want to deploy industrial process heat only where this is necessary. In the future, the use of steam should not be allowed for processes that can also use low-temperature heat. Where possible, we want to structure processes so that less high-temperature heat is required or low-temperature alternatives can be used. An example of an innovative technology that puts this into practice is pervaporation, which combines membrane separation with vaporisation. This technique can be deployed for recycling and chemical processes, for example.
Cautious first steps Many of the measures that are currently being implemented are relatively minor improvements in comparison with the enormousness of the challenge we are facing. If we are able to implement greater changes, then most studies suggest that an efficiency improvement of some 50% could be achieved65. To this end, the industrial processes will have to be completely restructured. In many cases the effected factories and plants will have to be completely overhauled.
Smarter use of residual heat Residual heat offers high potential for energy savings The use of residual heat can lead to huge energy savings, especially if it can be provided to industries in the form of steam. The Netherlands is in a good position to implement this solution thanks to its strong clusters of industrial activity. This will need to be given more attention in spatial planning policy. We want to encourage companies to establish their activities in areas that best meet the needs of their energy profile and where these activities can complement or complete an energy chain together with the other industries and functions in the area.
65 PBL and ECN, Naar een schone economie: routes verkend, 2011. 86 Transition to sustainable energy
Exchanging residual heat The residual demand for industrial process heat can be largely provided from low CO2 sources. Generally speaking, the higher the temperature requirement, the more difficult it is to implement sustainable alternatives. About 6% (40 petajoules) of the industrial heat demand involves heat of less than 100°C. This heat is used in processes such as cooking, drying, evaporation and frying in the food and tobacco and alcohol industries. The first step to making the low temperature heat supply more sustainable will involve increasing the energy efficiency of the processes. The residual heat demand can partially be met using residual heat from high temperature processes. Because the industry is geographically clustered, and locations of residual heat supply and demand are often nearby each other, there are plenty of opportunities for such exchanges of residual heat in the Netherlands.
Electrification and sustainability measures for industrial process heat production Low-temperature heat (< 100°C): electrification The residual demand for industrial process heat that remains after the energy saving measures have been implemented must be produced as sustainably as possible. For example, the demand for low temperature heat can be provided using electricity in the form of heat pumps. In a heat pump, the temperature of ambient heat is increased using pressure, which is a relatively efficient manner of producing heat. The electricity required for the process can be obtained from renewable sources, such as wind and solar energy. Because heat can be stored (temporarily) for later use, and by modifying certain processes in the electricity supply, the industry will be able to offer flexibility in cases of peaks and troughs in the electricity demand. This is not only an interesting proposition for the electricity sector, but also for the industry itself, as the costs of electricity will be reduced. Finally, there are other sustainable options that provide direct heat, such as geothermal systems.
Medium-high-temperature heat (100-200°C): deep geothermal energy Some 31% of the Dutch heat demand concerns heat of between 100°C and 200°C that is used for separation processes such as vaporisation, drying, distillation or for heating process materials. The heat demand in this temperature range can be generated almost entirely with geothermal systems66, however there is very little experience with this form of heat supply. Demonstration projects will need to be established in order to build this experience in preparation for large-scale implementation on the road to 2050. There may also be a real potential for heat generation using hydrogen and renewable electricity. This is already technically possible up to temperatures of 600°C.
High-temperature heat (> 200°C): burning biomass Heat above 200°C (up to as hot as 1600°C) is used in conversion processes such as cracking, for powering reactors and for heating ovens for the production of steel, glass, ceramics, etc. Biomass is a sustainable alternative to natural gas for the production of a large part of this heat demand (preferably residual products from processes that use biomass as a raw material).
66 IF Technology and ECN, Kansen voor diepe geothermie bij industriële processen, 2014. Transition to sustainable energy 87
Extremely-high-temperature heat (> 1600°C): limited opportunities A small part of this heat demand is currently generated using coal (for extremely high temperatures). There is only a limited potential to meet this particular heat demand more sustainably. Biocoal (torrefied wood) could potentially play a role in the future. Carbon capture, storage and, possibly, utilisation (CCSU) could temporarily play an important role in reducing the emissions produced by these processes.
Industrial system innovations
According to the Rli, some 73% of the energy demand of the energy-intensive industry is used for process heat. Alongside making industrial process heat more sustainable, there are also other ways of reducing CO2 emissions in this industry. The industry uses fossil fuels as a raw material. In a bio-based economy, a considerable percentage of fossil raw materials can be replaced by biomass. Plastic, for example, is traditionally produced from oil, but it is now also being made from biomass. Biomass has a particularly large potential in the chemicals sector, but such developments will require new industrial processes. This is also an opportunity to design these new processes to be as energy efficient as possible. For example, bio-based processes often require lower temperatures than the corresponding fossil processes. The energy-intensive industry can also play a role in sustainability further down the chain, for example with materials that reduce the emissions caused by transport, use or recycling. Alongside creating a renewable energy supply, the use of more sustainable raw and other materials is also very important for achieving the European greenhouse gas emissions targets. Although this factor is not discussed in this report (because this report focuses only on the energy supply), it will be important to take steps in this direction in order to achieve the required CO2 emissions reductions. The cabinet will discuss this in the near future in its “Strategic vision for the deployment of biomass on the road to 2030” (Strategische visie voor de inzet van biomassa op weg naar 2030).
Short term: accelerated deployment of the available technology An enhanced ETS It is important to set out a transition path with clear interim targets up to 2050. This will make it clear to companies what they need to do so they can take timely action to meet the targets. The European Emissions Trading System (ETS) was designed for this purpose, but it is currently not effective enough. The Netherlands is committed to improving the effectiveness of the ETS, however, as long as it does not go far enough to achieve the Dutch ambitions, additional domestic policy will be required that focuses on utilising the available technology and far-reaching innovation. 88 Transition to sustainable energy
It is time to start conserving energy It is important for the available technology to be implemented as soon as possible. There are opportunities to make important steps right now, in the area of energy conservation. The Rli recommends implementing a stricter energy conservation policy and coupling agreements to more accountability and sanctions. This is also logical in the light of corporate responsibility.
This means that concrete action is required to implement technology, and more stringent policy must ensure that energy conservation will become increasingly obligatory. Measures are often not taken because the financial returns are too low. However, a substantial percentage of these measures promise much higher financial returns than efficiency measures for the built environment, for example, with payback periods of less than five years.
Energy conservation measures have already been made more obligatory with the more stringent implementation of the MEE and MJA3 covenants, in which the industry and the government have reached agreements on energy conservation targets. Now it is time to implement more binding measures, with a focus on financial incentives and standardised regulations.
Long term: innovation It is time to start innovating In the period up to 2030 we will need to invest heavily in innovation so that we can implement breakthrough technologies between 2030 and 2050. Major changes are required that will involve the complete transformation of technological processes. In many cases, the requisite technology has not been developed yet.
Innovation agenda The government can play an important role in encouraging and driving innovation, although the business community will also have to display commitment and daring to try out untested technologies. As part of the Energy Dialogue, we will discuss which instruments need to be deployed and how to ensure that the stakeholders all play their part. This will involve drawing up a target-specific innovation agenda.
Public-private partnerships The government will need to provide sufficient support for demonstration projects and recognise the commercial risks involved in these innovative projects. Businesses also need to be able to continue scaling up and testing new technology after the first demonstration phase has been completed.
Transition to sustainable energy 89
Opportunities in the medium term There are also medium-term opportunities in some areas. Heat dumping, for example into surface water, will need to be greatly reduced and in time completely phased out. It is quite feasible to avoid producing residual heat altogether or to supply this heat to other parties, and this will need to become standard practice. Other transition components will also need to be identified and targeted and we will discuss this is as part of the Energy Dialogue. This could include phasing out older industrial plants or the aforementioned electrification of part of the high temperature heat demand.
Innovative industry projects
• Empyro (BTG, Hengelo) produces pyrolysis oil from biomass (wood pulp). The steam and electricity generated are efficiently reused. The pyrolysis oil is currently being used by Friesland Campina as a source of energy, but they are also developing a method to reprocess it as a biofuel and raw material for the chemicals industry. • Tata Steel is developing a promising breakthrough technology called ‘HIsarna’. This is a completely new way of producing iron and results in 20% less energy consumption, 20% less CO2 emissions and more efficient use of the raw materials. • The paper industry is developing DES. The current method of converting pulp into cellulose, lignin and hemicellulose requires high temperatures, high pressure and heavy chemicals, and hence a lot of energy. TU Eindhoven is working on a method of separating pulp using solvents with their own Deep Eutectic Solvents (DES) system. DES works at low temperatures and under atmospheric pressure. Moreover, DES is renewable, biodegradable and cost-effective.
Broad partnerships facilitated by the government Corporate responsibility The industrial process heat transition will demand a great commitment from the Dutch industry. Some businesses may find there is no role for them in the sustainable economy and will cease to exist. It is clear that these sectors will need to make the transition in order to survive. They have a corporate responsibility to do something about their carbon footprint. Many of these sectors have already drawn up roadmaps. However, the plans need to be linked to more binding rules and appropriate sanctions67.
Higher ambitions We expect businesses to take their responsibility to carry out the incremental steps using the available technology. Many businesses are already making good headway, but too many good projects remain on the shelf because businesses have other priorities or because their expectations of the financial returns are too high. If the industry is to become future proof, it will have to high sustainability ambitions and link concrete action to these ambitions.
67 Rli, Rijk zonder CO2, 2015. 90 Transition to sustainable energy
Business community – scientific community – government At the same time, far-reaching steps need to be taken in the area of innovation in order to make the sustainability transition possible. Here too, the business community will need to make the greatest commitment, while scientists and researchers will be an important source of new technology. However, businesses are faced continuously with strong international competition and will not always have the opportunity to take the necessary steps, even if these steps are better for them in the long term. If the business community and the government work together they can surmount the difficulties. The government will play a facilitating role. The triangle formed by the business community, the scientific community and the government is brought together in the ‘Top Sectors Policy’ with the aim of driving innovation further.
Regulations and preconditions The role of the government is to provide the frameworks. This will make the targets enforceable and facilitate the creation of preconditions, which could be set down in environmental regulations, for example. Furthermore, the government also has a role to play in facilitating far-reaching innovative measures and easing legislation to allow innovations to be tested, for example.
4.4 Transport
Far-reaching energy transition in the transport sector Sixty per cent reduction in CO2 emissions Alongside energy conservation measures, the transition to a reliable, affordable and sustainable transport sector will also require different kinds of vehicles and the use of different energy carriers. The ambition for 2050 is to decrease CO2 emissions by 60% in comparison with 1990. The primary measures for meeting the sustainability targets for the transport sector will be sustainable behaviour, more intelligent organisation and technological improvements. However, the diversity of modes of transport will also require a number of additional sustainability routes.
The transition to electricity and biofuels Passenger transport and short distance freight transport will make the transition to electric power sources (batteries or hydrogen fuel cells). However, the current electric power sources are still unsuitable for heavy long-distance transport by road, water or air. For these modes of transport, fossil fuels will be replaced by biofuels and both fossil and bio-LNG. The transition offers opportunities for Dutch businesses that are prepared to invest in making the transport sector more sustainable. The Netherlands is committed to the implementation of stricter European CO2 emissions requirements for road transport and advocates applying similar requirements to international shipping and aviation. The Netherlands is also a proponent of more stringent fuel quality requirements and prolongation of the current share of renewable energy in transport after the 2020 target has been achieved. Passenger and goods transport in 2050
Biofuels Biofuels from waste processing Biofuel factory
Buer function
Energy supply
Smart grids
Self-driving vehicles
Hydrogen and electricity back to the grid
Biofuel Charging point
Hydrogen powered vehicle
Electric vehicle
Smart road Higher energy e ciency
Ministry of Economic Aairs, January 2016 92 Transition to sustainable energy
Building a sustainable transport sector The 2014 Sustainable Fuel Vision (Duurzame Brandstofvisie) and the corresponding Action Agenda have already set out the first steps that are required to build a sustainable transport sector68. The Vision and the Action Agenda are designed to be adaptive and were drawn up in collaboration with a great many organisations. This method of collaborating will be continued in the coming years, taking the international dimension into account and harmonising with our neighbouring countries where necessary. Local authorities will play an important role in the projects and initiatives, for example by facilitating networks of charging points or organising public tenders of transport concessions.
Transition, opportunities and stakeholders We will now describe the current transport sector and the challenges this sector faces, followed by an outline of three transition paths: energy conservation, electrification and the conversion to biofuels. The paragraph concludes with an overview of the opportunities and the key actors in this transition.
Transport as an economic lifeblood Gateway to Northwest Europe The Netherlands is one of the gateways to Northwest Europe. Goods and passenger transport is not only an essential component of our domestic economy, it is also important for our import and export activities. The transport sector is highly varied, involving the carriage of goods and people by land, water and air.
Multifaceted sector The transport domain provides a variety of important services, such as moving raw materials and products, commuting and leisure travel. Transport takes place over long, medium and short distances, within and between communities (e.g. to school or to shops) and within the Netherlands (e.g. the distribution of foodstuffs) and beyond (holidays and the import and export of raw materials and products). Without all these various means of transport, the economy would literally grind to a halt.
Key role for road transport Within the Netherlands, road transport is the primary means of moving goods and people. About 75% of all passenger transport kilometres are travelled in private cars, 10% in public transport and more than 10% by bicycle, moped or by foot. The quantity of goods imported is about the same size as the quantity of goods that is moved within the Netherlands; exports are about a quarter lower. A large percentage of the goods is transported over the road and over water. About 2% is transported by rail and less than 1% by air. About 20% of the exported goods flow is transported by pipeline69.
68 Parliamentary Document 30 196, no. 353. 69 CBS, Transport en mobiliteit, 2015. Transition to sustainable energy 93
Road transport responsible for 95% of energy consumption The transport sector consumes some 500 petajoules of primary energy per year70. More than 95% of this energy is used for road transport. The Netherlands also uses an equivalent amount of fuel in the form of light and heavy fuel oil for maritime shipping and about 150 petajoules of kerosene is consumed for international aviation71.
Transport and CO2 emissions Transport responsible for 20% of all CO2 emissions The transport sector is responsible for a quarter of all Dutch energy-related CO2 emissions and 20% of the total Dutch greenhouse gas emissions. The CO2 emissions of the Dutch transport sector increased from 30.5 megatonnes in 1990 to 38 megatonnes in 2005 and remained more or less stable in the subsequent years. There has been a slight decrease over the last two years72. Slightly more than half of these emissions are caused by passenger transport by road and just above a quarter are produced by freight transport. Inland shipping, fisheries and maritime shipping in Dutch territorial waters are responsible for nearly 20% of the CO2 emissions caused by the Dutch transport sector73.
Trends in CO2 emissions It is expected that the energy consumption and CO2 emissions of the Dutch transport sector will decrease slightly up until 2030. However, freight and passenger transport will each display different trends. For freight transport, a slight increase in energy consumption and stabilisation of CO2 emissions is expected between now and 2030. Despite an increase in traffic volume, the energy consumption and 2CO emissions of the passenger transport sector are expected to decrease up until 203074. This is a consequence of European CO2 standardisation measures and tax incentives for vehicles that produce low CO2 emissions. The European CO2 standardisation measures take the form of average emissions standards for vehicles and vehicle manufacturers.
Relatively limited opportunities for sustainability Because transport makes such a significant contribution to the total CO2 emissions, a sustainable energy supply cannot be achieved without making the transport sector more sustainable. Of the four energy functions described in this chapter, transport is the most dependent on high density energy carriers. This means that in comparison with other sectors, there are only limited opportunities for making the transport sector more sustainable. It is possible that fossil energy carriers will still be required for the transport sector in 2050 (and particularly heavy transport).
70 Rli, Rijk zonder CO2, 2015. 71 CBS Statline, Table: Motorbrandstoffen voor vervoer; afzet in petajoule, gewicht en volume. 72 CBS, Transport en mobiliteit, 2015. 73 CBS Statline, Table: Feitelijke emissies naar lucht door mobiele bronnen. 74 ECN and PBL, Nationale Energieverkenning 2015, 2015. 94 Transition to sustainable energy
The Agreement on Energy for Sustainable Growth The following agreements were set down in the Agreement on Energy for Sustainable Growth (drawn up in September 2013) for sustainable growth of the transport sector: in 2030, CO2 emissions caused by the transport sector must be reduced by 17% to at most 25 megatonnes (in comparison with 1990) and to at most 12 megatonnes by 2050, in accordance with the European ambition to reduce the CO2 emissions of the transport sector by minimum 60% in 2050 in comparison with 199075. These ambitions were set down in a broad dialogue between the involved parties and have the support of the Dutch government. The ambitions for the year 2050 are also in line with the challenge sketched by the Rli to limit CO2 emissions caused by transport and mobility to between 7 and 15 megatonnes in 2050.
Increased diversity in the transport domain Different ways of working and consuming In the coming decades there will be a transition in the transport domain. The rise of flexible and remote working, 3D printing and car sharing will potentially result in fewer transport movements overall. However, other developments are causing an increase in transport, such as home deliveries of online purchases. It is unclear what the consequences will be for the total volume of transport in the long term. In any case, it is likely that the future will bring an increased diversity of transport modes and services.
A transition in energy carriers The international developments in the energy supply will also influence the Dutch transport sector. Petroleum from conventional sources is becoming scarcer. In fact, by 2030, oil from unconventional sources will be more important for the security of supply, which will probably mean that oil prices will increase76. This means that the diversification of energy carriers in the transport sector, for example by deploying electricity, hydrogen, biofuels and natural gas, will be important to ensure a reliable and affordable supply of energy for transport in the future.
Transition: energy conservation Renewable fuels and energy conservation Electricity and hydrogen cannot be deployed in all transport modalities and sustainable biofuels may not always be available. This means that energy conservation will be a crucial part of making the transport sector more sustainable and ensuring long-term security of supply and affordability. The contribution of the transport sector to the energy conservation targets for 2020 is quantified in the Agreement on Energy for Sustainable Growth and further conservation measures can be implemented after 2020.
75 European Commission, Transport White Paper, COM (2011) 144, 2014. 76 ECN and PBL, Nationale Energieverkenning 2015, 2015. Transition to sustainable energy 95
Smarter driving and organisation There are two ways to conserve energy in the current transport sector: the first is smarter driving and organisation and the second is technological improvement. Significant fuel savings can be achieved by encouraging smarter driving and organisation. Smarter driving involves measures such as ensuring that vehicle tyres are kept pressurised and adopting more energy-efficient driving habits. Traffic can also be managed more efficiently by changing the times at which vehicles go on the road or opting to share cars more. There are also opportunities for smarter organisation of the transport network, for example by deploying the existing infrastructure and mobility more efficiently and by improving the efficiency of the goods transport sector. Finally, the use of multiple transport modalities throughout the logistics chain can help reduce fuel consumption.
Technological developments Technical improvements and innovations, such as decreasing resistance, applying lightweight materials and using more energy-efficient engines can help make vehicles tens of percentage points more efficient. This applies to transport by road, water and air. The trend towards smart mobility (more ICT applications, self-driving vehicles) will also help improve traffic flows and hence decrease fuel consumption.
Make innovations compulsory These improvements and innovations can be made compulsory by setting them down in international agreements, such as the European CO2 emissions standards for road traffic, the international shipping standards of the International Maritime Organization (IMO) and the aviation standards of the International Civil Aviation Organization (ICAO). The European CO2 standards currently only apply to passenger cars and vans but are expected to be applied to goods transport in the near future. A stricter standard will encourage innovation and create a market demand for sustainable transport solutions.
Energy conservation a first step However, energy conservation measures alone will not be sufficient to achieve the ambitions in the Agreement on Energy for Sustainable Growth. In general terms, we can conclude that the present combination of combustion engines running on fossil fuels is not future-proof. Reductions in transport CO2 emissions of more than a few percentage points will only be feasible by changing the types of vehicles used or switching to other energy carriers such as electricity.
96 Transition to sustainable energy
Transition: electric transport High expectations The electrification of vehicles is expected to make an important contribution to reducing CO2 emissions. Thanks to relatively short travelling distances and a highly innovative business community, the Netherlands is perfectly positioned to make this transition rapidly. Electric motors are ideally suited to smaller vehicles (passenger cars) and transport over relatively short distances (buses, light freight transport). There may also be opportunities for the electrification of heavy freight vehicles in urban areas.
Types of electrification The application of hydrogen in electric vehicles will increase vehicle ranges and allow heavier freights to be transported. The technology used in electric vehicle batteries and fuel cells (a fuel cell converts hydrogen to electricity) is developing at a rapid pace.
Electric infrastructure The costs of batteries are decreasing rapidly as well, while the number of electric vehicles sold in the Netherlands is increasing and more and more charging points are being installed. The number of electric vehicles and public and semi-public charging points has increased strongly over the past five years. By the end of 2015, nearly 1% of all Dutch vehicles was electrically powered (Figure 4.3).
Figure 4.3 Electric vehicles and charging points in the Netherlands, 2010-2015*
Number of electric vehicles Number of public or semi-public (3- en 4 wheels, x 1000) charging points (x 1000) 90 30
75 20 Vehicles 50 Charging points
10 25
0 0 2010 2011 2012 2013 2014 2015
* RVO, Cijfers elektrisch vervoer http://www.rvo.nl/onderwerpen/duurzaam-ondernemen/energie-en-milieu-innovaties/ elektrisch-rijden/stand-van-zaken/cijfers, consulted on 13 January 2016. Transition to sustainable energy 97
CO2-free passenger cars One long term perspective set out in the Agreement on Energy for Sustainable Growth is that, as of 2035, all new passenger cars must be capable of driving without producing any CO2 emissions. This will be achieved in phases with interim targets. By 2050, this will apply to all passenger cars. All current CO2 emission-free vehicles are powered by a batteries or fuel cells. These vehicles produce zero CO2 during use and zero or less emissions of other environmentally harmful substances such as NOx and particulate.
Emissions caused elsewhere CO2 emissions are released when electricity or hydrogen is produced. However, when the entire chain is taken into account, electric vehicles cause less emissions of CO2 per kilometre travelled than conventional vehicles using fossil fuel (petrol, diesel, gas, LPG). This CO2 advantage will continue to grow in the future as the production of electricity and hydrogen energy carriers is made more sustainable. Electric vehicles are just as safe as conventional cars77.
Costs of electric mobility decreasing Electric cars are still expensive to purchase, however these costs are decreasing thanks to scale advantages and innovations. Examples are the decreasing costs of battery packs and fuel cells and the continued development of the technology and infrastructure for hydrogen vehicles. This is an international development that may result in the total cost of ownership of battery driven cars falling below that of petrol and diesel cars in the coming decades.
Transition: biofuels Biofuels a good alternative Fully electric vehicles are currently unsuitable for longer distance transport by road, water and air. Alongside further energy conservation measures, alternative energy carriers will need to be found for long distance transport. For shipping, the most suitable energy carriers are biofuels and conventional and bio-LNG. For aviation, the best sustainable alternative is biokerosene. Biofuels can also serve as a temporary solution for transport over short distances during the transition to electrification.
Innovation and supporting policy The continued growth of the volumes of biofuels needed (including bio-LNG and biokerosene) will require more innovation and adequate regulation. Innovations will help make the production processes more cost-effective. Regulatory measures will be required to compensate for the additional costs of biofuels in comparison with fossil fuels. These matters will be discussed in the Action Agenda that is part of the Sustainable Fuel Vision.
77 TNO, Energie- en milieu-aspecten van elektrische personenvoertuigen, 2015. 98 Transition to sustainable energy
Synthetic fuels Wherever possible, innovations will take place with the support of the European co-financing funds. These innovations will need to focus on the development and market introduction of advanced biofuels and the development of new production routes for renewable fuels. An example is the development of synthetic natural gas and synthetic diesel from biomass (with syngas as an interim step). These fuels can also be produced using electricity and CO2 captured during other processes (see also the text box entitled ‘Power-to-X’ in Section 5).
Availability of biomass As the demand for biofuels (including bio-LNG and biokerosene) increases, we will need to consider how much biomass is actually available. Is there sufficient biomass available for the production of the required volumes of biofuels (taking into account the demand for biomass for other applications)? The required biomass will need to be produced in sustainable production chains and this sustainability will need to be safeguarded on the basis of clear and preferably internationally applicable sustainability criteria.
Import dependence Most of the raw materials for the large-scale production of biofuels and bio-LNG will need to be imported. The availability of these raw materials therefore also depends on the energy policies of other countries. For example, the production of biofuels in the Netherlands is based on used frying oil sourced from more than 50 countries78. This raw material is currently available for use in the Netherlands because other countries do not yet have policies in place to be able to use it themselves. Such raw materials may no longer be available for the Dutch market if these countries change their policies in the future. These uncertainties will require the transport sector to adopt an adaptive and internationally harmonised approach to the energy transition.
78 Nederlandse Emissieautoriteit, Rapportage hernieuwbare energie 2014: Naleving jaarverplichting hernieuwbare energie vervoer en verplichting brandstoffen luchtverontreiniging,2015. Transition to sustainable energy 99
Societal and economic challenges and opportunities Increasingly complex interrelationships The innovations described above will lead to more interrelationships between the transport sector and other sectors, such as: • The electricity and hydrogen sector and electricity networks and smart networks, within which electric vehicles could also be used as flexible storage points for surplus electricity. This applies to direct use of the vehicles’ battery packs for storage, but it could also apply to the conversion of electricity into hydrogen, methane or liquid fuels (so-called Power-to-Gas or Power-to-Liquids) for storing temporary surpluses of electricity or gaseous or liquid fuels • The agriculture and forestry sector and the foodstuffs and waste processing industries for the supply of raw materials for biofuels • Increasingly, the bio-based industry for products and fuels produced from biomass • The natural gas and green gas industries
Battery packs in electric vehicles contribute to the reliability of the electricity supply
The increasing share of solar and wind energy means that there is now an increasing amount of intermittent electricity production. Li-ion battery packs have been decreasing in price rapidly in the past years, so that battery packs in electric cars can now contribute to the energy system by absorbing the peaks and troughs in electricity production and consumption over periods of a few days (however, they are not an affordable solution for absorbing seasonal fluctuations). Plenty of new developments have been announced in the past year: • The first battery packs for home use became available to the general public in mid-2015. • Battery packs in electric cars can be used as for the temporary storage of electricity. A project in Utrecht is currently experimenting with this technology. • In Zeeland, there are plans to build a commercial energy storage centre based on battery packs with a capacity of 10 megawatts. In Germany, car manufacturers are building the first energy storage system with used battery packs from electric cars. About 1000 used battery packs from an electric Smart are required to build a storage system with a capacity of 13 megawatts. 100 Transition to sustainable energy
Opportunities for green growth The transition in the transport sector offers the Netherlands various economic and societal opportunities for green growth. Dutch market parties can develop strategic market positions based on a solid home market. There are opportunities today and there will be more opportunities in the future. Once the current innovations have been adopted by the wider market, it will become more difficult for newcomers to acquire a share in the international markets for new fuels and new vehicles (and components for these vehicles).
The Netherlands is excellently positioned The Netherlands plays a leading role in the production, storage and supply of fuels for transport by road, air and water. We are excellently equipped to maintain this position during the transition from fossil fuels to biofuels (including LNG, bio-LNG and biokerosene). For example, we are an important producer of advanced biofuels and there are high ambitions to become a major producer of bio-LNG, where we can profit from our experience, knowledge and expertise of natural gas extraction, storage and distribution. This means that the transition from fossil to biofuels offers plenty of opportunities for Dutch businesses. However, this same transition will also lead to a declining market for businesses that produce and distribute fossil fuels. These businesses will need to adapt their products and markets to the changing conditions.
New products and markets The electrification of passenger transport also offers opportunities for the Dutch business community. Some 90,000 electric passenger cars are already on Dutch roads, of which 9,000 are fully electric. This puts the Netherlands in a leading position. Many Dutch companies supply the automobile industry as well as manufacturers of custom vehicles such as electric buses and light electric vehicles. These companies can profit from the rise of new markets. Dutch companies are also involved in the development of products and services for the charging infrastructure, electric drive systems, range extenders, smart grids and metering and mobility services. In 2014, the number of jobs in the electric transport sector increased by 25% in comparison with the previous year79.
Positive effects of sustainability Making the transport sector more sustainable will not only help reduce CO2 emissions, it will also improve air quality and reduce noise pollution. This transition will also help make us more energy independent and it can contribute to our security of supply. It is important that the transition to a more sustainable energy and transport sector incorporates all these potential contributions as cohesive interrelationships that can provide added value to the whole.
79 RVO, Verzilvering verdienpotentieel Elektrisch Vervoer in Nederland, jaarrapportage stand van zaken medio 2014, 2014. Transition to sustainable energy 101
The business community, the government and foreign markets The business community in a leading role The transport sector’s transition will demand an intensive commitment and effort on behalf of the many businesses active in the new sustainable transport modalities, such as the producers of (primarily advanced) biofuels, the suppliers of parts for electric and fuel cell vehicles and the suppliers of goods, services and ICT solutions for the charging and refuelling infrastructures for these vehicles. These businesses will need to play a leading role in the energy transition, on the one hand by adapting to the changing conditions and on the other by innovating and creating new opportunities.
International source-based policy The national government will play an important role in the transition of the transport sector by setting preconditions for the implementation of this transition. The government considers a source-based policy (European CO2 emissions standards for road traffic and international agreements under the IMO and ICAO for international shipping and aviation) to be the cornerstone of the transport sector transition and it will use its position in these international forums to tighten the CO2 emissions standards even further in binding agreements. If the source-based policy does not achieve sufficient results, then the government will consider pushing for further steps within the EU.
European policy after 2020 There is currently insufficient information about the continuation of the European policy on the transition to renewable energy carriers (including biofuels) after 2020. The national government is committed to more stringent European fuel quality requirements and a continued share of renewable energy in transport after 2020. If this fails to happen then the government will make national choices.
Dutch policy is complementary In order to be cost effective, the national policy will need to complement the European and international policies. In addition to the international policy, the Dutch government will create the right preconditions to stimulate the requisite innovations and so create opportunities for the Dutch economy.
The role of the national government The European source-based policy forces manufacturers to invest in clean technologies so as to ensure that these are made affordable. The government’s role is to set frameworks in addition to the market mechanism and is primarily focused on removing barriers. During the innovation phase, the government will encourage the development and initial implementation of new technology and it will help Dutch market parties to establish strategic international positions.
Role of the local authorities The changes in the transport sector will be felt at all levels of society. Electric vehicles are quieter than the current vehicles with combustion engines. Battery driven vehicles are 102 Transition to sustainable energy
refuelled in a very different manner than current conventional vehicles. This will have consequences for the charging infrastructure along roads and motorways, in communities and around houses. Local authorities will play an important role by ensuring an adequate charging infrastructure in the public domain and by emphasising the advantages for the local air quality. The public transport and group transport sectors are an ideal growth market for sustainable vehicles due to their geographic concentration and daily or nearly daily use of vehicles. Local authorities will play a crucial role here because they will be awarding the contracts for this transport.
Lessons learned It is worthwhile to offer incentives to buyers of fully electric vehicles throughout the market introduction phase and up until 2020. The effectiveness of the tax incentives for using fully electric vehicles will be evaluated in 2018. However, in its ‘Motor Vehicles Memorandum II’ (Autobrief II), the cabinet concluded that the accumulating variety of CO2 tax incentives for vehicles in the Netherlands overlapped considerably with the European source-based policy, and that therefore these incentives were not cost effective. The environmental benefits were being passed on to foreign countries by means of the ‘waterbed effect’80. The cabinet concludes that the tax incentives no longer complement the European policy. The tax incentives for plug-in hybrid electric vehicles and the accumulating variety of CO2 incentives will be phased out and new incentives will focus more on fully electric vehicles.
International developments Worldwide transition in the transport sector Norway has the most ambitious incentives policy for CO2 emissions-free vehicles in Europe, while the Netherlands comes in a close second. Our neighbouring countries are also increasingly working on incentives for zero emissions transport. Germany, France and the UK will be investing in electric and hydrogen-powered driving in the coming years, and Denmark and Austria are developing a strategy to roll-out CO2 emissions-free vehicles. Germany and Japan have linked these developments to energy transitions to alternatives such as hydrogen. A number of states in the US, among which California, have very ambitious plans for zero emissions transport. Finally, Italy, Sweden, the US and other countries have established pilot installations for advanced biofuels.
Coordination with neighbouring countries Clearly, the Netherlands is not the only country that is faced with a major energy transition in the transport sector. Electric vehicles and liquid and gaseous biofuels are also increasingly being developed and applied abroad. The Dutch government will take the international dimension into account in its own energy transition, harmonising its approach with our neighbouring countries where necessary.
80 At the European level, manufacturers are required to comply with an average production of CO2 emissions per kilometre. Dutch manufacturers that can produce emissions below this this average (with the help of tax incentives) can afford to sell less efficient cars in other countries; this is known as the ‘waterbed effect’. Transition to sustainable energy 103
4.5 Electricity
A CO2 free electricity supply One of the European climate ambitions is a completely CO2 free electricity supply by 2050. The Netherlands is committed to this ambition. This means that the way we generate electricity for use as a source of energy will change drastically. The available options for far-reaching reductions in CO2 emissions are energy conservation, electricity production using renewable sources (solar, wind, biomass and hydropower) and nuclear energy. Power plants that currently still use fossil energy will need to capture their CO2 and store it underground (CCS).
The sectors that participate in the European Emissions Trading System (electricity producers and heavy industry) are bound to a European interim target of 43% emissions reductions by 2030 (in comparison with 2005). The Agreement on Energy for Sustainable Growth contains concrete agreements for the further growth of investment in and production of electricity from renewable sources: 6000 megawatts (54 petajoules) of operational land-based wind capacity by 2020 and continued growth of this capacity in the subsequent period; 4450 megawatts (66 petajoules) of operational offshore wind capacity by 2023 and maximum 25 petajoules of biomass co-gasification in coal-fired power plants.
Cornerstone of the renewable energy supply Electricity will become the cornerstone of the renewable energy supply. In 2050, electricity will still be used to provide power, light and ICT facilities, but it will also play a role in heating buildings, industrial processes and transport. The deployment of electricity for new functions is described with the term ‘electrification’.
A modern society needs to have access to a reliable electricity supply. A recent analysis81 confirmed that the national electricity supply and the electricity infrastructure are ‘absolutely vital’ to the Dutch economy and Dutch society. In the future, electricity will not only be generated in centralised power plants, but also locally and closer to the users. These far-reaching changes will demand much of the system as a whole. The key to the new system will be flexibility of supply and demand.
Changes in the landscape We are moving towards a system that, much more than today, will involve electricity generation from renewable sources: in 2030 these sources will account for some 50% of the electricity we use. Most of the new electricity will be produced in the North Sea, but a lot of electricity will also need to be produced on land using wind turbines, solar farms, etc. These production sites will have a dramatic influence on the landscape and this will require the acceptance of the effected communities. In the Energy Dialogue, the stakeholders, initiators and investors on the one hand, and the local communities and users on the other can discuss how best to confront this issue.
81 Parliamentary Document 30 821, no. 23. Electricity for power & light in 2050
Solar farm
Smart grids
O grid
Energy storage
More ecient consumption behaviour
Electricity back to the grid
Energy market
Cross-border connections
Ministry of Economic Aairs, January 2016 Transition to sustainable energy 105
The electricity supply is part of a European system Northwest European market During the past years, the electricity supply has been intensively integrated. Thanks to the installation of cross-border networks and agreements on market regulation, Northwest Europe now has a functioning regional electricity system. The Dutch electricity sector is part of this integrated system. In 2014, the Netherlands produced more than 103 billion kilowatt-hours of electricity. This was more than in the previous year and mainly driven by increased exports of electricity to Belgium and the UK.
In 2014, 70% of the electricity used in the Netherlands was produced by plants that burn fossil fuels. The amount was even larger in terms of total production (for the internal and European market): 83 billion out of a total of 103 billion kilowatt-hours, i.e. more than 80% of the total electricity consumption. The share of electricity from coal-fired plants increased considerably in comparison with the previous year (due to the relatively low global market price of coal). Electricity production in the Netherlands was responsible for 49 million tonnes of CO2 emissions in 2014.
Electricity consumption The first step towards achieving the ambition of a CO2 free electricity supply in 2050 will be to reduce electricity consumption. Following a decrease in consumption due to the 2007-2008 economic crisis, European electricity consumption has since remained more or less constant at a level of 2800 terawatt-hours. Electricity consumption in the Netherlands is currently 115 terawatt-hours and is likely to grow to 120-125 terawatt- hours/year (according to the 2015 National Energy Review (Nationale Energie Verkenning). This is the net result of two developments: • Increased consumption caused by economic growth and structural changes (electrification) • Decreased consumption due to conservation measures (LED lamps instead of incandescent lamps) and structural changes in the economy (such as factory closures).
Electrification The increase in consumption is mainly due to the process of electrification: electricity is increasingly being used for heating and for transport. The limits of electrification are unclear: the National Energy Review predicts that by 2030, some 18% of all energy used will be electricity (on the basis of existing policy). Other scenarios suggest that this share will be as much as 26% by 2030 (depending on assumptions on the adoption of electric transport and electric heating), and that this share will increase in the subsequent period. 106 Transition to sustainable energy
Electricity conservation The decrease in consumption will be driven by electricity conservation measures. Electricity conservation is part of European and Dutch energy policy and a component of the general energy conservation policy. For example, the European Energy Efficiency Directive requires all Member States to conduct audits of their energy consumption and the opportunities for energy conservation, specified for each of the energy use sectors. The Netherlands meets this requirement by means of the sector reports specified in the long-term agreements on energy efficiencyMeerjarenafspraken ( Energie Efficiëntie:MJA-3 and MEE). Electricity consumption is part of these agreements, but there are no specific targets or agreements on energy consumption for power, light and ICT facilities separately. The so-called Ecodesign Directive sets out a wide range of requirements for energy-related products. Some of these will be tightened and requirements will be issued for a number of new products in the period up until 2020.
More use of renewable sources Various studies on market developments in Western Europe indicate that the electricity systems in the Netherlands will undergo a marked change82.
82 Frontier Economics, Scenarios for the Dutch electricity supply system, 2015; ECN and PBL, Nationale Energie Verkenning 2015, 2015.
Figure 4.4. Current and expected eletricity production in the Netherlands*
160 60% Net imports
140 Other renewable sources 50% 120 Hydropower
100 Solar 40% 80 Land based windfarms
60 30% Offshore windfarms
40 Gas (local) 20%
Electricity production (TWh) 20 Gas
0 Nuclear 10% -20 Coal
-40 0% Share of renewable 2015 2020 2023 2030 2035
* Frontier Economics, 2015, Scenarios for the Dutch electricity supply system. Transition to sustainable energy 107
The most important change is that, by 2035, more than 50% of our electricity will be produced from renewable sources, the majority of which from intermittent renewable sources (weather-dependent sources such as the sun and wind). The 2015 National Energy Review predicts that 133 petajoules of electricity will be obtained from wind energy and 52 petajoules from solar energy in 2030 (on the basis of the current policy). Total production in the Netherlands will exceed the internal demand, which means that the Netherlands will become a net exporter.
Figure 4.4 shows the expected electricity production in the Netherlands in 2035. The share of electricity from renewable sources will increase from 13% in 2015 to 54% in 2035, assuming that the national subsidies for electricity production from renewable sources are continued. The export surplus will amount to some 26 terawatt-hours, which will mainly be purchased by Belgium and Germany.
This prediction is based on the assumption that the ETS trading price will increase and that global energy prices will rise. Under these conditions, a business case for new nuclear power plants could become feasible around 2035. Higher CO2 trading prices will also improve the competitive position of gas-fired power plants in relation to coal-fired plants, although the latter will remain the cheaper alternative based on the current global market prices.
The analyses also reveal that electricity from renewable sources is still not a fully-fledged competitor on the wholesale trade market in relation to electricity from fossil sources and, possibly, nuclear energy. This is despite the anticipated cost reductions as a result of innovation and series production. The main reason for this is the intermittency of the renewable sources: electricity from the sun and wind is produced simultaneously and on a huge scale, irrespective of the demand at a given moment. The 2015 National Energy Review predicts that the proceeds from renewable energy in 2030 will be a sixth lower than the then current wholesale price.
Because the share of renewable sources in the energy mix will increase, the CO2 emissions will decrease. The aforementioned analyses predict that Dutch electricity production emissions will decrease to 37 megatonnes in 2035 (in the context of the European market).
Reliability Capacity surplus The Netherlands has a highly reliable electricity infrastructure, even in comparison with other countries in Europe. This has proven to be an important condition for customers whose business depends on a reliable and high quality electricity network to establish operations here (such as ICT companies and datacentres). TenneT, the Dutch Transport System Operator (TSO), continuously monitors the reliability of the network and provides an annual monitoring report of the results. The most recent report revealed that the Dutch system will have a capacity surplus of about 1.3 gigawatts up until 2022.
108 Transition to sustainable energy
TenneT also forecasts strong growth of the conserved (gas-fired) production capacity, which will increase from 4.3 gigawatts in 2015 to 6.2 gigawatts in 2022. A large proportion of this (2.5 gigawatts) is relatively modern and flexible capacity that can be quickly redeployed if the market requires it. Furthermore, the Netherlands has ample interconnection capacity (about 8.7 gigawatts in 2022) to absorb any temporary deficits.
Security of supply The situation in our neighbouring countries is also relevant. The network operators in the pentalateral energy forum conducted a joint security of supply analysis in March 2015, which assessed the security of supply for the periods 2015-2016 and 2020-2021. This analysis revealed that there is sufficient production capacity in the region but that Belgium and France in particular will be dependent on their neighbours for their security of supply in the winter months.
Studies and analyses reveal that the current market system and regulatory framework provides a good starting point for the assurance of this reliability in both the short and long term, and with a much larger share of renewable sources in the electricity supply. A study by Frontier Economics indicates that the domestic peak demand in 2035 will remain more or less unchanged from the current 20 gigawatts. To meet this peak demand, the Netherlands will ensure a domestic capacity of 23 gigawatts and an import capacity of 9 gigawatts in 2035. This is an ample guarantee of security of supply. New capacity will primarily be generated from renewable sources. The Netherlands will expand this renewable capacity from the current 4 gigawatts to 26 gigawatts in 2035. Some 25 gigawatts of this capacity is weather dependent (intermittent) and hence not always available. This is why this capacity has been rated much lower in the capacity balance (this is known as de-rated capacity), namely at 3 gigawatts83. The challenge now is to make this system more flexible.
Cooperation in Northwest Europe European internal market for energy The modifications to the electricity supply system needed to meet the sustainability challenge cannot be achieved in Europe without cooperation. The coupling of domestic electricity markets will be an important factor in the creation of a European internal market for energy and it will lead to more efficient price formation and provide market parties with the opportunity to trade electricity across the national borders. It will also make it easier to incorporate renewable energy sources such as wind and solar energy, so that these energy sources will be valued higher in the market84.
83 Frontier Economics, Scenarios for the Dutch electricity supply system, 2015. 84 Koutstaal, P.R. en J. Sijm, De toekomst van de elektriciteitsvoorziening bij toename van zon en wind, 2015; Özdemir, O, P.R. Koutstaal and M. van Hout, Impact of Integrating Intermittent Renewables in Electricity Markets. Transition to sustainable energy 109
However, this does not only require physical connections, but also organisational connections (for example for the cooperation between regulators, network operators and trading platforms) and regulatory connections (such as regulations for cooperation in the network and the regulation of the balancing and intraday markets).
Pentalateral energy forum In addition to reinforcing the coupling between the Dutch and German electricity markets, the Netherlands is also committed to the aforementioned pentalateral energy forum. This forum provides the framework for cooperation between seven countries in our region: Germany, France, Belgium, the Netherlands, Luxembourg, Austria and Switzerland. The pentalateral energy forum focuses on strengthening the integration of the electricity market and the security of supply. In June 2015, the ministers in the pentalateral energy forum signed a political declaration which describes a work programme for the coming years aimed at further cooperation in the areas of market integration, improving the security of supply and increasing the flexibility of the energy system. The Netherlands pushed hard for more cooperation within the pentalateral region with the aim of creating a more flexible energy market and integrating renewable energy in the market. The following ambitions have been incorporated in the work programme: a more efficient balancing market, the development of demand-side response and the cost-effective integration of renewable energy in the market.
The most recent forum success was the launch of the flow-based market coupling system on 21 May 2015. This method allows the capacity of the networks to be used more efficiently. The first results have been positive. It is expected that the flow-based market coupling system will structurally reduce the price disparity between the Netherlands and Germany by about €4 per megawatt-hour85.
Strengthening regional cooperation The Netherlands is also committed to strengthening regional cooperation through the Baake group. In June 2015, a political declaration was initiated by the German State Secretary Baake that arranges for cooperation between twelve countries (the members of the pentalateral energy forum plus Sweden, Norway, Denmark, Poland and the Czech Republic). The declaration includes a number of ‘no-regret’ adaptation measures, such as a joint evaluation of the security of supply, the removal of barriers to cross-border trade and the improvement of flexibility by removing price ceilings in the wholesale trade market.
85 Parliamentary Document 29 023, no. 196. 110 Transition to sustainable energy
Making the most of the North Sea Economic opportunities The Agreement on Energy for Sustainable Growth will lead to a major expansion of the activities in the North Sea. Alongside the construction of wind farms and the requisite infrastructure, this will also require the organisation of the supply industry, the knowledge infrastructure, etc. Innovation will form an integral part of the agreements and the long-term ambition: the aim will be a cost price reduction of 40% within the framework of the Offshore Wind Top consortium for Knowledge and Innovation (TKI).
This development will offer opportunities for new economic activity and innovation. The Netherlands has unique knowledge and expertise in the field of offshore activities and this is the focus of the TKI’s research. For the further development of the offshore wind farms until 2023, it will be important to professionalise and optimise the supply chain (standardisation, alternatives, ready stocks). The short-term challenge is already enormous: one turbine will need to be installed at sea every day over a period of three years. A consistent public policy can help to encourage the willingness to invest and reduce the currently high risk premiums, which could lead to considerable cost reductions.
National Water Plan The 2009-2015 National Water Plan allocated a capacity of minimum 10,000 megawatts of offshore wind power. However, the Netherlands has more capacity than this in its own North Sea waters, in contrast to Belgium and Germany, where the Exclusive Economic Zone (EEZ) is practically at maximum capacity with the current and planned wind farms. We will need to identify how more international cooperation in the North Sea region can contribute to more growth of the offshore wind industry and how the available capacity in the Dutch EEZ could be deployed for alternative forms of energy generation (such as energy from tides, waves, osmotic power, aquatic biomass, etc.) in order to achieve the European sustainability targets. This is expected to bring the Netherlands economic benefits.
Electricity users become producers The public and the business community Increasingly cheaper and easier to use solar panels are making it more and more interesting for the public and businesses to generate their own electricity, alone or in energy cooperatives. This development is contributing to making the energy supply more sustainable and is simultaneously bringing about more social cohesion. The government is encouraging the transition to renewable energy with various instruments. Electricity that is produced for own use (‘behind the meter’) is exempt from energy taxes and any surpluses and deficits can be used to cancel each other out (offsetting). There is a tax incentive for communities and districts that produce electricity from renewable sources communally, known as the postcoderoosregeling (postal code area scheme). Finally, any business can apply for an energy investment allowance (EIA) on their income tax or corporation tax (if all the conditions are met) and solar energy projects can apply for an SDE+ subsidy. Transition to sustainable energy 111
Local energy production There are plenty of opportunities for local energy production. Technological develop- ments such as the smart meter and changes in the existing regulations will make it easier for parties to trade on the electricity market or provide flexibility. It is anticipated that this trend towards more local generation of renewable electricity will continue. In the future, people will generate more of their own electricity and increasingly adapt their demand and supply behaviour to the price dynamism of the electricity market: the demand will increase when the electricity is cheap and the supply will increase when there is more money to be made off it. Electricity storage in batteries or other storage modes (‘power- to-X’) may also come to play an important role, although this will not be required for the stability of the system in the short term. This development will encourage competition and improve the dynamism of the total electricity market, although it will require modifications to the electricity system, such as the ICT infrastructure for allocating consumption and production capacity to consumers or the roll-out of the smart meter.
Experimenting with local renewable energy
An experiment is currently underway which makes it possible to deviate from the regulations in the Electricity Act if doing so contributes to the production and consumption of locally produced renewable energy. The idea behind this experiment is that the existing regulations for the generation, supply and distribution of electricity are too complicated to apply to small projects in which consumers and other small users jointly manage production installations.
One project submitted as part of this experiment involves the owners of apartments in a former school building, who are jointly producing electricity using solar panels and distributing the energy and the costs and benefits among themselves. They are applying rate differentiation, in the expectation that this will encourage them to adapt their consumption behaviour to the availability of solar energy. In order to avoid peak loads, the solar system has been combined with a CHP system that produces electricity in the winter (when there is a demand for heat).
In another experiment that has been submitted, the applicants want to get together with the inhabitants and users of a combined working and living complex to identify sustainable technologies to make the complex future-proof. The aim is for the users to generate as much as possible of their own energy and distribute this energy and the costs and benefits among themselves. They want to absorb surpluses and deficits in the form of heat and cold, while surplus electricity production from the solar panels on the complex will be supplied to the local community.
If these experiments prove successful then the applicable legislation can be changed accordingly. The experiments will be evaluated in four years’ time. 112 Transition to sustainable energy
Market parties are also closely involved in these experiments. The Ministry of Economic Affairs will cooperate with these parties in the coming years to identify the necessary changes to the electricity system. This could involve a new role for aggregators – organisations that bring together the supply and demand of electricity or flexible capacity provided by small parties and trade in this.
The development of local energy also has a downside: if people only produce for themselves and their neighbours and store their surpluses locally, they may in time no longer require a connection to the central network and instead go off-grid. If this development happens too rapidly, the costs of communal systems (such as the network management costs and the costs of balancing the system) will be borne by a diminishing group of users.
Flexibility The electricity market is not simply a matter of distributing volumes: the timing of consumption is also very important. This will become increasingly important in the future because of the intermittency of the supply of electricity from the sun and wind and the increasingly volatile electricity prices.
It is expected that the electricity system of the future can and will have to involve roles for more and more parties in the provision of flexibility, including small users. As price volatility increases, the provision of capacity will become an increasingly interesting economic alternative. Technological developments and changes in the regulatory frameworks will make it easier for parties to provide such flexibility.
The availability of infrastructure may also play a more dominant role in the future. After all, it is unclear whether infrastructure will need to be built to fully meet the maximum transport demand at any given time of the day, or if it will be cheaper to meet the demand with flexible solutions.
Short term Short-term flexibility, with the option to trade a day, an hour or a minute in advance, is already sufficiently available in the Dutch system: • The trade in flexibility takes place within the framework of the instruments available to TenneT (adjustable capacity, reserve capacity and emergency capacity) but also implicitly in trading markets such as the day-ahead market and the intraday market. • There is plenty of flexibility available on the demand side, and also additional unused potential in the sector, as revealed in various studies and research (among others by the Top Sector Energy). • The Dutch system of programme responsibility is fully developed, market-oriented and efficient. Transition to sustainable energy 113
On the supply side, the Netherlands has sufficient ‘quick start’ capacity for still a long time. These gas-fired power plants have been temporarily closed down due to market conditions. According to the market research cited, the market will improve after 2023-2025 so that these plants can then be profitably restarted86.
An effectively functioning flexibility market that is accessible to all will contribute to making the energy supply more affordable. The opportunities for the Dutch electricity sector to provide the required flexibility will be studied as part of the Energy Dialogue.
Long term Another aspect of flexibility is the long-term availability of sufficient backup capacity. Until recently, electricity production was driven by the fluctuations in the electricity demand. Electricity production took place in power plants that produced more or less around the clock (baseload plants – primarily coal-fired power plants and nuclear power plants, but also industrial gas-fired CHP installations), supplemented by plants that responded to demand fluctuations (medium load and peak load plants – usually gas fired). This will change: electricity from renewable sources (in the Netherlands that would be mainly offshore and land-based wind farms) will provide the baseload and electricity consumption will adapt to follow this production. The remaining power plants will be deployed increasingly to provide variable capacity. This means that these plants will be operating less and so they will have less opportunity to recover the investment costs. In combination with the current prices and price relationships on the world energy market, this has resulted in gas-fired power plants being shut down temporarily. It may also mean that less money will be invested in gas-fired plants, while these will remain important for balancing the intermittent supply of renewable electricity.
The Netherlands opts for an energy-only market This issue affects the entire European electricity market. Over the past years, there has been much debate in Europe on the issue of whether and how to respond to these changing market conditions. A number of Member States (including France and the UK) have opted to offer compensation for the provision of capacity (a so-called capacity mechanism). Other Member States are considering implementing such a capacity mechanism in order to assure their security of supply in the long term. On the other hand, the Netherlands, Germany and a number of Scandinavian countries advocate maintaining the ‘energy-only’ market, whereby producers only receive compensation for the electricity supplied, and thus not for the provision of capacity. These countries point to the importance of effectively coupling the spot markets (day-ahead and intraday markets) and organising the balancing markets more efficiently. An essential part of the energy-only market is that price formation is left entirely up to the market. The investment costs in energy generating capacity should then be able to be recuperated during the peak price periods. This is also the European Commission’s preferred market system.
86 Frontier Economics, Scenarios for the Dutch electricity supply system, 2015; ECN and PBL, Nationale Energieverkenning 2015, 2015. 114 Transition to sustainable energy
Research by Frontier Economics predicts that the European electricity market will improve after 2023. According to this analysis, the currently decommissioned gas-fired power plants can then be reopened. The 2015 National Energy Review foresees a similar scenario (from 2025 onwards). Frontier’s research concludes that there is no reason to assume that an energy-only market will not function correctly if large amounts of renewable electricity are made available on the market. As part of the European market, the Dutch electricity supply is adequately future-proof: the system of programme responsibility combined with a market-based balancing market functions well, because it efficiently balances short-term surpluses and deficits in the electricity market. This system also has major advantages for the long term. The Netherlands has therefore opted for an energy-only market without capacity compensation and advocates that all European Member States adopt this market system. If other Member States decide to create capacity markets, they will need to ensure that they are open to other Member States and that they disrupt the European market as little as possible.
Energy networks and network operators Electricity networks are designed to transport electricity from central producers to local users. The installation and maintenance of these networks is financed by means of regulated rates that are paid by all users. The function of the network will change as more users start producing their own electricity: • The electricity network will become a two-way network (inter-network), comparable to the internet. • Local communities can elect to install fully autonomous systems and go off-grid. • Electricity networks can be managed in new ways with the help of intelligent solutions (smart grids).
At the same time, the peaks and troughs in electricity consumption will increase. Electricity from renewable and local sources will not always be available. The wind may die down, the sun may not shine, or a local source of production could fail for whatever reason. This means that electricity will have to be obtained elsewhere: an alternative local source, a central power plant, or a production location abroad. The high voltage network must be prepared for these changes. Considerable investments will need to be made in the existing infrastructure and new infrastructure in order to assure the current high level of security of supply and reliability, and to be able to anticipate the challenges of the energy transition.
The effects of these developments on the costs of the electricity networks cannot be determined in advance. In 2011, the joint Dutch network operators drew up various scenarios to estimate how much additional investment will be required in the networks in order to facilitate the energy transition87. The total cost of the investments in the electricity and gas infrastructures up until 2050 is estimated to lie between €20 and €71 billion. These amounts do not take the potential cost-reducing effects of smart networks into account.
87 Netbeheer Nederland, Net voor de toekomst, 2011. Transition to sustainable energy 115 The availability of energy in the future energy supply
Now that the transition has been set out per energy function, we need to ask ourselves where the energy for these functions can be obtained and what the 5opportunities and limitations of the Dutch and international markets are. This chapter will start by sketching the potential of the future European and Dutch mixes of energy sources and technologies. We will describe which sources and technologies are available per energy function and what developments and innovations will be required to realise these potentials. The sources and technologies and the involved issues will then be described in more detail. Transition to sustainable energy 117
5.1 The future energy supply in an international and system perspective
The energy mix of the future Before we can draw a picture of the Dutch energy mix in the far future, we will first need to sketch the European perspective. In the Energy Roadmap 2050 of 2011, the European Commission drew up energy supply models for various scenarios, assuming an 80% reduction of greenhouse gas emissions by 2050 and based on the then-current insights with regard to future technological developments, etc. The scenarios (Figure 5.1) are: (1) the situation in 2005, (2) emphasis on energy conservation, (3) a level playing field for technology, (4) emphasis on renewable energy, (5) little CO2 capture and storage (CCS), and (6) little nuclear energy.
In these scenarios, the primary energy demand decreases by 30-40%. The share of renewable energy will increase to 40-60%. Coal consumption will drastically decrease, particularly in scenarios involving far-reaching conservation, renewable energy or limited application of CCS. Oil consumption will decrease to about 20% of the current consumption (this applies to all scenarios). Natural gas will still be needed in all the scenarios, but in most scenarios consumption will decrease in comparison with the scenario in which the current policy is continued (not included in Figure 5.1). The share of natural gas does increase in the scenario with little nuclear energy (to about 26%). Nuclear energy consumption decreases in all scenarios. It is important to note that in all scenarios, there is a transition from a small number of energy carriers to a broader mix of technologies and energy carriers, which of course may differ per country.
Scenarios have also been developed to provide insight into the Netherlands’ future energy supply. Figure 5.2 displays the results of various alternatives through which the 80% reduction target is achieved88. The various scenarios for the energy demand and the deployment of low CO2 energy carriers in 2050 all share a number of robust elements: energy conservation, the use of biomass, CCS and clean electricity production. If any one of these elements is used less, then one or more of the other elements will have to be deployed more. If there is a strong dedication to energy conservation, then less low CO2 energy will need to be produced. The same applies to the deployment of CCS. The more CCS is applied, the less the share of renewable energy that will be required. In this figure, the share of renewable energy in 2050 varies between 50 and 75%. If any energy generation technologies are ruled out, then it will become all the more difficult (and expensive) to achieve the target. If important technologies such as CCS or biomass are ruled out, then this will also lead to greater costs. If greenhouse gas emissions are reduced by 95%, then energy consumption will have to be reduced (to around 40-50% of final energy conservation). The share of renewable energy is then higher in most scenarios. If the climate target is an 80% reduction in emissions, then more low CO2 options will be required.
88 Based on the E-design model. This is a backcasting model produced by PBL, with consumption, potentials and costs based on the Dutch situation. 118 Transition to sustainable energy
Figure 5.1 Scenarios for the European energy mix in 2050*
2000 Renewable
1800 Nuclear energy
1600 Gas
1400 Oil Coal 1200
1000 Mtoe 800
600
400
200
0 2005 Scenario 2 Scenario 3 Scenario 4 Scenario 5 Scenario 6
* Europese Commissie, Energy Roadmap 2050, 2011.
Figure 5.2 Scenarios for the Dutch energy demand in 2050*
Reference
A B C D E F G H I Wind J K Solar energy L Alternatives M Ambient heat N O Biomass P Q Biomass with CCS R S T Fossill with CCS U V Fossill 0 250 500 750 1000 1250 1500 1750 2000 2250 2500 Total energy demand (petajoule)
* PBL, Recente ontwikkelingen in het energie-en klimaatbeleid. Balans van de Leefomgeving 2014 ( part 3), 2014. Transition to sustainable energy 119
Figure 5.2 reveals that between 1250 and 2250 petajoules of energy will be required if emissions reductions of 80% (in comparison with 1990) are achieved. Table 5.3 provides an overview of the potential of low CO2 technologies based on the current knowledge, taking into account the spatial and physical conditions in the Netherlands.
Table 5.3 Potential of low CO2 options in the Netherlands89
Options Potential in 2050 (petajoules) Biomass 200200 (domestic), 120-780 (import) Electricity from renewable sources 500-750 (sun, wind, water) Heat from renewable sources 200-550 (sun, geothermal, air and residual heat) Nuclear energy 30-200 CO₂ capture and storage (CCS) 320-60090 Natural gas -91 Total (in round figures, excluding imports) 1.200-2.300
9091 The overview demonstrates the large degree of uncertainty with regard to the energy challenge and illustrates why we cannot rule out any options if we are to achieve the 2050 targets.
The options for the Netherlands per energy function Table 5.4 provides an indication of how these low CO2 energy carriers could be deployed in the Netherlands in order to meet the demand of each of the four energy functions. The energy supply will shift from a relatively limited number of technologies and energy carriers (mainly gas, coal and oil) to a highly diverse mix of technologies and energy carriers. In the Netherlands, this mix may vary per region.
89 PBL, Biomassa: wensen en grenzen, 2014; Ecofys, NWP and Blueconomy, Marktkansen en bijdrage aan verduurzaming van innovatieve technologie voor energie met water, 2014; PBL, Naar een duurzamere warmtevoorziening van de gebouwde omgeving in 2050, 2012; PBL and ECN, Naar een schone economie: routes verkend, 2011. 90 This is excluding aquifers and storage in the North Sea waters of the UK and Norway. The conversion of gigatonnes of CO2 to petajoules assumes 50% coal and 50% gas. 91 The extraction of natural gas in the Netherlands or the import from abroad is difficult to express as a potential for 2050, because this is determined by the current stocks and the rate of extraction up until 2050. According to the most recent estimates, the Groningen gas field currently contains about 30,000 petajoules. The most recent IEA estimate suggests that there are sufficient global stocks to continue extracting natural gas for another 61 years (based on the current global rate of consumption). 120 Transition to sustainable energy
Tabel 5.4 Energy functions and low CO2 energy sources and carriers
Energy functions Current energy Low CO2 energy sources and carriers in 2015 sources and carriers Space heating • Natural gas • Electrification (renewable, coal/biomass + CCS, • Small share of nuclear energy, gas and biogas + CCS) renewable energy • Ambient heat (heat pumps, solar collectors) • Ground source heat (GSHP, geothermal energy) Industrial • Natural gas • Gas and biogas process heat • Small share of coal • Residual heat • Gas + CCS • Biomass + CCS (optional) • Electrification (renewable, coal/biomass + CCS, nuclear energy, gas and biogas + CCS) • Deep geothermal energy Transport • Oil • Passenger transport: electrification (renewable, • Small share of coal/biomass + CCS, nuclear energy, gas and biofuels biogas + CCS), hydrogen • Small share of gas and • Buses: electrification (renewable, coal/biomass + electricity CCS, nuclear energy, gas and biogas + CCS) • Heavy transport: LNG and bio-LNG, biofuels • Maritime and inland shipping: LNG and bio-LNG, biofuels • Aviation: biofuels Power and light • Coal and gas • Renewable (wind, solar PV, hydro-electricity, • Small share of nuclear biomass, geothermal energy etc.) energy and renewable • Coal/biomass + CCS energy • Nuclear energy • Gas and biogas + CCS
Much innovation is required to be able to use the potential of low CO2 options If we are to rely on the deployment of these low CO2 options for the four energy functions, it will be important to obtain as much as possible information about the potential of these options. The aforementioned low CO2 options cannot be implemented in the short term as a matter of course. A number of technologies have been sufficiently developed that they can already (or nearly) compete with fossil energy carriers, such as land-based wind and solar farms and some applications of biomass. However, most technologies are not economical in the current market conditions. If the potential is to be achieved at a societally acceptable cost, then these technologies will require further development. Transition to sustainable energy 121
The innovation challenge per energy function can be described as follows. To make industrial process heat more sustainable, a number of fundamental technical innovations will be needed in relation to core industrial processes. Another major challenge will be to develop a whole new range of products and alternatives for existing energy and CO2-intensive products in order to meet the societal needs and challenges of 2050.
In the area of spatial heating, the challenge will be to find creative solutions for the incorporation of sustainable energy carriers in buildings and the environment, as well as system innovations and smart inventions that can accelerate the acceptance and implementation of sustainable alternatives. The application of these solutions, innovations and inventions will depend strongly on how fast the built environment is renovated.
The big challenge for electricity is to make the energy system more flexible. This will require more research into conversion and storage solutions and various other innovations that can accelerate the integration of intermittent renewable sources. The spatial accommodation of the infrastructure can be facilitated by means of innovations that intelligently combine energy generation or conservation functions with other functions of buildings, products and services.
There are various challenges for the transport function. Various fundamental technical innovations will be required for heavy transport. System innovations will be required to make transport systems in urban areas sustainable. Social innovations and intelligent use of ICT can help to optimise the transport demand and the selection of the best means of transport.
At the system level, we need to set up large-scale CCS demonstration projects for both electricity and industrial producers. Various biomass conversion technologies (such as gasification) need to be developed further and it is very important to establish sustainable production and distribution chains for biomass. New storage solutions will also need to be developed and demonstrated.
Finally, the spatial accommodation of the requisite infrastructures and the degree of local support for these measures will partly determine how rapidly low CO2 options can be deployed. It will take time to carefully consider all the local, regional and national spatial interests. This particularly applies to the spatial accommodation of wind energy, new nuclear power plants, gas extraction and CCS. 122 Transition to sustainable energy
5.2 Considerations per energy technology and source
Depending on the energy function, various solutions are available to conserve energy and sustainably generate low CO2 energy. There are already many options available for electricity and low-temperature heat, while there are relatively few solutions for high-temperature heat, mobility and transport. The various options offer different advantages and disadvantages in terms of sustainability, affordability, reliability and safety, while they also offer varying economic opportunities and possibilities for their spatial accommodation. The considerations involved in each of the energy functions are described below.
Biomass Biomass is used in foodstuffs, animal fodder, materials, industrial raw materials (chemicals and plastics) and energy production. Biomass should only be deployed for energy production if there are no or only very limited alternatives available, preferably where the biomass solution can substitute the most fossil energy carriers per energy unit. It is very important that, wherever possible, only residual products are used for biomass for energy and that the involved material cycles are closed. On the basis of the current knowledge, the best way to deploy biomass is as a high-quality raw material for the bio-based economy, for example for the production of chemicals, to generate industrial process heat and as a fuel for the aviation, maritime and inland shipping sectors. Biomass can also play a role as a backup fuel to offset peaks in space heating and electricity supply and demand. In the longer term (after 2050), biomass may become a critical factor in achieving negative emissions of greenhouse gases.
Depending on the conversion technology used, biomass can be used to substitute almost all fossil energy carriers and – in gaseous or liquid form – it can be deployed for all the energy functions. It is one of the few options currently available for the transport and industrial process heat functions. This makes bioenergy an attractive solution for these energy functions.
Uncertain potential However, the Netherlands has only limited room available to produce its own bioenergy. The maximum domestic potential is currently estimated to be 200 petajoules92. This means that the Netherlands will have to import biomass. There is plenty of global potential for biomass, but the sources are uncertain. This uncertainty is connected to worldwide food consumption, agricultural productivity, the utilisation of marginal land, developments in forestry, technological developments (e.g. bio-refineries) and the application of recycling and cascading. This entails that the development of the price of biomass for energy is also uncertain. The potential of biomass imports is estimated to be 120 to 780 petajoules.
92 PBL, Biomassa: wensen en grenzen, 2014. Transition to sustainable energy 123
Sustainability It is also very important to set clear sustainability requirements on bioenergy production. This will help to assure that the use of biomass will lead to a reduction of CO2 emissions, that no undesired land use change takes place and that ecosystems remain intact. The European Union has established sustainability criteria for biofuels and the Netherlands has also set criteria for some fixed bioenergy streams in the Agreement on Energy for Sustainable Growth. The aim is to develop a European-wide sustainability system. Sustainability can also be enhanced by investing in efficiency improvements in biomass production and use. This can be done by closing and optimising the material cycles, for example by utilising residual biomass.
Renewable sources for power and light Solar energy Renewable sources for power and light include wind and solar energy, geothermal energy and energy from water. The potential of these sources is expected to be between 500 and 750 petajoules in 2050, primarily based on solar and wind energy93. Solar energy is ideal for roofs, with the additional advantage that the public and businesses can easily implement this solution themselves. If solar panels were to be installed on all suitable roof surfaces, then they would jointly produce 180 petajoules of energy (based on the current technology)94. Because solar energy is an intermittent energy source, there is a risk of imbalances between the supply and demand. The current system is capable of managing this imbalance. However, if more solar energy is produced (for example because it makes increasing economic sense), then the imbalances will also increase and so the system will need to be modified to deal with this (for example by enhancing the infrastructure, alternative storage solutions or by implementing demand response).
Wind energy Wind energy has huge technical potential but the opportunities are limited due to the complications involved in its spatial accommodation, particularly on land. There are also conflicts with environmental and landscape values. Although offshore wind farms are highly productive, they are more expensive to operate than land-based wind solutions due to the challenging physical conditions. Moreover, the network costs increase the further from land the wind farms are installed. The joint potential of wind energy is approximately 540 petajoules (based on the current technology)95. The potential of offshore wind is 470 petajoules, i.e. a maximum capacity of 34 gigawatts. The maximum potential capacity of land-based wind energy is estimated to be 8 gigawatts. Like solar energy, wind energy is an intermittent energy source, so it may also require modifications to the network system. Technological developments are needed hardest in the offshore wind industry, which is currently still relatively expensive. Agreements on cost reductions up until 2020 have been set down in the Agreement on Energy for Sustainable Growth.
93 PBL and ECN, Naar een schone economie in 2050: routes verkend, 2011. 94 PBL and DNV GL, Het potentieel van zonnestroom in de gebouwde omgeving van Nederland, 2014. 95 PBL and ECN, Naar een schone economie in 2050: routes verkend, 2011. 124 Transition to sustainable energy
Geothermal energy Ultra-deep geothermal energy (deeper than 3500 metres) can be used to generate electricity by means of steam. This technology has not yet been introduced in the Netherlands and the potential cannot yet be estimated.
Water With its many kilometres of coastline, canals and rivers, the Netherlands is ideally positioned to benefit from electricity-from-water solutions. Electricity can be generated from tides, river and canal flows, and salinity gradients. Most of these technologies are still in the experimental phase. It is estimated that they have a potential of some 40 petajoules, taking environmental and other values into account96.
Renewable sources for heat Renewable heat is heat that is extracted from the ambient environment (such as the atmosphere), the soil (geothermal heat), the sun and residual heat (from greenhouses or industrial complexes, for example). The joint potential of these sources is estimated at between 200 and 550 petajoules, primarily from ambient and geothermal sources. However, there is much uncertainty about the potential of ultra-deep and deep geothermal energy, because these technologies are still being developed and have only been applied at a limited scale. Geothermal energy is only economical if there is sufficient heat demand, so that collective heat systems have the best potential here.
Ambient heat from the ground and the air can be extracted using heat pumps that can be installed at the individual building level. The ground is used as a medium to store heat and cold. Residual heat from power plants and industrial processes can be reused in other industrial processes and for heating buildings and greenhouses. It is important to match the heat supply to the demand in these systems and this supply must be located somewhere close to the users. Solar heating systems have only a limited potential in the Netherlands due to the unsuitable physical conditions.
CO2 capture and storage CO2 capture and storage (CCS) make it possible to generate energy from fossil fuels while at the same time drastically reducing the CO2 emissions. Major power plants and industrial installations offer sufficient scale advantages for the implementation of CCS. The CO2 must be stored such that it cannot escape into the atmosphere. Potential locations are empty gas and oil fields, aquifers and coal layers under the sea or land. In 2011, the Netherlands decided to place a moratorium on CCS on land due to the potential risks, environmental effects and social unrest. The CCS installations also need to be supported by infrastructure. The greater the distance to the CCS location, the higher the cost will be (this will particularly apply to undersea storage). However, CCS is still considered to be a potentially cost-effective option to achieve considerable CO2 emissions reductions.
96 Ecofys, Marktkansen en bijdrage aan verduurzaming van innovatieve technologie voor energie met water, 2014. Transition to sustainable energy 125
The potential of CCS for the empty gas and oil fields in the Netherlands is estimated to be between 1 and 2 gigatonnes of CO2 under land and 1.2 gigatonnes of CO2 under the sea97. If this were evenly distributed over 50 years, it would amount to 24 megatonnes of CO2 per year (for undersea storage only) or 44 megatonnes (for both sea and land-based storage). This is excluding the Groningen gas field, which has an estimated capacity of 9 gigatonnes. Little research has been conducted into aquifers in the Netherlands, so the potential is uncertain (currently estimated at between 0.07 and 0.15 gigatonnes of CO2). The potential of the aquifers in non-Dutch North Sea waters is probably many times this amount. Although CCS technology has been applied in the oil and gas industry for some time now, CCS for power plants and other industries is still in the demonstration phase. Its development has been halted for some years now in the Netherlands. A number of installations are in operation abroad, but only at a very limited scale.
CCS can be used to capture the emissions produced during biomass combustion, for example for the production of electricity. This is also known as Bio-CCS. Bio-CCS is considered to be an unavoidable measure at the global level, because the CO2 level in the atmosphere will need to be actively reduced after 2050 in order to permanently limit global warming to two degrees98.
Global stocks of fossil fuels
The fossil energy carriers petroleum, natural gas and coal are of primary importance for the current energy supply. Fossil energy carriers will continue to be important for some energy functions during the transition to a low CO2 energy supply. There are ample global stocks for the coming decades. On the basis of the proven reserves and the current rate of consumption, there is enough petroleum, natural gas and coal for respectively 52 years, 61 years and 122 years99. There are sufficient technically recoverable reserves of petroleum and natural gas for nearly two centuries, and theoretically enough coal for an even longer period. For nuclear power plants, there is enough uranium to last some 120 years (based on the current rate of consumption).
99
97 PBL and ECN, Naar een schone economie in 2050: routes verkend, 2011. 98 IPCC, Climate Change 2014: Synthesis Report. Contribution of Working Groups I, II and III to the Fifth Assessment Report of the Intergovernmental Panel on Climate Change, 2014. 99 IEA, World Energy Outlook 2015, 2015. 126 Transition to sustainable energy
No business case for nuclear energy right now Assuming a maximum of four major new plants, the potential contribution of nuclear energy to the Dutch energy supply is estimated to be a maximum of 200 petajoules of electricity in 2050 (currently 15 petajoules per year). Although there are currently no plans for the construction of a new nuclear power plant, this could become feasible if market conditions become more favourable (potentially from 2023-2025)100. Market parties that meet all the preconditions (these include nuclear safety, non-proliferation and sufficient financial reserves for later decommissioning) can be granted a licence for the construction of a nuclear power plant101. Innovations may result in safer nuclear power plants, shorter radioactive waste lifetimes and more use of cheaper fuel sources. If these innovations come about then this will increase the likelihood of new licence applications in the future.
One such innovation is the use of thorium as a nuclear fuel. Natural thorium is estimated to be about four times as abundant as uranium. However, if thorium were to be used in the existing nuclear reactors, it would still produce radioactive waste102. Thorium will not become available as a fuel for existing nuclear reactors in the short term, among others because there is no infrastructure to produce thorium fuel at the necessary scale. On the basis of current (and foreseeable) uranium prices, the necessary investments in existing reactors will not be made. Thorium could potentially be a more efficient alternative in molten-salt reactors. These reactors produce almost no long-lived radioactive waste and much of the short-lived waste decomposes within a few hundred years. Another important advantage of this reactor is that it is inherently safe. However, much research still has to be conducted before molten-salt reactors can be constructed for energy production. The government is supporting research into innovations such as molten-salt reactors and other generation IV reactors. These reactors could well play a role in the energy supply in the long term.
No new coal-fired power plants On the basis of a European climate target of 80 to 95% emissions reductions by 2050, the CO2 emissions allocation for the generation of electricity in Europe is more or less zero. The electricity market is currently undergoing a transition involving the accelerated deployment of renewable energy alternatives. In the Netherlands, we are committed to encouraging more renewable energy production. There will be no place for new coal-fired power plants in the transition.
The Agreement on Energy for Sustainable Growth The Agreement on Energy for Sustainable Growth stipulates that the most polluting electricity production plants are to be phased out at an accelerated rate. On the basis of the cabinet’s efficiency requirements, the five oldest coal-fired power plants will be decommissioned by 1 July 2017. Five coal-fired power plants will remain in operation
100 Frontier Economics, Scenarios for the Dutch electricity supply system, 2015. ECN and PBL, Nationale Energieverkenning 2015, 2015. 101 Parliamentary Document 32 645, no. 1. 102 Serp et al., The molten salt reactor (MSR) in generation IV: Overview and perspectives, 2014. Transition to sustainable energy 127
in the Netherlands after 2017, three of which were only taken into operation this past year. In total, the involved companies have invested some €5.5 billion in these three plants. Within the framework of the energy transition, these plants are also required to reduce their CO2 footprint. To this end, the Agreement on Energy for Sustainable Growth stipulates that the remaining five coal-fired power plants will co-fire renewable biomass, which will reduce their CO2 emissions and generate renewable energy. The co-firing of renewable biomass in coal-fired power plants will contribute more than 1 percentage point to our targets of 14% renewable energy in 2020 and 16% in 2023. This ensures that the remaining coal-fired power plants will make the requisite contribution to the energy transition as stipulated in the Agreement on Energy for Sustainable Growth that was reached together with the energy companies and environmental organisations. The cabinet will get together with the sector and other stakeholders to flesh out alternative plans for completely phasing out the coal-fired power plants in the longer term103.
Strengthening the European Emissions Trading System Because we have a highly integrated Northwest European electricity market and because our electricity production is governed by the European Emissions Trading System (ETS), we will have to consider the energy transition from a European perspective.
Despite the accelerated pace of the energy transition, fossil fuels will continue to be an important part of the Dutch energy mix for a long time yet. The use of natural gas for electricity production is considerably less harmful to the environment than the use of coal. Alongside concrete measures to reduce the CO2 emissions of coal-fired power plants, we are also committed to strengthening the ETS so that it provides an effective price incentive. This is important in order to intensify the focus of the electricity market on the least polluting technologies. This will eventually provide a sufficient economic impulse for the operators of coal-fired power plants to reduce their emissions, for example by implementing biomass co-firing, CCS, a combination of both, or by shutting their plants down. At the same time, it is important to ensure sufficient affordable low CO2 alternatives for electricity generation. The development of new low CO2 alternatives, such as solar, wind and water energy, will be stimulated by creating favourable market conditions and encouraging innovation.
CCS The deployment of a CCS system is currently under preparation at one of the new coal-fired power plants on Maasvlakte as part of the Rotterdam CCS demonstration project (ROAD). This demonstration project aims to further the development of CCS technologies. It is expected to capture and store 1.1 million tonnes of CO2 during the demonstration phase. The project will also study the potential for utilisation of the captured CO2 in the Westland region greenhouse development. The development of this technology will be important for reducing the CO2 emissions of all forms of fossil energy production and the industry.
103 Parliamentary Document 30196, no. 380. 128 Transition to sustainable energy
Natural gas Natural gas currently plays an essential role in the Dutch energy supply, providing some 40% of our primary energy demand. Practically all households, businesses, hospitals and stores in the Netherlands use natural gas. Natural gas is the most sustainable source of fossil energy and it is an efficient energy carrier. Natural gas will be deployed where there are only limited low CO2 and energy conservation alternatives available. It will also continue to be deployed after 2050 if necessary. As the energy transition progresses, we aim to limit the use of natural gas increasingly to those energy functions for which few or no alternatives are available. On the basis of the current insights, this will be the case for industrial process heat, goods transport by road and water and the production of electricity during peak demand. If stationary functions are involved, the use of natural gas will have to be combined with CCS or the natural gas will need to be replaced by sustainable gaseous energy carriers (green gas). All other natural gas consumption will need to be replaced by low CO2 alternatives as soon as possible. This particularly applies to space heating. This has consequences for domestic gas extraction, for consumers, for the infrastructure and for the organisations and businesses involved.
Groningen field As long there is a demand for natural gas, the safe extraction at societally acceptable costs of this gas in the Netherlands will continue to help reduce our dependence on gas from abroad. The gas that we use in the Netherlands is extracted from the Groningen field, from smaller Dutch gas fields or obtained from abroad. The Netherlands and Western Europe have profited from the huge reserves of Dutch gas for many decades. Although these reserves are shrinking fast, there are still substantial amounts of gas in Dutch soil and particularly in the Groningen field (700 billion 3m ). The decreasing domestic production of natural gas is in keeping with the target of reducing CO2 emissions.
Figure 5.5 displays the gas demand and production in the Netherlands estimated during the 2015 National Energy Review. It is important to emphasise that the current decision on gas extraction for 2016 and any future decisions on gas extraction have not been included in this estimate. The Netherlands will eventually transform from a net exporter to a net importer of natural gas. The limits to gas extraction that were set down following the earthquakes in Groningen will bring this transformation forward to 2025-2030 (see Figure 5.5). If gas extraction is limited further, then this transformation will take place even earlier. Transition to sustainable energy 129
The gas in the Groningen filed is of unusual quality because it has a relatively low calorific content (the energy content per unit of volume). The natural gas from our smaller fields and imported gas has a higher calorific content. High-calorific natural gas is primarily used for producing industrial process heat and for electricity production, while the space heating demand in the Netherlands is primarily met with low-calorific Groningen gas. The gas systems used in homes and businesses are set up to process this type of gas. In principle, the gas demand for this function can also be met with high-calorific natural gas, but this gas does need to be modified first (known as quality conversion). This is done in two large nitrogen installations operated by Gasunie Transport Services (GTS), where nitrogen is added to high-calorific natural gas. The capacity of these two installations is limited to maximum of 20 billion m3 and so Groningen gas will be required in order to meet the physical demand for low-calorific gas in the meantime. A third GTS nitrogen installation will become operational in late 2019, which will mean that, as of 2020, the demand for Groningen gas will decrease by 5 to 7 billion m3 in comparison with 2016.
Figure 5.5 Gas production and demand in the Netherlands*
100 Groningen 90 Small fields 80 Realisation of the gas demand 70 Projection of the 60 gas demand A Projection of the 50 gas demand AP
40
30
20 Billions of m ³ Groningen Gas Equivalents 10
0 2000 2005 2010 2015 2020 2025 2030
* Source: Nederlandse Energieverkenning 2015 TNO, 2015, for historic data, forecasts based on ECN calculations; Gas demand A and AP are the gas demand prognoses for respectively Approved Policy and Approved and Proposed Policy. 130 Transition to sustainable energy
A consequence of the decreasing production of the Groningen field is that, as of 2020, the transport capacity between the Netherlands and Germany will be decreased by 10% per year. The transport capacity between the Netherlands and France and Belgium will be decreased from 2024. The foreign users of Groningen’s low-calorific gas will convert their networks and installations to high-calorific gas. This means that the demand for low-calorific gas will decrease by some 2 billion 3m between 2020 and 2024 and continue to decrease by some 3 to 4 billion m3 per year after 2025. This will also result in a decreasing demand for Groningen gas.
Small fields A decrease in the production of Groningen gas can not be compensated with gas from the other, smaller Dutch fields only. In 1974, extraction from the Groningen field was limited in order to make the extraction from the smaller fields economically feasible. This so-called ‘small-fields policy’ resulted in a considerable supply of predominantly high-calorific gas from small fields. The total production has been decreasing since the start of this century and will fall quickly over the coming years to about 10 billion m3 by 2030. The small-fields policy can be successfully continued if it is underpinned by a stable and attractive investment climate and more efficient extraction techniques. This will help to reduce our dependence on gas from abroad in the future.
Small gas fields
The remaining, primarily marginal gas reserves are mainly located in the North Sea on the continental shelf. It is critical that these reserves are linked up to the existing infrastructure (platforms and pipelines) on the Dutch territorial continental shelf. Most of this infrastructure was installed during a period in which much larger gas fields were being developed and operated off shore that justified the high investment and maintenance costs. If no new volumes are added, the infrastructure will be dismantled and removed when the larger gas fields run dry. The remaining small and marginal gas fields will then remain unused, because it will not be economical to build a new infrastructure. In order to encourage mining companies to find and develop as many of these small gas fields as possible, in September 2010 a financial incentive measure came into force as part of the Mining Act. The government is currently considering whether to extend, amend or replace this incentive measure with the aim of maintai- ning the essential infrastructure on the continental shelf for the extraction of the remaining gas reserves.
As with any other form of mining, the extraction of natural gas must take place in a responsible manner and at an acceptable cost. This will require surveying the deep subsurface, as well as studies of mitigating measures to reduce the risks. Transition to sustainable energy 131
Shale gas An alternative for natural gas in the long term is to extract gas from the Dutch shale layers. In Section 2 we indicated that, on the basis of our current knowledge, practically all low CO2 energy carriers will need to be deployed in order to assure the future energy supply. Where possible, we will apply energy conservation measures and use more sustainable sources to reduce the emissions caused by the use of fossil energy sources.
On 10 July 2015, the cabinet decided to place a five-year moratorium on the commercial exploration and extraction of shale gas. The studies that underpinned this decision indicated that a number of the effects of shale gas extraction are currently uncertain due to the lack of specific data on the deep subsurface. There is also societal unrest about the impact of shale gas extraction activities on the living environment and the landscape.
We do not yet know whether the commercial exploitation of shale gas will be needed in the longer term. This will depend, among other things, on the pace and the direction of the transition, and the use of natural gas will in any case be reduced as much as possible by means of implementing energy conservation measures and replacing it with renewable sources. Geopolitical and market developments also play a role in the longer term, and technological developments can change the method of extraction and hence influence factors such as safety and the effects on natural and living environments. For all these reasons, we cannot rule out the shale gas option for the longer term. It is currently unclear how much extractable shale gas there is in the Dutch subsoil. Many years of research will be required by the international community to facilitate a judicious decision-making process for licensing the commercial exploitation of shale gas, particularly in light of the potential risks and the social unrest caused by the shale gas debate. In 2016, a research programme will be prepared to this end that will be meticulously substantiated. Initially, we plan to collect information from drill cores from the currently scheduled deep drilling projects. A scientific team can decide whether or not further research is required on the basis of these cores, taking into account any other European or international research in this context. Eventually, a handful of drilling sites will be included in a government research programme. No shale gas drilling will take place during the current cabinet period.
A careful socio-political assessment will need to be conducted as soon as the results of the research become available. This assessment will need to consider whether, and under which conditions, shale gas could be considered a viable energy option. The local authorities will be actively involved in these deliberations. This is in line with the recommendations of the Netherlands Commission for Environmental Assessment.
The consequences for spatial planning following from the decision-making on shale gas will be incorporated in the National Policy Strategy for Subsurface Activities (Structuurvisie Ondergrond). 132 Transition to sustainable energy
Northwest European gas market With its ‘gas roundabout’ strategy, the Netherlands has proactively prepared for the reduction in domestic production. Thanks to this strategy, the Netherlands has ensured it has sufficient transport and storage capacity, while the diversification of supply (LNG from various countries, Norwegian and Russian gas) has ensured that it is not dependent on any one particular supplier. The Dutch gas market is now one of the best functioning gas markets in Europe. A properly functioning gas market will ensure that buyers pay a fair price for their gas. This is important for the competitiveness of the Dutch business community and the purchasing power of the households that will eventually use the gas. Furthermore, a properly functioning gas market in combination with an effectively functioning infrastructure will facilitate the flow of gas from abroad to the Netherlands which will improve our security of supply.
The Netherlands currently fulfils an important role in the Northwest European gas market by engaging in the extraction, import, storage and export of natural gas. In 2014, the Netherlands extracted 66 billion m3 of gas but only consumed 38 billion m3. In that same year, the Netherlands exported 56 billion m3 and imported 28 billion m3, the majority of which from Norway and with Russia as the second most important supplier. Natural gas can be imported through pipelines or transported in liquefied form (LNG) with gas tankers to one of the various terminals in the Netherlands or our neighbouring countries. Dutch natural gas is primary exported to Belgium, France, the UK and Germany.
The worldwide supply of natural gas will increase significantly in the coming years. The development of the European LNG market depends in part on the price formation process, which is currently led by the high prices in Asia. Western Europe has sufficient capacity in its LNG terminals to handle a strongly increased volume of imported LNG. Most LNG is currently obtained from North Africa and the Middle East. Natural gas is piped in from Norway and Russia. In the long term, Northwest Europe will come to rely on natural gas from Norway and Russia and on LNG. Russia has plenty of production capacity in reserve and is well connected to Europe through a network of pipelines (including Nordstream). However, it would be undesirable to become dependent on imports from only one country or region. In the interests of diversification, it is important to maintain the infrastructure for both natural gas and LNG.
Thanks to the experience it has gained with gas over the past decades, the Netherlands has secured itself a strong position as a gas producing nation with up-to-date knowledge and expertise. The gas roundabout strategy enables Dutch market parties to acquire the gas that the Netherlands needs for its domestic consumption requirements from the Northwest European market. This strategy is also important for the Netherlands’ international position. Due to its favourable geographic location, a widespread transport network, extensive facilities for natural gas storage and a liquid gas market with a virtual trading platform (TTF) and a gas exchange (ICE index), the Netherlands will remain an ideal hub for the international gas market, even if its domestic gas consumption decreases. Transition to sustainable energy 133
Fossil oil will continue to be important for heavy transport and the aviation and maritime shipping sectors In the long term fossil oil will probably continue to be an important energy carrier for transport and mobility. While much of the passenger transport domain will be able to switch to electric vehicles (potentially including hydrogen options), this will be much harder to achieve for heavy transport and the aviation and maritime shipping sectors, because there are only limited low CO2 alternatives available. The most important alternatives are biofuels and LNG and bio-LNG. There are currently too many uncertainties surrounding the potential technological development of these alternatives and they are also too expensive at the moment. For this reason, within the framework of the European climate target of 80% emissions reductions, part of the remaining CO2 emissions allocation will be made available to these sectors. In the scenario with 95% emissions reductions, the role of fossil fuels in heavy transport will need to be reduced even further.
5.3 Infrastructure and cost reduction: important preconditions
The importance of the transport and storage infrastructure Energy from renewable sources such as the sun, wind and water is not always available at the right moment, in the right quality or at the right location. Solutions for transporting and storing energy could facilitate the use of intermittent renewable sources considerably. The current storage technologies are in any case inadequate. Furthermore, the geographic conditions in the Netherlands limit the storage options, which is why the potential of solar energy and other forms of intermittent energy is limited in many of the Dutch scenarios104.
The provision of long-distance transport options is a precondition for the deployment of energy carriers that are based on climatic and other favourable conditions in other countries. For example, we could import solar energy from Southern Europe. An efficient transport system could then contribute to achieving a cost-effective and reliable European energy supply. However, not all energy carriers are suited to long-distance transport (e.g. residual heat). The disadvantages of transport are network losses and the heavy investment required to install the infrastructure. In light of the uncertainty of the extent of both the demand and the supply of domestic sources (see Table 5.3), the import of energy from abroad will remain unavoidable. This means that a good infrastructure with cross-border connections is a precondition for the energy transition. This will also provide opportunities for the business community to respond to the demand and supply of energy carriers.
104 See (among others) CPB, Technological uncertainty in meeting Europe’s decarbonisation goals, 2015; PBL, Balans van de Leefomgeving, 2014; PBL and ECN, Naar een schone economie in 2050: routes verkend, 2011. 134 Transition to sustainable energy
Better storage solutions and the integration of energy systems will also improve opportunities to achieve an affordable and reliable energy supply. Unused energy from intermittent sources such as the sun and wind could be stored in the batteries of electric vehicles or used to heat buildings. This energy could also be converted to an alternative energy carrier with better storage capabilities, such as hydrogen gas (see the text box on Power-to-X). Many of these technologies are still in the experimental phase.
Power-to-X: an opportunity and example for increasing integration between economic sectors
Electricity can be converted into gaseous or liquid products (known as Power-to-Gas and Power-to-Liquids respectively). Electricity can be converted into hydrogen by means of electrolysis. The hydrogen can be used as fuel in vehicles, for example. Other products such as methane, methanol and synthetic diesel or kerosene require a carbon source, such as CO2, in addition to electricity. This CO2 could be obtained from a CCS installation installed for another production process, for example. The inclusion of these products in the energy supply could lead to a reduction in CO2 emissions (by reducing the consumption of fossil energy carriers). Power-to-Gas and Power-to-Liquid are technologies that connect the electricity market to the market for energy carriers that can be more efficiently stored. These technologies are currently not economical in the Netherlands, nor are they currently required to balance the supply and demand of electricity105. If they are developed further and the costs are reduced, in the long term these technologies could play an important role in the flexibilisation of the electricity market (if intermittent sources such as solar and wind energy become responsible for a large share of the energy supply).
105 Uncertain costs of the future energy supply The transition to a low CO2 energy supply will demand major investments, both in energy conservation measures and the generation of renewable energy and storage of CO2. However, it is unclear exactly how high these investments will need to be. Because the technologies are still under development, there is little certainty about the costs of these technologies in the long term. Over the past years, the costs of many technologies, such as wind energy, and more particularly solar panels, have decreased strongly106. These costs are expected to continue to fall, but it is uncertain exactly how much. The costs could also increase if the conditions for installing the technologies grow more difficult (for example for offshore wind energy). More stringent safety requirements could also lead to cost increases, for example in relation to the construction of new nuclear power plants.
105 ECN and DNV GL, De rol van power-to-gas in het toekomstige Nederlandse energiesysteem, 2014. 106 IEA, World Energy Outlook 2015, 2015. Transition to sustainable energy 135
Reducing energy consumption Costs can also be avoided by reducing our energy consumption and purchasing less fossil fuel. The potential for energy conservation is uncertain. Without an ambitious, global climate policy, the IEA expects the prices for oil, coal and gas to continue to rise as a consequence of increasing demand and the increasing costs of extracting these resources. If this is the case, then energy conservation measures could lead to huge savings.
However, these savings could end up lower than anticipated if the prices for fossil fuels actually continue to decrease, for example due to the decrease in demand that would follow an ambitious climate policy.
Investment costs continue to be an important component of the cost structure The cost structure of energy is also changing. The cost structure is currently determined by the variable costs of oil, gas and coal (taxation aside). In a future energy supply based on a large share of renewable energy, the energy costs would be determined much more by the investment costs. The variable costs of energy from renewable sources such as the sun, wind and water are almost zero. The variable costs will remain an important component of the cost structure for biomass. It is still uncertain how the price of biomass will develop, because there are major uncertainties about the availability of renewable biomass for energy and because the necessary markets are still under development. Other factors with an important influence on the costs of low CO2 energy technologies are the development of the raw materials prices and the availability of specialised equipment and staff. For example, the price of copper and steel influences the price of wind turbines and the electricity infrastructure.
Costs and benefits of a low CO2 energy supply The direct additional costs for the Netherlands of a low CO2 energy supply in 2050 in comparison with the reference situation are estimated to be about €10 billion per year107. However, this estimate involves a large margin of uncertainty. If we allow ourselves to be optimistic about the technology and price developments in the intervening period, then the direct costs could be comparable with the reference values. However, in the most pessimistic case, the direct costs will be more than €20 billion per year higher. This is assuming a global effort towards achieving a low CO2 economy. No account has been taken of costs and benefits that are not directly reflected in the energy bill, such as the consequences of climate change and the health benefits of cleaner air. If these costs and benefits were taken into account, then the benefits of a low 2CO energy supply would easily outweigh the higher direct and indirect costs108.
107 PBL and ECN, Naar een schone economie in 2050: routes verkend, 2011; ECN and SEO, Kosten en baten klimaatbeleid 2050, 2012. 108 PBL, Kosten en baten van klimaatbeleid, 2015. The Energy Dialogue This Energy Report sets out a vision and a strategy for our future energy supply. We choose for a low CO2 energy supply that is safe, reliable and affordable and 6offers opportunities to innovating businesses. The current energy supply will change drastically. This transition affects all of society, because the supply and consumption of energy is an issue that concerns us all. We see that many citizens, businesses, knowledge institutes, government authorities and NGOs are already thinking about the energy supply of the future and working on solutions. Transition to sustainable energy 137
The Energy Report demonstrates that the Netherlands will need to take major steps during the coming decades in order to bring about a transition in how we use energy for space heating, industrial process heat, transport, and power and light. The Netherlands has access to a great deal of knowledge to achieve this transition. We now need to get together to consider how we can mobilise this knowledge of the energy transition. At the same time, there are societal concerns about the consequences of the transition, such as its potential impact on the scarce space we have available in the Netherlands. It is important to discuss the concerns we have about the energy transition with each other and to work on acceptable solutions. This is the only way that the Netherlands can effectively work on a transition to a sustainable energy supply that can count on sufficient support.
Public survey on support for the transition to energy sustainability
A public survey conducted by Motivaction109 revealed the following: • There is a relatively low sense of urgency with regard to the energy issue: only 18% of the Dutch put the energy issue in their top 5 of societal topics that need to be addressed. At the same time, there is awareness that there is an ecological problem, and the Dutch are positive about plans to make the energy supply more sustainable. • The Dutch estimate the current share of renewable energy to be much higher (33%) than it actually is (5.6%) and they underestimate the share of gas in the energy mix. They think that only a quarter of all energy is provided by gas, while the actual figure is 42%. • The Dutch believe that they have a limited responsibility for the energy transition. They think that the national government and the energy companies bear the greatest responsibility for making energy consumption more sustainable. They think that the business community, the Dutch public and they themselves only have secondary responsibility for this. • A small majority is motivated to make an effort themselves and see concrete opportunities to take action. The Dutch are slightly more willing to adopt energy-efficient behaviour than they are to generate their own renewable energy. Dutch citizens consider affordability and independence to be important values. • Resistance to certain energy options often develops if certain core values are perceived to be threatened. Examples are doubts about safety, ecological consequences, costs and effectiveness, limits to freedom of choice and decrease of comfort.
109 Motivaction, Energievoorziening 2015-2050: publieksonderzoek naar draagvlak voor verduurzaming van energie, 2015. 138 Transition to sustainable energy
Objectives of the Energy Dialogue The Energy Report invites the public, businesses, government authorities and NGOs to join the Energy Dialogue on the transition to a sustainable energy supply. The Energy Dialogue is intended to contribute to the design of the energy transition.
The dialogue will result in a policy agenda with concrete proposals that will be submitted to the House of Representatives in late 2016. This is not to say that the dialogue with society will stop there. The cabinet wishes to maintain the dialogue with the public, the business community and NGOs throughout the energy transition. This dialogue will contribute to awareness-raising and the development of knowledge on the energy transition. The public and various organisations are invited to take part. Participation in the dialogue will strengthen the stakeholders’ sense of ownership and hence also the support for the energy transition. If the public understands and supports the measures required for the energy transition, then it will be possible to draw up a clearer timeline: what can we start doing now, what requires more time and what does the overall timeline up to 2050 look like?
Organising the Energy Dialogue The societal Energy Dialogue is already being conducted in various places. The cabinet wishes to join this dialogue wherever this is possible and provide support in the exchange of ideas and decision-making. We will also actively invite government authorities, businesses, knowledge institutes and NGOs to organise activities that contribute to the dialogue and together decide on what form the dialogue is to take.
The public, the business community, knowledge institutes and other government authorities and NGOs will be invited to present their vision and analysis of the future energy supply. They may also be asked to suggest which steps they think are needed, in particular in relation to the different energy functions, and what they think will be necessary to achieve this.
In the Energy Dialogue, the cabinet will hold to the three preconditions for a low CO2 energy supply in 2050, being the assurance of: • Safety during the production and consumption of energy • The security of the energy supply • The affordability of energy Transition to sustainable energy 139
The Energy Dialogue will provide opportunities to question, suggest answers and work out solutions. The following issues will be discussed (among others): • The Netherlands needs to reach agreements on how we can achieve the ambitions for 2050. How can we ensure the commitment and input of all stakeholders? What contributions are businesses, knowledge institutes, municipalities, provinces, water agencies, NGOs and the public prepared to make? What contribution can each of the four energy functions described in this report make? • The European Emissions Trading System (ETS) is the cornerstone of the European Union’s climate policy. At the same time, it is important to keep sight of how our current policy fits in with a strategy that is primarily focused on CO2 reductions by means of the ETS. How can we ensure that the policy is unambiguously focused on the targets that we set, without disrupting the ETS? • The deployment of cleaner and more efficient technologies costs time and money. Investments have to be made and these investments have to be recuperated further down the line. However, this is at odds with the development of new and innovative technologies. How can we ensure that there is sufficient room to recuperate such investments without inhibiting the development of new and even cleaner technologies? • The cabinet wants the Netherlands to make the most of the opportunities provided by the energy transition by developing and demonstrating innovative solutions and deploying our competitive advantages to their maximum effect. What do the government, the knowledge institutes and the business community need to do to achieve this? • The cabinet has an ambitious goal of reducing greenhouse gas emissions on the basis of dialogue, participation and public support. How do we need to shape the transition towards 2050 with regards to spatial planning? How can we manage incorporation in the scarce available space in the Netherlands? • The transition will require changes to the infrastructure. How can we ensure that this infrastructure is adequately maintained and that it is flexible enough to adapt to the changing energy market? Appendix: Concessions and motions in the Energy Report Transition to sustainable energy 141
A Concessions in letters to parliament
Letter details Concession Described in Letter of 10/07/2015 The 2015 Energy Report will provide the Paragraph 3.2 and Shale gas cabinet’s integrated vision of the steps needed Section 5 Parliamentary Document to make the energy supply sustainable. 33952, no. 32 The various alternatives will be compared and set out on a timeline which will describe when each alternative will become available and to what degree it will be market ready. Letter of 09/01/2015 The 2015 Energy Report will provide a more Paragraph 3.4 Cabinet response to the detailed description of the required innovation (Energy Dialogue Sustainable Netherlands efforts. and Policy Agenda) Monitor (Kabinetsreactie Monitor Duurzaam Nederland), Parliamentary Document 31239, no. 186 07/10/2014 The EIA commission has submitted recommen- Paragraph 3.2 and Response memorandum. dations on the information that is required to Section 5 Views and recommendations. make judicious decisions with regard to shale gas. Concept memo on the scope These will be incorporated where possible in and level of detail of the the National Policy Strategy or the 2015 Energy Shale gas EIA report Report. (Reactienota Zienswijzen en adviezen Conceptnotitie reikwijdte en detailniveau plan MER Schaliegas) Parliamentary document 33952 no. 12. Letter of 07/07/2015 The 2015 Energy Report will provide the Section 5 Shale gas cabinet’s integrated vision of the steps needed Parliamentary Document to make the energy supply sustainable. If it 33952, no. 32 proves desirable to consider the option of shale gas extraction in the Netherlands, then the cabinet will participate in broad and long term European research to this end, with drilling solely taking place for research purposes. Letter of 07/10/2014 The 2015 Energy Report will discuss issues such Section 5 Natural gas policy in the as the optimum utilisation of our soil resources, Netherlands, Parliamentary including the Groningen field and the future of Document 29023, no. 176 the small fields policy, energy security of supply, the future of the ‘Gas Building’ partnership and the fulfilment of the European energy market. Letter of 31/03/2015 For the 2015 Energy Report, the cabinet will Section 5 EIA plan, National Policy first decide whether the wind energy targets (Energy Dialogue Strategy for Land-based Wind (6000 MW by 2020) can be continued after and Policy Agenda) Energy (Plan-MER Structuurvisie 2020. Windenergie op land) Appendix to Parliamentary Document 33612, no. 23 142 Transition to sustainable energy
Letter details Concession Described in Letter 01/04/2015 The framework for the Energy Report is Section 2 Answers to written questions formed by the European commitment to the related to the ‘policy audit of negotiations in Paris and the plans for an the energy article (article 14)’ Energy Union, including the EU2030 targets as (Beleidsdoorlichting energieartikel agreed in the European Council. (artikel 14)) Parliamentary Document 30991, no. 20 Letter of 02/04/2015 The Energy Report will discuss the potential of Section 5 Heat vision heat and electrification for the future energy Parliamentary Document supply and what the role of gas could be. 30196, no. 305 Letter of 13/07/2015 Energy storage is also a theme that is being Section 5 Motions and concessions considered as part of the 2015 Energy Report. (Energy Dialogue concerning energy, We will consider whether additional efforts are and Policy Agenda) competition, tenders and required on top of the current commitment of post-market the Top Sector Energy and how to effectively cooperate on this theme as part of the European research and innovation programme. Letter of 30/03/2015 The shaping of the policy, the setting of Paragraph 4.1 Answers to written questions concrete and measurable targets and the (Energy Dialogue related to the ‘policy audit of importance of monitoring and regular interim and Policy Agenda) the energy article (article 14)’ evaluations of the instruments are all elements (Beleidsdoorlichting energieartikel that will require more attention in the future. (artikel 14)) These lessons will all be incorporated in the 2015 Energy Report. Letter of 02/04/2015 The Energy Report will discuss the choice that Paragraph 4.2 Heat Vision has to be made between gas networks and (Energy Dialogue Parliamentary Document district heating and cooling networks, or only and Policy Agenda) 30196, no. 305 an electricity network. Transition to sustainable energy 143
B Concessions in parliamentary debates
Details of the debate Concession Energy Report 17/11/2014 The 2015 Energy Report provides an integrated Sections 2 and 5 WGO Energy vision of the role of gas in the energy transition. 07/04/2015 The 2015 Energy Report will discuss the Paragraph 4.5 AO 380 KV development of electricity demand and supply and the need for new transport capacity. 10/02/2015 The 2015 Energy Report will discuss the Paragraph 4.2 Energy efficiency replacement of gas networks in relation to renewable energy. 19/11/2015 The geopolitical energy strategy will form part Section 1, Approval of the budgetary of the 2015 Energy Report and the Energy Paragraph 2.2, statements of the Ministry of Dialogue. Paragraph 5.2 foreign Affairs (V) for 2016 (Energy Dialogue)
C Motions
Motion details Concession Energy Report 08/10/2015 Within the framework of the Energy Report, Energy Dialogue Budget debate, Housing and a study will be conducted into how the and Policy Agenda the Central Government conversion of the complete existing social Sector, 2016 34 300 XVIII housing stock to zero emission homes can be no. 26 legally founded, whereby the deadline for this conversion is the year 2035. 06/10/2015 The Energy Report will discuss the role that Paragraph 3.3 Gas and Electricity Act 34199, the infrastructure companies can play in (Energy Dialogue no. 51 accelerating the transition to a renewable and Policy Agenda) energy supply. 15/10/2015 The Energy Report will discuss the prospects Section 5 Budget debate, Ministry of and the advantages and disadvantages of Economic Affairs, economy thorium energy with TU Delft. and innovation component, 34300 XIII, no. 57 13/10/2015 The Energy Report will discuss additional Energy Dialogue Netherlands Budget measures to ensure far-reaching CO₂ reductions and Policy Agenda Memorandum 2016 are facilitated after 2020. 34300 G 17/11/2014 The Energy Report will discuss the required Energy Dialogue WGO Energy 34000 XIII, efforts (in euros over the coming ten years) in and Policy Agenda no. 115 the area of fundamental and applied research towards the 2050 targets. 144 Transition to sustainable energy
Notes This report is published by: Ministry of Economic Affairs P.O. Box 20401 | 2500 EK The Hague The Netherlands www.government.nl/ministries/ez
Illustrations: Today Designers, Utrecht The Netherlands
Layout and printing: Xerox/OBT, The Hague The Netherlands
April 2016 | 91670