Dutch green power subsidy gets EU approval

Green electricity to get favourable tax treatment, but scheme's efficiency questioned

The Netherlands is set to exempt "green electricity" from an environmental tax following approval from the European Commission which passed the plan under EU rules on state aid. The tax cut will allow electricity distributors to cut the price of green electricity with the aim of boosting its market penetration and supporting renewable energy producers.

Under current Dutch rules, householders and small firms can choose to pay up to 20% extra for green electricity, which covers wind, solar, small-scale hydro or biomass power. Distribution firms undertake to invest the extra revenue in developing renewable energy. Some 20,000 consumers are purchasing green electricity, according to the Commission.

The authorities have now won EU approval to waive an environmental tax on electricity introduced in 1996. The effective subsidy will be DF30m (Ecu13.5m), according to the Commission, and will halve the price gap between green and standard electricity, though still leaving green electricity more expensive for consumers.

While welcoming the Dutch authorities' move to support renewables, environmental groups and renewable energy figures have questioned the subsidy's relatively small size and suggest that other approaches could have a greater effect.

According to one national renewable energy producers' association, the best tool for governments to boost renewables is to establish fixed tariffs payable to renewable energy producers. Small changes made to the price paid by consumers would have less effect, the association told ENDS Daily.

A spokesperson for the Dutch environment ministry conceded that the tax change would have only a marginal effect on persuading consumers to switch to the green system, as green electricity will still cost around 10% more than standard prices.

EU policy on renewable energy support is unclear and the European Commission is currently formulating a draft directive to be published by the end of the year (ENDS Daily 18 March). The Commission is concerned that government aid to renewable energy producers should not give them an unfair advantage over competitors in other countries in a liberalised energy market.

EU energy ministers will also broach the subject of support for renewables when they meet on Monday. They are due to adopt a White Paper on the promotion of renewables, which recommends tax exemptions of this kind.

Follow Up:
European Commission, tel: +32 2 295 1111; Dutch environment ministry, tel: +31 70 339 3939.

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