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Netherlands

Netherlands

Wind escapes fiscal weeding -- Still eligible as green investment

Fears that wind power development in the Netherlands may have become too commercially successful for projects that qualify for funding under so-called green investment schemes have been allayed following a joint announcement from the ministries of environment and planning. For the time being at least, wind power developers can continue to apply for cheaper loans from so called green investment funds to build new wind farms.

The announcement that from 2002 only "darker green" projects will be eligible for green loans follows an upsurge in the popularity of green fund investments under a new tax law introduced this year. With some 120,000 green fund investors, the government is now stipulating that only technologies with marginal returns today, but which have a viable commercial future, will qualify for consideration.

On the basis of studies by government environment agency NOVEM, Dutch wind farms meet these criteria. The NOVEM studies indicate that without green funds and other fiscal incentives a wind farm, which currently becomes profitable in 10.7 years, only becomes profitable after 25.2 years, while a more viable wind project which becomes profitable after eight years with fiscal benefits requires 15.6 years to pay off its loan without them.

Review next year

The extension to green fund eligibility for wind projects may, however, only be temporary for a radical review of the various fiscal mechanisms currently used to support renewable energy investment in the Netherlands is scheduled for next year.

In addition to excluding some market gardening projects from being able to apply for green fund financing, the new regulations have increased the size of foreign projects eligible under the Kyoto Treaty's Joint Implementation mechanism from NLG 10 million to NLG 20 million, but only on condition that all a project's associated emissions rights are credited to the Netherlands.

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