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Netherlands

Netherlands

Regulation makes green power cheapest

An coming increase in the rate of energy tax (REB) means that householders in the Dutch provinces of Noord Brabant, Limburg, Groningen, Drenthe and Overijssel will be able to buy green electricity for less than they pay for grey. The implications for green power marketers are huge, but utilities are worried about too much sudden demand in green power will outweigh current supply. In practical terms the Dutch wind sector stands to benefit both from increased green electricity sales and a higher REB rate.

In one corner of Europe the wildest fantasy of any green power marketer is about to become reality. An increase in the rate of energy tax (REB) means that householders in the Dutch provinces of Noord Brabant, Limburg, Groningen, Drenthe and Overijssel will be able to buy green electricity for less than they pay for grey, says Jack van Gestel of the Netherlands' largest utility, the PNEM-MEGA EDON group.

"This doesn't mean that green electricity is actually cheaper than grey," Van Gestel is quick to explain, But when the new REB rate of NLG 0.0964/kWh is added to the price of grey power and the various taxable thresholds are factored in, at a certain point it becomes cheaper for the average household to go green than to continue buying grey electricity.

The calculations are complex as the REB -- effectively a carbon tax intended to encourage energy consciousness among consumers introduced in 1996 -- is levied at a sliding rate with the first 800 kWh being exempt and a levy of NLG 0.082/kWh being charged on the 801-10,000 kWh band. When that band rate is increased to NLG 0.0964/kWh from January, the average household will be better off paying the premium on REB-free green electricity.

Van Gestel points out that the implications are huge. Currently some 65,000 environmentally conscious households subscribe to PNEM's "groene stroom" green electricity scheme. Effectively these people have chosen to put their hands in their pockets for the sake of the environment by paying a premium price for nominally green electricity, with the extra revenues being returned to renewables development.

From January, however, the number of the environmentally virtuous is likely to be swollen by a new, cannier type of consumer who has calculated that if you consume more than 3000 kWh a year, it makes financial as well as environmental sense to go green.

With 2.2 million households on its books -- approximately one-third of the Dutch population -- the potential market for the PNEM-MEGA EDON group is immense. "The break even point lies just under 3000 kilowatt hours per annum, and the average Dutch household consumes 3300 kWh per annum, so yes we are looking at a potentially huge increase in demand," says Van Gestel.

A sudden explosion in the number of green electricity customers could, however, prove problematic. At present the PNEM group, which launched its green electricity scheme in 1995, has capacity to spare having just built a new bio-mass generator which can supply some 50,000 households. But it is not a situation which is likely to last believes Van Gestel: "I'm afraid that we will be turning customers away fairly early in the new year," he says of those seeking to buy green electricity.

Profitable to be green

Other utilities such as NUON and Eneco are already operating green power options at near full capacity. They will attempt to prevent demand outstripping supply by raising green electricity prices. "We're afraid of a sudden increase in demand which we will be totally unable to meet," says a spokesman for Rotterdam-based Eneco; "It's alright to offer green electricity for sale, but you've got to be able to deliver it." Consequently the 7000 Eneco customers currently paying a little more for their "ecostroom" will be paying a little bit more again next year -- and that includes a number of government ministries who have concluded green electricity contracts with Eneco ranging between 20-100%.

If green electricity under-cutting grey is a dream come true, explaining to loyal "ecostroom" customers that they will be paying more for green power in order to prevent additional people buying green power may be the green marketer's worst nightmare. "It is a strange situation," agrees Van Gestel. "But it clearly shows that the problems in Dutch renewables lie with supply rather than demand."

In practical terms the Dutch wind sector stands to benefit both from increased green electricity sales and a higher REB rate. Increased green electricity sales stimulate the renewables market directly with all the revenues being used by the utilities to make or buy new capacity. REB funds, although used largely in schemes which reward energy efficiency, are fed directly into the renewables tariff as a component of the price paid by the utilities to green power producers. Wind farm owners will consequently feel the benefit of the higher rate directly in their kWh price.

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