Netherlands

Netherlands

Dispute over cost benefit analysis

In a cost-benefit analysis report looking at the possibility of 30 North Sea wind farms generating 6000 MW in 2020, the Netherlands Bureau for Economic Policy Analysis (CPB) concludes that the "social benefits fall short of the social costs" unless there is a gradual phased-in approach. But that conclusion has been slammed by one of the country's independent sustainable energy consultants. Ecofys argues that wind energy unquestionably provides a positive value if more realistic assumptions for oil prices, CO2 emission prices and learning curve efficiencies are used.

The cost-benefit analysis was initiated at the request of several members of parliament, the Ministry of Economic Affairs and the Energy Research Centre. The CPB concludes that socially cost-effective investment in offshore wind energy requires very gradual capacity development. Even given a scenario with a stringent European climate policy -- and taking into account reductions in costs through technological development and a low discount rate to account for the security of supply benefits of a geographical spread of projects -- social costs exceed social benefits with fast development. If 6000 MW is constructed in phases, however, concluding in 2030, there is a positive balance of benefits and costs.

Constructing 6000 MW by 2020 will cost EUR 2-2.5 billion more than if it was for 2030, according to CPB. Gradual capacity development avoids large initial losses, provides sufficient perspective for achieving learning effects and ensures a flexible reaction to the development of major uncertainties regarding climate policy, technology and structural supply developments on the world energy market.

The analysis shows that if a strong climate policy is pursued, offshore wind energy will become economically cost-effective after 2025. "From that moment, the energy supply will renew itself without any form of subsidy," the CPB concludes.

Ecofys looks at scenarios involving an oil price of $40-65 a barrel rather than the CPB's $22-28 a barrel and CO2 prices of EUR 20-25 per tonne. In a marked contrast to the government initiated report, Ecofys finds that 6000 MW of wind energy in the North Sea can make at least EUR 180 million and up to EUR 5.3 billion.

Ecofys director and professor of the University of Utrecht, Kornelis Blok, says: "The conclusion is clear, the economic value of wind energy is positive in contrast to the CPB research. I am challenging the CPB to analyse their own conclusions with ours."

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