With the Dutch liberalised green power market entering its third year, the consequences of a national policy which stimulates renewables production through tax breaks on green power sales, rather than any form of mandate for the proportion of green power in the supply mix, are becoming clearer. While sales of green power continue to climb -- up to 1.8 million customers or 26% of consumers -- there are signs that wind could lose significant market share to cheaper renewables.
Nuon, the Netherlands' dominant electricity retailer, initially rejected the idea of using an ecotax on grey power, known as REB, to balance the price difference with green power. Instead it pursued an "added value" marketing strategy, arguing that its "Natuurstroom," electricity generated exclusively from wind, sun and small-scale hydro, is a premium product and should be sold at a premium price.
Competition from rival utilities and a host of new independent green power retailers has, however, forced it to revise this strategy. Last year it introduced two cheaper green products, "groenstroom" and "greenstep," aimed respectively at the domestic and commercial markets. These are both biomass-based and are sold at the same price as grey power.
WORRYING FOR WIND
With 240,855 new customers, "groenstroom" immediately out sold the premium brand Natuurstroom, with 217,625 new customers in 2002. The proliferation of so-called green power products now available looks likely to swamp Nuon's strategy of value added branding. The company has even been rapped over the knuckles for advertising its predominantly biomass generated "groenstroom" with a picture of a child blowing a toy windmill.
Import trends are also worrying for wind. Last year a total of 10,350 GWh of green power was imported into the Netherlands, 60% from biomass and 40% from hydro. Although the new renewables subsidy package implemented from July 1 has discontinued a production incentive payable to foreign producers, Dutch green power retailers will still have some extra cash to shop for green power abroad thanks to a tax differential between grey and green power of some EUR 0.029/kWh.
Moreover, Dutch green power retailers now hold reserves of 13,977 GWh. This is four times the current demand of 3,600 GWh, according to the CBS. Under the Dutch system these reserves can be banked indefinitely in the form of green certificates. Consequently, cheap, biomass based green power looks set to be a market reality for some time to come.
Despite the flood of foreign imports and the increasing use of biomass for cheap green power packets, the domestic renewables sector and wind's position continued to grow over 2002. Total domestic renewables production was up 24%, largely thanks to the use of biomass in coal-fired power stations -- biomass accounted for 2.3% of national electricity use. Wind also enjoyed its best ever year with a 40% increase in installed capacity, translating to a 10% increase in power production. Wind contributed 0.8% of total power consumed. Hydro supplied just 0.1% and solar 0.015%.
With the new production incentive package introduced this summer (Windpower monthly, July 2003) along with a 50% cut in the tax differential between grey and green power, the true competitiveness of Dutch wind on the country's liberalised green power market should soon become much clearer.