Netherlands

Netherlands

Political crisis halts Dutch market -- From bad to worse

The protracted period of uncertainty hampering wind development in the Netherlands looks set to continue into the new year following the forced resignation of economics minister Herman Heinsbroek on October 16 and the subsequent dissolution of Jan Peter Balkenende's 87 day-old centre-right coalition cabinet. Elections are now expected in early to mid January.

In the weeks leading up to the government's spectacular collapse -- brought on by wrangling between Heinsbroek and fellow minister and member of the libertarian populist, LPF, party, Eduard van Bonhof -- the renewables sector has already twice been surprised by unexpected announcements from The Hague. On September 26 it learned that the finance ministry would be suspending three separate tax breaks for the green power market with immediate effect. Unexpectedly high levels of renewables investment mean that the allocated reserves have been exhausted, said the ministry. The tax credits are critical to project finance and suspension of them leave project developers in a vacuum at least until the new year.

Lifeline

Two weeks later, the economics ministry appeared to throw the sector a lifeline with news that EUR 35 million was up for grabs under the fifth and final round of the government's CO2 reduction fund, which aims to cut CO2 emissions by three million tonnes a year. Introduced in 1997, the fund provides up to 30% investment subsidy for projects which would otherwise not be commercially viable and which can secure CO2 reductions of at least one thousand tonnes a year.

To date wind has been a big winner under the scheme -- previous rounds have seen funding for 678 MW (across 77 wind farms). Participation in this round could, however, be hampered by the overall lack of clarity about renewables finance. Subsidies from the CO2 fund are awarded on an auction basis -- and the deadline for bids is already December 10. The auction requires applicants to request a subsidy amount to a maximum of 30% in the knowledge that projects with the lowest subsidies have the greatest chance of success.

At present it seems unlikely that there will be any greater certainty about wind's long term prospects by mid-December. Minister Heinsbroek had promised that by this month he would clarify the government's plans for renewables support, in particular the rate of the new environmental electricity production subsidy, the MEP. This was to replace the Dutch strategy of supporting green electricity purchases through tax breaks, with support of green power production instead of consumption. The MEP was to come into force on January 1, 2003. Speaking immediately after his minister's resignation, an environment ministry spokesperson said he had no idea what was to become of the MEP proposals.

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