Double Dutch on offshore policy -- Fine words but disastrous action

One of the Netherlands' two planned offshore wind farms faces premature death from a government proposal to cut the national wind subsidy. At the same time, the government has been lauding its "substantial" plans for offshore wind energy at an international workshop marking the start of its six month term in the EU presidency chair.

Early last month, Dutch economic affairs minister Laurens Jan Brinkhorst announced an end to the moratorium on Dutch offshore wind development, which has prevented any activity on new projects since 2001. "Only a substantial increase in wind and biomass offers sufficient prospects of reaching the 9% Dutch [renewables] target by 2010," he told delegates at the invite-only offshore workshop in Egmond aan Zee. "The moratorium was imposed in order to realise new legislation for offshore wind parks," he said. "Unfortunately, it took a great deal of time to reach agreement on the principles for this legislation and its design. As you can imagine, I am very pleased that the impasse has now been broken."

His colleagues in government, however, were meanwhile preparing to trim EUR 100 million from the Energy Investment Allowance (EIA), a tax break that allows private renewable energy developers to subtract 55% of the sum they invest in a project from their taxable earnings. Under proposed revisions to the 2005 tax laws, the EUR 160 million allocated for the EIA budget each year will be cut to EUR 60 million (current expenditure is EUR 100 million), thereby reducing to 44% the slice of investment that can be offset against income tax.

The reduction will likely sink plans for Nuon and Shell's 99 MW Near Shore Wind (NSW) project, according to David Uitdenbogaard from Dutch utility Nuon. Given the plant's limited profitability under such conditions, it is unlikely the directors of either Nuon or Shell will approve the project, he says. Furthermore, the offshore project -- which has been in planning since 1997 -- is still embroiled in a legal dispute with national conservation protest group Stichting Duinbehoud, making the scheduled 2005 construction start date highly improbable, he adds.

The Netherlands' only other planned offshore wind farm, the WP Q7, will be unaffected by the EIA revision, having already secured its tax exemption, says Mathieu Kortenoever of renewables developer E-Connection (Windpower Monthly, February 2004). But the reduction will rule out any further offshore development, he believes.

A blow onshore too

For Dirk van der Ham of the Noordenwind wind farmers' co-operative, the consequences of the EIA cut are equally disastrous for future onshore wind development. Planning for most Dutch wind projects takes around five years and most plans will have been based on the assumption of a 55% EIA. "Many of these will now be put on ice," he says. "In the less windy provinces such as Limburg, the eastern part of Noord Brabant, Gelderland, Utrecht, Overijssel, Drenthe and large parts of Groningen, wind farms will no longer be possible."

Parliament is scheduled to decide on the proposal next month. Diederik Samsom of the opposition Dutch Labour party is not convinced that a crisis is imminent. He points out that the subsidy cut already represents a softening of the cabinet's original plans. "We are fighting a rearguard action at the moment, and a 44% EIA rate with no cap on the total budget is far better than what was originally on the table," says Samsom.

He adds that with this measure, the most rightwing faction of the governing coalition, the VVD, has jumped on board a growing anti-wind bandwagon in the Netherlands. "As a right wing liberal party, they are obviously opposed to subsidies on renewable energy, but officially the government is still pro-renewable energy, so it will be interesting to see how this story ends. Perhaps we will see that their bark is worse than their bite," says Samsom.

He concedes that a 44% rate will effectively stifle any marginal inland projects but believes that offshore wind development is still possible at that rate -- although it will need to be seen within the context of other changes to the tax law, especially alterations to the profit tax on companies, he says.

Ironically, the EIA reduction, which threatens to scupper the Nuon-Shell wind farm, was made by the VVD's Paul Krom, formerly vice president of human resources at Shell Renewables International.

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