The Netherlands has been slow to adopt an energy transition programme compared to other European countries. The Climate Plan, released by the government in late-June 2019, marked a clear turning point as it aims to reduce Dutch carbon emissions by at least 49% by 2030 compared to 1990. This ambition would turn the country from laggard to frontrunner. Energy transition plays a pivotal role as emissions from the energy sector need to be reduced by as much as 73% by 2030. The Dutch government wants to phase out coal in its energy mix by 2030 and natural gas by 2050. The plan has strong implications for the Dutch gas and electricity network operators as it requires exponential capital expenditure. Some network operators want their shareholders to inject new capital. While this would provide temporary relief, it needs to come with higher tariffs from the Dutch regulator ACM in order to finance investments with operating cash flow.
The share of renewables in the power generation mix accounted for 18% in 2019. We forecast this share to reach 25% in 2020 with the number expected to be 74% in 2030. The transformation to a low carbon economy requires increasing investment into the energy system from around €10bn a year in 2010 to an estimated €16bn a year in the period 2020-2030. Total investment in solar panels and wind farms will continue to fall as the assets become less expensive. However, investment in grids will continue to rise in order to accommodate the increasing share of renewables coming into the Dutch network systems. For the Transmission System Operators (TSOs) and the Distribution System Operators (DSOs), the adaptation to a low carbon economy translates into exponential capital expenditure plans. Already, a number of Dutch network operators are unable to cover operating costs and required investment by the cash flow they generate. The Dutch regulator ACM has set the rate of remuneration at among the lowest in Europe. TSOs and DSOs expect a methodology change for the new regulatory period starting in 2022.
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