Energy Policy: Towards Greater Coherence
Energy Policy: Towards Greater Coherence
Energy Policy: Towards Greater Coherence
Translation
Tony Parr
Cover
Design: Corps Ontwerpers, The Hague
Photo: Siebe Swart / Hollandse Hoogte
The original Dutch version of this report (entitled Energiebeleid: op weg naar samenhang) was adopted on
8 December 2015. The report was presented to the Dutch House of Representatives on 10 December 2015.
2 algemene rekenkamer
Contents
1 Introduction 4
1.1 The importance of Dutch energy policy 4
1.2 Recent developments and agreements 6
1.3 Scope and method 8
1.4 Format 9
4 Policy planning 21
4.1 More coherence needed in decision-making on energy policy 21
4.2 Vague policy aims and not enough evidence in support of them 23
4.3 No clear assessment of competing policy aims 24
4.4 A proactive stance on European energy policy 26
Appendix 1 Court
of Audit publications on the subject of energy (2006-2015) 38
Appendix 2 Glossary 43
Bibliography 46
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1 Introduction
We have regularly audited Dutch energy policy during the past ten years. This review of
ten years of energy policy audits (from 2006 to 2015) has been produced as a means of
contributing to the broad public dialogue that the Minister of Economic Affairs1
wishes to pursue in order to pave the way in good time for a fully renewable energy
supply in 2050. Based on the findings of previously published audit reports, this report
contains observations and insights for further shaping, implementing and monitoring
the national energy policy.
Ever since the Second World War and particularly since the oil crisis, the Dutch
government has sought to secure an energy supply that is both reliable and affordable
in the short and the long term. At the same time, since the 1990s the government has
sought to ensure that the country has a renewable energy supply. An important aspect
of this policy has been a desire to increase the share of renewable energy in the
national energy mix.2 These elements form the three goals of Dutch energy policy:
sustainable, affordable and reliable.
Sustainable
Joris Fiselier Infographics
dec
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1
This report refers jan
which lays down a number of goals and measures for the period up to 2020-2023
(Social and Economic Council, 2013).
The overall objective of the government’s current energy policy is to create ‘an
internationally competitive energy supply that is reliable, safe and sustainable’. Direct
government spending on ‘promoting a sustainable, affordable and reliable energy
supply’ falls under the Ministry of Economic Affairs’ budget and represented a figure
of approximately €11 billion in the period between 2006 and 2015.3 The bulk of this
spending consists of policy tools such as grants for the production of renewable
energy.
Energy production grants are a form of central government spending and are as such
included in the national budget. However, these are not the only form of spending:
spending on energy also includes ‘tax expenditure’. This should in fact be regarded as
‘tax revenue forgone’ and is a separate item in the Budget Memorandum. ‘Tax
expenditure’ comprises forms of tax relief that the government affords to citizens,
institutions and businesses, with the aim of inducing them to adopt certain kinds of
behaviour, such as energy-saving.4
Of the current forms of tax expenditure, 13 types (representing a total value of €5.6
billion) have a potentially adverse environmental impact (Netherlands Court of Audit,
2015c). One of them is the excise duty exemption for aircraft: the government
estimated the value of this form of tax relief at €2,023 million in 2014 (Netherlands
Court of Audit, 2015c). There are also forms of energy tax relief that may have an
adverse environmental impact. For example, bulk consumers are among those
taxpayers who are exempt from energy tax; the amount of relief involved has been
estimated at €119 million. By way of comparison, the government spent €988 million
on energy policy in the same year; of this figure, €852 million was spent on ‘greening’
the energy supply.
• Energy-related revenue (i.e. natural gas revenue, energy excise duties and energy
tax) accounted for 12% of the aggregate national budget in 2013 (Schoots &
Hammingh, 2015).
In September 2013, the Dutch government signed a covenant known as the ‘Energy
Agreement’ with civil-society organisations and representatives of Dutch trade and
industry. The Energy Agreement lists a number of targets that need to be met in order
to create a more renewable energy supply in 2020 and 2023. Although the covenant
also contains various agreements about renewable energy and energy-saving, it does
not set any targets for reducing CO2 emissions.
Today, at the time that this publication goes to press, energy policy remains a major
topic of political and social debate at all sorts of different levels - global, European and
national. See Figure 2.
In terms of the global debate on energy policy, the UN climate change talks are due to be
held in Paris in December 2015. The organisers are hoping that the conference will
culminate in an agreement on a new, global treaty setting climate-change targets for
2050 and 2100.
At a European level, a European Energy Union has been formed and the details of an EU
climate and energy package for 2030 and beyond are currently being fleshed out. The
EU has set three sub-targets for the year 2030:
• a 40% reduction in emissions of greenhouse gases5 compared with 1990, for the
EU as a whole;
• renewable energy to account for 27% of the EU’s energy consumption;
• 27% energy-saving throughout the EU.
The EU-wide targets for 2030 have yet to be transposed into national targets.
5
The remainder of this
report refers only to one
specific greenhouse gas, i.e.
carbon dioxide (CO2).
However, the latter is
intended to include the
other greenhouse gases, i.e.
methane, dinitrogen oxide
and the fluorinated gases
(F gases). CO2 accounts for
by far the largest share of
greenhouse gas emissions.
7 e n e r g y p o l i c y : t o wa r d s g r e a t e r c o h e r e n c e
2050
September 2013
Energy Agreement March 2015
signed between
European Energy Union
2030
government, civil-society December 2015
organisations and
World Climate Summit December 2015
business
in Paris
Dutch government Autumn of 2016
Minister of Economic
Affairs
Targets set for Climate and Desired result: a new 2015 Energy Report Policy agenda
renewable energy energy package climate treaty to enter setting out Dutch for
supply in 2020 for 2030 into force in 2020, energy strategy 2030-2050
and 2023 containing CO2 emission for 2030-2050
targets for 2050 and 2100
2016
Council for the Environment
and Infrastructure
‘Rich without CO2’
2015 Netherlands Environmental
Assessment Agency in con-
junction with Energy Research
Centre of the Netherlands
2014 ‘2015 national energy outlook’
At a national level, a number of research centres and advisory bodies have produced
relevant publications, including:
• Rijk zonder CO2 (‘Rich without CO2’), which is intended to pave the way for
parliamentary decision-making (Council for the Environment and Infrastructure,
2015);
• the Nationale Energieverkenning 2015 (‘2015 national energy outlook’) by the
Netherlands Environmental Assessment Agency in conjunction with the Energy
Research Centre of the Netherlands.
The Dutch government will be publishing the 2015 Energy Report at the end of
December, marking the start of a wide-ranging public debate on how to solve the
energy problem in both the medium term (i.e. 2030) and the long term (2050). The
government plans to translate the results of the lpublic debate into a policy agenda that
the Minister of Economic Affairs will be presenting in the autumn of 2016 (Ministry of
Economic Affairs, 2015b).
6
Our annual regularity audits 1.3 Scope and method
and the letters we publish
each year commenting on
Our observations are based on an analysis of our own publications on the subject of
the draft budgets.
energy. We have published a total of 12 reports on the subject since 2006 and have also
7 focused on energy policies in two series of annual publications6 (see Appendix I for a
Budget article 14 (‘An full list). For the purpose of this analysis, we sought to identify whether the reports
efficient and renewable
contained any recurrent findings, with the aim of outlining the strengths of the energy
energy supply’) of chapter
XIII (Ministry of Economic policy pursued by the Minister of Economic Affairs, as well as the opportunities for
Affairs) of the national improvement .
budget.
The audits selected for the purpose of this review encompass the full expanse of the
8
Figure 3 does not include budget article relating to energy policy,7 which means that they cover all three energy
the tax revenue forgone as a policy objectives, i.e. affordability, reliability and sustainability. The ‘greening’ of the
result of the tax relief country’s energy supply forms the main focus of this review, however. This is because
provided on electric cars
we selected our audit topics in accordance with the outcomes of a series of risk
and other forms of energy-
related tax expenditure (see analyses. Monetary value is another factor affecting the choice of topics. This is
section 1.1). because the vast majority (i.e. 91%) of budget spending on energy (under budget
article 14) during the period between 2006 and 2014 was on greening the energy
supply; see Figure 3.8
Figure 3 Cumulative expenditure on energy policy between 2006 and 2014, and our audit reports on each policy
objective
Number of audits
9 audits
Sustainable
2 audits 3 audits
dec
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€913 million €92 million
jan
Reliable Affordable
*€1,190 million of this was spent on Energy Investment Tax Credits Joris Fiselier Infographics
9 e n e r g y p o l i c y : t o wa r d s g r e a t e r c o h e r e n c e
Our analysis centres on the Ministry of Economic Affairs and the energy budget article.
This means that we take account of the climate policy pursued by the Minister of
Infrastructure and the Environment and the policy on the management of state
holdings pursued by the Minister of Finance only where this has a direct bearing on
the government’s energy policy. We are specifically interested in the policy on CO2
emissions, the tax relief paid on electric cars, and the policy on state shareholdings in
relation to Gasunie, Energiebeheer Nederland (EBN) and TenneT. The vast majority of
the revenue in the energy budget article in the Ministry of Economic Affairs’ budget
was in the form of natural gas revenues.9 In 2006-2014, natural gas revenues accounted
for 98% of the €98 billion aggregate energy revenue.
The national energy supply consists of a mix of energy carriers and applications.
Petroleum, coal, gas and electricity are not the only energy carriers: heat is, too. For
the moment, relatively little use is made of the residual energy from manufacturing
plants, and the same applies to the construction of collective (sustainable) thermal
power networks.10 We did not perform any audits of thermal power during the period
between 2006 and 2015.
1.4 Format
Chapter 2 sets out our main general observations based on ten years of Court audits, as
well as our comments and recommendations for shaping, implementing and
monitoring the national energy policy. Chapter 3 contains the response of the Minister
of Economic Affairs to our report, and our own afterword.
9
Although we also published
a report in 2015 on the way
in which natural gas
revenues are spent, this
report was not included in
the terms of reference for
this study. The report
mainly concerned the use
made of the revenues and
the way in which this was
accounted for, and did not
address the production of
natural gas as part of
government policy on the
national energy supply.
10
Collective thermal power
met 2% of the aggregate
demand for heating from
households and firms in the
Netherlands in 2013
(Schoots & Hamming, 2015).
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Looking back at ten years of Dutch energy policy, it is clear that, while the policy itself
has remained broadly the same, different governments have chosen to emphasise
different aspects. A second conclusion is that, although the results in terms of
affordability and reliability are good to reasonably good, the government has not to
date proved able to meet the targets set for sustainability. Our audits show that that
has been due to a lack of coherence and a failure to prioritise between the three policy
goals, which are not always compatible with each other. A decision to focus on one of
them can result in less progress being made in relation to the other two. This may be
either an unintended consequence or a carefully considered choice. Obviously, it is up
to politicians to make this choice, but their reasons for doing so are not always
transparent. Transparency is needed, however, in order to ensure that both parliament
and the public at large are properly informed about the consequences of the
government’s choices in relation to energy policy.
There are also positives, though. Successive governments have learned from previous
problems in their quest to encourage the generation of renewable energy. Various
Dutch governments have also taken a proactive stance in the formulation of an EU
energy policy.
11
Figure 4 shows the milestones and key policy objectives in relation to each
Under EU rules on the single
market, electricity and gas government during the period under review.
transmission is kept
separate from the other
functions in the energy
supply chain, i.e.
production, supply and
trade.
11 e n e r g y p o l i c y : t o wa r d s g r e a t e r c o h e r e n c e
Government
Balkenende Rutte
2nd 3rd 4th 1st 2nd
30
30%
25
6
5
Target for annual
In 2008-2012 compared with 1990 No comparable national objective energy-saving
1.3 1.3 1.3 1.6 1.6 1.6
0
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
‘Clean and Efficient’ Programme: creating 2008 Climate Social and Economic
one of the most sustainable and efficient Agreement Council Energy Agreement
energy supplies in Europe in 2020
2005 Energy Report: 2008 Energy Report: 2011 Energy Report: 2015 Energy
guaranteeing security of energy supply in 2050 energy system to be more Report:
supply and addressing must be much cleaner sustainable, less dependent scheduled for
the world climate than today, just as on increasingly scarce publication in
problem reliable and also fossil fuels; maximise the December
affordable potential of the strong
Dutch energy industry
The policy objectives defined as ‘the affordability’ and ‘the reliability’ of the energy
supply have not been translated into specific, measurable indicators. This makes it
difficult to measure the results of policy. However, as will become clear from the
remainder of this section, the Dutch energy supply seems to be both reliable (in terms
of the security of supply) and reasonably affordable by comparison with other EU
member
12 algemene rekenkamer
states. Although a number of specific, measurable national and EU-wide targets have
been set for sustainability, it is clear that there is still a long way to go in this respect.
Reliability
The reliability of the energy supply consists of two elements: the security of energy
supply on the one hand and energy-source security on the other. As far as the security
12 of supply is concerned, the relevant figure for the electricity grid is 99.996%, which
The average annual duration
means that electricity is available for 99.996% of the time (Movares Nederland B.V.,
of electricity power outages
in the Netherlands is 20 2015). The Dutch score is high compared with the neighbouring countries.12 The
minutes. The only country Dutch also score well in terms of the security of the gas supply, although the average
to do better is Germany, duration of outages has risen in recent years, from 23 seconds in 2008 to three
which has a slightly better
minutes in 2014 (Movares Nederland B.V., 2015).
five-year average of 17
minutes. In countries such
as the UK and France, the Energy-source security hinges on the long-term availability of sources of energy
average annual duration of (Ministry of Economic Affairs, 2008). This depends, inter alia, on the size of global
power outages is over 70
energy reserves in relation to production capacity, consumption and geographical
minutes (Council of
European Energy distribution. Dutch governments have sought to guarantee energy-source security by
Regulation, 2014). maximising the distribution of energy sources over a range of energy carriers and
countries of origin. We have not audited the effectiveness of this policy.
13
The average Dutch
household comprises 2.2 Affordability
members. Its annual gas Energy is reasonably affordable in the Netherlands, as is borne out by a European
consumption is 1,600 m3 comparison of energy prices (including tax and duties). The average price of electricity
and its annual electricity
for industrial consumers is low - 26% less than the EU average in 2015. Dutch
consumption is 3,500 kWh.
households pay 6% less than the EU average. The price of gas paid by industrial
14 consumers in the Netherlands was in 2015 7% above the EU average. The price paid by
Writing in the 2015 National Dutch households, on the other hand, is relatively high: 15% higher than the EU
Energy Outlook, the Energy
average (Eurostat, 2015; own calculations).
Research Centre of the
Netherlands and the
Netherlands Environmental The ‘average Dutch household’13 will probably see a rise in the surcharge on its energy
Assessment Agency bill in the future (Netherlands Court of Audit, 2015e). For example, our audit of the
predicted that the
SDE+ scheme for encouraging renewable energy production showed that, if there was
renewable energy surcharge
no change in the policy as pursued in May 2014, the surcharge on the energy tariff
would rise to A 163 per
average household in 2020 would rapidly rise from €20 a year in 2015 to €123 a year in 2020.14 If an additional
including VAT (or A 135 grant was allocated, as we felt was needed in order to ensure that the SDE+ scheme
excluding VAT). The figures achieved the target set for 2020, this would have the effect of raising the surcharge on
in the 2015 National Energy the energy tariff to €229 a year (according to the calculations in our audit report). The
Outlook also assume that
Minister of Economic Affairs currently assumes that the surcharge will rise to €213 in
energy-saving by consumers
will produce a different 2020 in order to achieve the 14% target. The €16 difference with the figure of €229
annual pattern of electricity quoted above is due to the fact that our own calculations assumed that more contracts
and gas consumption. for offshore wind energy projects would be put out to tender and that this would be
done at an earlier stage.15
15
Both figures, i.e. A 229 and
Sustainability
A 213, are based on an
assumption that there will The current position is that three main sustainability objectives have been formulated
not be any change in the for energy:
average annual • generating more renewable energy;
consumption of gas (i.e.
• lowering CO2 emissions;
1,600 m3) and electricity
(3,500 kWh) per average • saving energy.
household of 2.2 persons.
13 e n e r g y p o l i c y : t o wa r d s g r e a t e r c o h e r e n c e
Figure 5 shows the target figures for each objective set by successive governments
(these are the grey and orange lines in the graphs), the actual outcomes and the
forecasts for the period up to the end of the year 2020.
20%
15
10
0
2004 2006 2008 2010 2012 2014 2016 2018 2020
30%
25
20
15
10
Annual energy-saving
2.5%
2.0
1.5
figures unknown
1.0
0.5
0.0
2004 2006 2008 2010 2012 2014 2016 2018 2020
The figures for energy-saving are based on the national target as measured by the Dutch Protocol for
Monitoring Energy-Saving (based on primary energy sources). Although the government has formulated
two further targets, these are not suited for comparison. See the glossary in Appendix 2.
14 algemene rekenkamer
Figure 5 makes clear that, in the case of at least two of the sustainability objectives, the
results achieved over a ten-year period have not measured up to the targets set by
successive governments. Of all the EU member states, the Netherlands is furthest from
achieving the national target for renewable energy (Netherlands Court of Audit,
2015e). The picture in relation to the two other objectives is rather more mixed, with
the results depending on the nature of the benchmark. The details in relation to each
objective are set out below:
• The Netherlands did not meet the interim target of renewable energy accounting
for 5% of the country’s energy supply in 2010.16 Although the bar for renewable
energy was gradually raised during the first few years (to 20% in 2020), it was later
moved back down again a number of times. The last adjustment was done in 2013
and set the target on 14%. A series of studies published during the past five years
have shown that government policy will probably not be sufficient to achieve the
(changing) target in 2020 (Daniels & Kruitwagen, 2010; Verdonk & Wetzels, 2012;
Hekkenberg & Verdonk, 2014; Schoots & Hammingh, 2015). Renewable energy
accounted for 5.6% of the aggregate supply of energy in 2014, and the share is
expected to rise to 11.9% by 2020.
• The Dutch Kyoto target for CO2 emissions was a reduction of 6% in 2008-2012
compared with the baseline year of 1990. The Netherlands met this target in 2012,
when it achieved a 6.4% reduction. This was most likely due in part to the decline
in economic activity in the preceding years (Netherlands Environmental
Assessment Agency, 2013). The percentage decrease in 2014 compared with 1990
was 15%. Recent calculations suggest that, if government policy continues
unchanged, the Netherlands will post a 19% decline in 2020 (Schoots &
16
This interim target was Hammingh, 2015). If this is indeed the case, it will mean that the Netherlands will
abandoned in 2007, when achieve the nationally binding target agreed with its partners in the EU.17
the government published • The annual figure for energy-saving has remained stuck at more or less the same
its ‘Clean and Efficient’
level. No outcome data has been published yet for 2011 and later years. According
policy agenda, which
switched the emphasis to a to recent estimates, the annual national energy-saving target set as part of the
10% target share of ‘Clean and Efficient’ programme should be achieved for the first time in 2020, as
renewable energy by 2020. will be the Dutch energy-saving target (set under the EU Energy Efficiency
Directive) of 31.5% for 2014-2020. The government will not meet the additional
17
This figure of 19% is lower targets for energy-saving set for 2020 under the Energy Agreement (Schoots &
than the 25% target for the Hammingh, 2015).18
reduction in emissions
compared with 1990 that
was imposed on the
2.3 Limited degree of coherence in energy policy
Netherlands by a court
ruling in June 2015, in the It is clear from the previous section that, while the results for reliability and
light of the globally affordability have been good to reasonably good, the government has not to date
accepted objective of
managed to achieve its sustainability aims. The audit reports we have published over
permitting no more than
two degrees of global the years have highlighted various factors that help to explain this.
warming and reducing The first problem is the absence of a coherent approach during the time when
carbon emissions government policy is planned and underpinned with arguments, and the chosen policy
accordingly.
is adopted. By the term ‘coherent strategy’ we mean an approach in which all the
18 various facets of the different policy aims are explicitly set against and compared with
See the glossary in each other. Apart from failing to undertake a comprehensive analysis of the three main
Appendix 2 for more details aims of energy policy, the government also failed to make any explicit comparative
on the energy-saving
assessment of secondary aims such as those relating to renewable energy sources and
targets.
reductions in CO2 emissions. This has had an impact on the effectiveness of
government policy. A substantial proportion of the policy tools used for greening
15 e n e r g y p o l i c y : t o wa r d s g r e a t e r c o h e r e n c e
energy policy have proved to be insufficiently efficient and/or effective. At the same
time, the government has clearly learned lessons from the experiences with renewable
energy grant schemes. Finally, the lack of a coherent strategy would also appear to
affect the quality of monitoring activities.
To use the words of the Minister of Economic Affairs in 2008, achieving all three policy
aims is a difficult plate-juggling act (Ministry of Economic Affairs, 2008). The
problem is that the three aims are not always compatible with each other. If the
government decides to go all-out on one of them, this may affect progress in one or
both of the others. However, synergies are equally possible. For example, increased
production of renewable energy may help to make the Netherlands less dependent on
imported fossil fuels. Transparency is a key element in all policy decisions: what costs
and benefits will accrue to which parties, and when?
The following three sections discuss our main findings in relation to policy planning,
implementation and monitoring. Each section concludes with a list of
recommendations for the Minister of Economic Affairs.
Another problem concerning the policy aim of sustainability is that there has not been
a clear prioritisation of the secondary aims for renewable energy and reductions in
CO2 emissions. In the current situation, these secondary aims are not always
complementary. Take the European emissions trading system. This has impaired the
effectiveness of national grants for sustainably generated electricity and electricity
conservation from the viewpoint of reducing CO2 emissions. For this reason, the
government needs to look at the energy problem from a broad perspective, decide how
the various policy aims and tools should interact with each other, and decide whether a
given energy policy tool should be allowed to restrict the effectiveness or efficiency of
another. In this way, the government can prevent a situation from arising in which
different policies prove to have been inconsistent with each other at the end of the day,
16 algemene rekenkamer
We also found that energy policy is not always underpinned by convincing arguments,
that proper cost-benefit analyses are not always performed and specific, measurable
interim targets are not always set. The absence of interim targets makes it hard to
judge whether the resources set aside for the policy tool in question will actually prove
adequate for achieving the relevant policy goal. As an example of the above, we have
reported for several years in a row that the Minister of Economic Affairs has failed to
make clear in his budgets how various forms of spending on energy policy will actually
help the government to achieve its target for the proportion of energy production
accounted for by sustainably generated energy in 2020. The annual reports published
by the Minister of Economic Affairs have also failed to dispel this confusion.
Our audits show that the affordability of the energy supply is in competition with the
aims of sustainability and reliability, that these conflicting interests have not been
subjected to a clear analysis, and that no clear assessment has been made of the
consequences of this analysis. The distribution of emission rights and the decision to
exempt large companies from the payment of energy tax are two concrete examples of
measures in which full account was taken of the impact on corporate competitiveness
(i.e. the affordability aspect) without any clear information being provided about the
sustainability and reliability aspects.
However, there are also good points to note in the policy planning process. We found,
for example, that successive governments have played an active role in European policy
planning. This is important given that Dutch national policy is firmly anchored in the
EU’s energy policy, which means that there must be policy coherence at a European
level, too. Thus, Dutch governments have sought to harmonise the policy on
renewable energy grants and to create a more level playing field for manufacturing
industry throughout Europe, i.e. the firms with which Dutch manufacturing
companies compete.
Suggestions for ways in which the Minister of Economic Affairs can improve the
coherence of policy planning, with a view to the future dialogue and policy agenda:
• Operationalise the policy aims of affordability and reliability by translating them into specific,
measurable indicators. Specific, measurable indicators have already been formulated for
sustainability as a policy aim.
• Make a transparent assessment of the primary and secondary policy aims that have been
operationalised. Before undertaking this assessment, we suggest making a systematic analysis of
the various trade-off mechanisms and synergies that are at play in this policy field.
• Set interim targets for the period up to 2050, specify the policy tools to be deployed and
estimate the amount of government expenditure that will be required in order to achieve these
targets.
• Clearly describe and communicate both the anticipated impact of the policy tools you decide to
use for all the policy aims, both primary and secondary, and the uncertainties surrounding these
choices.
• Continue to improve the coherence of EU policies.
17 e n e r g y p o l i c y : t o wa r d s g r e a t e r c o h e r e n c e
2.3.2 Policy on sustainability must be both efficient and effective; policy adjustments
are not made or take too long
The policy tools used for achieving the government’s sustainability policy aims (a
substantial number of which we have audited over the past few years) are not
sufficiently effective and efficient. In our opinion, these problems are caused by:
• a lack of coherence and motivation before the policy tools are adopted;
• the use of predominantly soft, i.e. non-compulsory, tools for energy-saving;
• a failure to adjust policies that do not produce the desired results.
A number of governments have continued to favour the use of ‘soft’ policy tools for
energy-saving. These have not proved sufficiently effective or efficient in practice,
however. The ‘benchmarking covenant for energy-intensive manufacturing industries’
is a good example of this: the commitments were gradually watered down in a series of
side letters issued after the covenant had been signed. The policy proved relatively
ineffective in the period between 1995 and 2008, particularly in relation to energy-
intensive manufacturing firms, which are responsible for 80% of energy consumption
by manufacturing industry.
Five of our audits have shown that critical warnings about failures to achieve targets
either did not result in the targets being adjusted or in the allocated budget being
raised, for example, or did not do so until a late stage. Successive Ministers of
Economic Affairs have insisted on abiding by favourable scenarios, even when policy
reviews and audit findings have painted a different picture.
Suggestions for ways in which the Minister of Economic Affairs can make policy
implementation both more effective and more efficient:
• Ensure that policy is properly reviewed and adjusted in good time where this is needed in
response to critical signals (whether one-off or recurrent) from monitoring and evaluation
exercises. This may mean lowering targets or raising budgets.
• Be aware of the need to create the right blend of incentives, conditions and more binding policy
tools as are required to be reasonably certain that targets will be met within the available time.
We recommend making greater use of harder, i.e. more binding, policy tools. This applies
particularly to the policy on energy-saving.
When the regulatory process became deadlocked, the Minister of Economic Affairs felt
compelled to intervene, but did so without explaining how he had assessed the various
interests involved. This has had a (potentially lasting) adverse effect both on the
system of tariff regulation and on the tariffs paid by consumers.
As network management is closely bound up with other aspects of energy policy,
decisions taken by the ACM as the external regulator often affect all three policy aims.
Should network operators be able to pass on to their customers the cost of investments
they need to make in order to step up the production of renewable energy? How much
pressure may be placed on affordability (in the shape of higher energy bills) in order to
safeguard investments in the reliability of the energy supply? Our own finding is that,
due to a combination of historical and legislative factors, the ACM’s supervisory role is
designed primarily with the affordability of the system in mind. Although the ACM
also monitors the reliability of the system, this form of supervision is not fully
comprehensive. We found that, in supervising investments by network operators, the
ACM takes a ‘high-trust’ approach, relying heavily on the plans and expertise of
industry players. Indeed, the Minister of Economic Affairs decided deliberately to
formulate ‘open standards’ for this form of supervision, and this has made the ACM’s
work more difficult.
As we explained in section 2.2, neither the ACM nor any other external regulator has
been made responsible for monitoring the implementation of sustainability policy. It
is the minister who bears prime responsibility for monitoring the progress made
towards the sustainability targets and for keeping check on policy coherence and the
prioritisation of the various policy aims. These are matters on which the minister
reports to parliament. We have noted on a number of occasions that the policy
information provided by the minister has its limitations and is in need of
improvement.
Suggestions for ways in which the Minister of Economic Affairs can safeguard
coherence in policy implementation and reporting:
• Ensure that the implementation of the various energy policies is coherent and also that
reporting on the achievement of policy aims and on their coherence is adequate. This will
enable the House of Representatives to discharge its responsibility for scrutinising the
government.
19 e n e r g y p o l i c y : t o wa r d s g r e a t e r c o h e r e n c e
The Minister of Economic Affairs stressed the importance of coherence between the
three aims of energy policy, i.e. reliability, affordability and sustainability. He said that,
during the process of preparing the Energy Agreement, he had tried to achieve this
coherence in partnership with all sorts of societal actors and that this coherence would
be one of the focal points of the forthcoming Energy Report and the subsequent
‘energy dialogue’.
While the minister was in broad agreement with the picture painted of the state of his
energy policy, he said that he was on course to meet the targets agreed with the
country’s EU partners for reductions in CO2 emissions and energy-saving. And,
thanks to the measures he had recently announced, he said that the target for
renewable energy in 2020 was also achievable. He welcomed the priority we gave in
our report to sustainability, seeing it as an expression of support for the government’s
aim of achieving international agreement on a fully renewable energy system in 2050.
The minister said that our report did not take sufficient account of the European
context in which energy policy was formulated. He cited as an example the interaction
between the subsidisation of renewable electricity and the CO2 emissions trading
system. Although he acknowledged the existence of this interlinkage, he said that he
was currently bound by the separate targets set for CO2 emissions, renewable energy
and energy-saving. Despite being the results of EU-wide agreements, these targets
were not sufficiently consistent with each other.
Finally, the minister said that our report did not do full justice to the actual situation
with regard to energy policy. Although we had looked at the findings of ten years of
energy-related audits, he felt that we had not taken sufficient account of the measures
taken by successive governments in response to the conclusions and recommendations
set out in our reports. He referred by way of example to the adjustments made to the
policy on energy-saving and to the supervision of the network operators’ investments.
These were both examples of action taken in response to Court audits.
The main aim of our report is to make recommendations for future policy. These are
based on a review of a series of past audits in which we have sought to identify both
strengths and opportunities for improvement. The government, parliament and other
stakeholders can use the findings of this study for the purpose of the forthcoming
public dialogue on the future of the energy supply. In our opinion, the key finding is
that there is room for improvement in the coherence of energy policy, in terms of both
planning and implementation.
20 algemene rekenkamer
The minister pointed out that many of the suggestions made in our previous audit
reports had now been put into practice. Although this is strictly accurate, our review of
recent developments shows that the broad thrust of our findings still remains relevant
today. This applies for example to the choice of policy tools used for promoting
energy-saving. Although the wording of the relevant covenants has now been
tightened up, the Minister of Economic Affairs recently wrote in a letter to the House
of Representatives that ‘due to the financial constraints on private-sector firms, certain
measures have not been put in place that could in fact be adopted at a relatively low
social cost’.
The minister referred to the EU context framing much of the Dutch national energy
policy. It is true that he is bound by this context – and by its shortcomings. At the same
time, this need not prevent the government from taking additional measures, where
appropriate in conjunction with other countries.
The Minister of Economic Affairs stressed the importance of energy policy coherence,
which he said would be one of the focal points of the forthcoming Energy Report and
the subsequent ‘energy dialogue’. Our own report should help the minister in making
the necessary judgements, setting priorities and making clear choices. In doing so, we
believe that he should give a clear account for the way in which these choices affect the
reliability and affordability, as well as the sustainability, of the energy supply, both now
and in the future.
21 e n e r g y p o l i c y : t o wa r d s g r e a t e r c o h e r e n c e
4 Policy planning
We found scope for improving not just the way in which decisions on energy policy are
planned, but also the arguments underpinning them, and the way in which such
decisions are taken. The ultimate aim is to come as close as possible to achieving the
targets for the medium and long term. We found a lack of policy coherence, as a result
of which the various policies are not as effective and/or efficient in practice as they
could be. In many cases, for example, no explicit assessment is made either of the
various policy aims or of the secondary aims pertaining to each primary aim, even
though there is a clear need for this. Similarly, the way in which certain policies are
enforced in practice is at times inconsistent with other aspects of energy policy. No
clear information is given about the reasons for choosing a particular course of action.
This choice is a political decision and must be transparent if both parliament and the
general public are to be properly informed about the effects of such choices on the
country’s energy policy.
The three policy aims are not always complementary and indeed are sometimes even
incompatible with each other. For example, investments made in improving the
sustainability of the energy supply may have the effect of lessening its affordability and
reliability. This is because investing in sustainability costs money and the higher peaks
and deeper troughs associated with wind and solar energy detract from the reliability
of the electricity grid.
Due to the scale and complexity of the energy problem, governments have decided to
divide Dutch energy policy into smaller fragments and set targets for separate policy
aims (or, pursuing the fragmentation even further, for each secondary policy aim).
There is no reason why this should be a problem as long as the individual pieces of the
jigsaw puzzle interlock to form a clear, single picture.
Sustainable Sustainable
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For this to succeed, the government has to explain in advance the broad thrust of its
thinking on the energy problem, describe how the primary and secondary policy aims
interact with each other and state whether the use of a given policy tool may have an
adverse impact on the efficiency or effectiveness of other tools. By acting in this way,
the government can prevent a situation from arising in which different policies prove
22 algemene rekenkamer
inconsistent or even incompatible with each other in practice, without this being the
result of a conscious decision.
Our reports suggest that the issue of policy coherence is precisely the area in which
there is scope for improvement. Four of our audits concluded explicitly that policy
geared towards one of the policy aims had an unexpectedly adverse impact on the other
policy aims or on one of the secondary aims of the policy on sustainability.
For example, we found in 2007 that the scheme for encouraging the production of
sustainably generated electricity (known as the MEP Scheme) focused solely on the
target for sustainably generated electricity, without paying any attention to its
coherence with other policy aims such as a low-carbon energy supply and the quality of
the environment. Similarly, an analysis of the entire production chain found that
certain types of biomass (such as palm oil) actually produced more CO2 emissions
than fossil fuels. Again, encouraging the co-firing of biomass was found to cause new
sustainability problems, such as the deforestation of tropical rain forests, the
displacement of food crops and the deterioration of the air quality in the vicinity of
biomass power stations (Netherlands Court of Audit, 2007b). In the same year, and
again in 2011 and 2015, we also found that, viewed from the perspective of the target
for reducing CO2 emissions, the adoption of the system of CO2 emissions trading had
weakened the effectiveness of policy tools for promoting sustainably generated
electricity (see box).20
Example: counterproductive interaction between CO2 emissions trading and the policy
on electricity generated from renewable sources (Netherlands Court of Audit, 2007c;
2011 and 2015e)
Before the system of CO2 emissions trading was launched, the Netherlands already had a number
of policy tools for encouraging the production of sustainably generated electricity and for reducing
CO2 emissions. The Environmental Quality of Electricity Production (MEP) Scheme and the Energy
Investment Allowance are two examples. After the system of CO2 emissions trading was launched,
the cost-benefit ratio of all the other tools was found to have worsened, at least in terms of their
effect on CO2 emissions. It would have been better, before launching the new scheme, to have
examined the cost-benefit ratio of each individual policy tool in the new situation. This was not done.
Again in 2015, we found that the CO2 emissions trading scheme was far from ideal in the way it was
working, due to its interaction with EU member states’ policies for promoting electricity
conservation and the production of sustainably generated electricity. This works as follows. If one
company manages to reduce its CO2 emissions, for example, by using grants to produce a large
amount of sustainably generated electricity or to save electricity, other companies, both in the
Netherlands and elsewhere in the EU, now have an opportunity to emit larger quantities of CO2.
The problem is that the aggregate volume of emission rights in the market remains the same. The
‘waterbed effect’ means that there is no change on balance. The solution of this problem would
20
The policy tools for require extra measures such as buying surplus emission rights and taking them off the market.
promoting sustainably
generated electricity may
If a coherent approach had been taken to policy planning in the previous cases, this
well be effective when
viewed purely from the type of potential side-effect would probably have been identified beforehand. In our
perspective of the target for report entitled ‘Energy saving: ambitions and results’ on our audit of the reasons for
sustainably generated the disappointing results of energy-saving (see section 5.2), we explicitly urged the
energy, innovation or
government of the day to improve its policy coherence (Netherlands Court of Audit,
reducing energy
dependency on foreign 2011; see box).
suppliers.
23 e n e r g y p o l i c y : t o wa r d s g r e a t e r c o h e r e n c e
Due to the conflict between the energy-related and climate-related aims, the government should
specify for each policy tool which specific aim it was intended to achieve and what potential impact
it could have on other energy-related or climate-related aims. We also suggested that it would be
worth assessing the Dutch policies on energy and climate so as to identify any inconsistencies and
to adjust them if appropriate. The minister referred to the coalition agreement that formed the
basis for Prime Minister Rutte’s first government for information on the government’s energy
strategy. However, this document did not contain sufficient information on the interlinkages
between the various aspects of the government’s energy policy.
As a further point, we pointed out in our letters on the draft budgets in 2013, 2014 and
2015 that the minister did not explain how various items of energy policy expenditure
actually contributed to the attainment of the target for renewable energy consumption
(as a proportion of aggregate energy consumption) by the year 2020. This was despite
the minister’s undertaking to publish annual reports on the matter (Netherlands Court
of Audit, 2013; 2014b, 2015h). Similarly, for a number of years now, the draft budgets
have failed to include a road map showing how the target for 2020 is to be achieved.
This makes it difficult to assess if and how certain measures are helping the
government to achieve the target for 2020 and whether the resources earmarked for
this purpose are indeed sufficient. This, in turn, makes it difficult to report on whether
or not progress has been made (Netherlands Court of Audit, 2015h).
The examples given in section 4.1 of the lack of policy coherence also show that a lack
of thorough preparation often adversely affects the way in which policies are planned
and adopted. This poses a risk of policy aims not being complementary with each
other and policy therefore not being efficient.
The three aims of energy policy are potentially inconsistent with each other. Our audits
have regularly shown that, when this happens, it is not clear how the various interests
were assessed and what the results of this assessment were. For example, governments
clearly take account of affordability for both industrial energy consumers and the
energy industry itself (and hence for all energy consumers) without making clear how
this affects the other policy aims.
Sustainable
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Reliable Afforrdab
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Affordable
The situation in 2013 was
that energy-intensive
manufacturing firms in the
Netherlands were liable to
1.52% tax on the aggregate
price of electricity. The
neighbouring countries Large industrial consumers
taxed their bulk consumers
There are a large number of international companies in the Netherlands, which also
at reasonably similar rates.
The comparative tax rate accommodates an energy-intensive manufacturing sector. In order for these firms to
was 3.4% in Germany, 3.2% remain internationally competitive, they must have access to affordable energy, which
in Belgium and 1.7% in is therefore a vital aspect of their cost price.21 We found that, when developing their
France. The UK tax rate for
energy policies, Dutch governments therefore take account of the economic interests
bulk consumers was much
higher, viz. 17.1% (PWC, of Dutch business and seek to protect the affordability of the energy supply (and hence
2014). the competitiveness of Dutch business). This is illustrated by the following example.
25 e n e r g y p o l i c y : t o wa r d s g r e a t e r c o h e r e n c e
In the two cases described above, the effects on other policy aims (such as slower
progress in reaching the sustainability targets) had not been made clear. Any lack of
clarity about the effects of the thinking behind government decisions creates
opportunities for surreptitiously giving priority to certain interests over others.
The minister is the person who bears prime responsibility for weighing up all the
various interests involved and deciding on their order of precedence. However, his or
her decision needs to be transparent if both parliament and the general public are to be
properly informed about the consequences of decisions affecting the government’s
energy policy. As we shall see in chapter 6, transparency in decisions to prioritise
certain policy aims over others also helps regulators to discharge their own
responsibilities.
A coherent energy policy is not simply a matter of national interest. Given that Dutch
energy policy is firmly rooted in EU energy policy and in the legislation on the single
market, the policies pursued by the EU as a whole also need to be coherent. The EU’s
energy policy sets high, but realistic, standards for all member states to meet. As the
EU harmonises its energy policy, so it creates a more level playing field for Dutch
businesses to compete on the European market. Moreover, it is more efficient to
regulate the reliability of the energy supply at a European level instead of having a
situation in which all the member states form their own petroleum and/or natural gas
reserves or create their own backup systems for power outages.
We have noted in a number of our audit reports that governments are aware of the
European context and take a proactive stance in the policy-making process in Brussels,
so as to ensure that EU policy converges as closely as possible with Dutch national
interests. For example, the government has done its best to ensure that the regulations
on CO2 emissions trading are adjusted (Netherlands Court of Audit, 2009b).23
Similarly, the auction system used for distributing grants for the generation of
renewable energy under the current SDE+ scheme for encouraging renewable energy
production is in line with the trend that the EU wishes to follow. The European
Commission has now decided that all member states should adopt similar mechanism
for promoting the production of renewable energy in 2017 (Netherlands Court of
Audit, 2015e).
It remains essential for the government to contribute to the debate on energy policy,
whether within the EU or in bilateral or multilateral negotiations, in order to preserve
or improve policy coherence at all of these levels. For example, the counterproductive
interaction between CO2 emissions trading and the policy to encourage the generation
of electricity from renewable sources (see section 4.1) is partly the result of EU policy.
Transparency about the effects of decisions to prioritise certain primary or secondary
energy policy aims over others is also of vital importance at EU level and in
operationalising EU policy.
23
European talks are currently
ongoing on the review of
the CO2 emissions trading
system post-2020.
27 e n e r g y p o l i c y : t o wa r d s g r e a t e r c o h e r e n c e
At the same time, we have also seen a readiness to learn and to improve practices. For
example, the current SDE+ scheme for encouraging the cost-effective production of
renewable energy has been improved with the aid of lessons learned from experiences
with previous schemes.
This chapter is concerned with policy tools that have been employed to achieve the
three aims of the government’s sustainability policy. We have chosen to disregard the
measures taken to foster a reliable and affordable energy supply as their impact is
difficult to measure. For this reason, previous audit reports have not contained any
firm judgements on the policy aims of reliability and affordability.
A policy review of 2007-2012 commissioned by the Minister of Economic Affairs also
showed that the operational aims of affordability and reliability had generated the least
opinions on the efficiency of the tools in question (Ministry of Economic Affairs,
2014). This was because the majority of the policy tools did not result in spending
charged to the Economic Affairs budget. The auditors also claimed that it was not
possible to conclude, on the basis of ‘soft evidence’, whether other policy tools would
have cost less or produced fewer adverse side-effects.
This policy has proved fairly inefficient from the viewpoint of CO2 emissions.25 For
example, the cost (per reduced tonne of CO2) of the tax relief on energy-efficient cars
was relatively high, and no attempt was made to calculate the effect of alternative
means of encouraging sales of electric and semi-electric cars (Netherlands Court of
Audit, 2014a, 2015f; see box).
Example: Measures for encouraging sales of energy-efficient and electric cars were not
efficient (Netherlands Court of Audit, 2014a; 2015f)
Energy-efficient cars
The measures taken to step up the demand for energy-efficient cars and hence to reduce CO2
emissions were relatively expensive. The Ministry of Finance estimated the cost at A 1,000 per
reduced tonne of CO2. Moreover, the test results painted far too rosy a picture of the levels of CO2
emitted by new cars. In practice, emissions were actually up to 35% higher than those recorded in
the tests. This put the cost per reduced tonne of CO2 even higher than A 1,000.
Electric cars
After the interim target set for 2015 had already been easily achieved in 2014, the government’s
target of 200,000 sales of electric and semi-electric cars in 2020 looked to be realistic. However, a
study into sales of electric and semi-electric cars performed the following year found that the bulk
of the sales were accounted for by sales of plug-in hybrid vehicles on the corporate market. The
experience was that these cars were not charged as frequently and were more likely to run on fossil
fuel than had previously been assumed. This meant that the cost per reduced tonne of CO2 was
relatively high, i.e. around A 1,600.
In short, the government would probably have been able to achieve a bigger reduction in CO2
emissions by spending the money in a different way. The cost of the Dutch policy was not justified
by its environmental benefits.
As we have seen in chapter 4, these problems could have been avoided if the policy had
been planned in a more coherent and carefully thought-out manner.
The Minister of Finance announced in his Motor Vehicles Memorandum in 2015 that
25 he would be tightening up the rules. As a result, hybrid vehicles no longer qualify for
In examining these forms of
tax relief.
‘green’ tax relief, our
assumption was that one of
the government’s aims in 5.2.2 ‘Soft’ measures for promoting energy-saving have not had much effect
granting this relief was to The second explanation for the lack of effectiveness and efficiency lies in the
reduce CO2 emissions.
government’s frequent use of ‘soft’ policy tools for promoting energy-saving. The term
Another possible reason for
pursuing this policy would ‘soft tools’ is used to refer to non-compulsory tools, tools that provided for all sorts of
have been to foster exemptions, and tools that were enforced only to a limited degree. Examples of such
innovation, i.e. to tools are:
experiment with the use of
• energy-saving covenants that did not contain any sanctions for companies failing
new technology in order to
be able to roll it out on a to comply with their terms;
larger scale and earn money • the Environmental Management Act, which was poorly operationalised and the
with it in the future. enforcement of which was not given priority (Netherlands Court of Audit, 2011).
However, even if we assume
The need for taking a less noncommittal approach, with more binding policy tools and
that the original scheme
was designed with this aim more powerful incentives for energy-saving (particularly in the built environment) had
in mind, it was still not already been identified at an earlier stage and was underlined by studies published in
efficient: both domestic 2013 (CE Delft & Institute for Environmental Studies, 2013) and more recently in the
sales and exports of energy-
autumn of 2015 (Council for the Environment and Infrastructure, 2015).
efficient cars continued to
rise after the scheme had
been scaled down.
29 e n e r g y p o l i c y : t o wa r d s g r e a t e r c o h e r e n c e
Example: Energy-saving policy tools are ‘soft’ and not sufficiently efficient or effective
(Netherlands Court of Audit, 2011)
Not only did government policies on energy-saving have little effect on manufacturing industry in
1995-2008, the balance between costs and benefits was skewed. Government policies resulted in
average energy savings of between 0.3% and 0.4% per annum in the manufacturing sector, as
compared with the national average of 1.4% per annum. There were a number of reasons why the
policies had such little effect:
• The use of less powerful policy instruments than an ex-ante evaluation had previously deemed
necessary in order to meet the energy-saving target.
• The tendency for agreements on energy-saving by energy-intensive firms to become less and
less binding. The process began with multiyear agreements and ended with a benchmarking
covenant the contents of which were then watered down in a series of side letters. Although a
number of multiyear agreements reached with small-scale energy consumers at the end of the
1990s did have an effect, this was achieved only at a high cost.
• Policy tools aimed at manufacturing firms were not aligned with their motives for investing in
energy-saving techniques. Moreover, the firms themselves failed to meet a key prerequisite:
access to data on their own energy consumption and on the opportunities available for saving
on this consumption.
• In practice, some of the savings achieved were undone by the adverse effects of trading in CO2
emission rights.
Apart from the fact that energy-saving measures were not effective, they were also
inefficient from a national perspective. As far as cost-effectiveness is concerned, it
makes more sense to distribute the energy tax more evenly over the various tax
brackets, instead of simply lowering tax rates for large-scale energy consumers. An
even distribution results in a lower level of costs across the board, given that all
consumers are induced to take the most effective form of action before firms adopt
more expensive measures (Netherlands Court of Audit, 2011). In practice, though,
other sectors already have an incentive to take relative expensive measures. It should
be stressed that a strong tax incentive will not have much effect if the government
sticks to its practice of exempting (in relation to electricity consumption) from the top
tax bracket bulk consumers who have signed up to the first multiyear agreements on
energy-saving, and subsequently to the benchmarking covenant (see section 1.1).
most optimistic scenarios, even where monitoring activities and audit findings have
painted a different picture.
In the case of the MEP (Environmental Quality of Electricity Production) scheme, for
example, a number of signs suggested that the scheme was not having as much effect
as the Minister of Economic Affairs himself had predicted it would (Netherlands Court
of Audit, 2007b). In the case of the trading system in CO2 emission rights, there was a
genuine risk at the launch of the system that the Netherlands would not meet its Kyoto
target. The conclusion we drew at the time was that there were shortcomings in both
the draft of additional policy measures announced by the government in its 2005
Climate Policy Review Memorandum and its letter on the ‘target values’ as they were
called (Netherlands Court of Audit, 2007c). It was already clear, even at the time when
the energy-saving policy was launched, that the government would need to make a
huge effort to meet the 2% national energy-saving target.26 The government
subsequently made use of fewer - and less effective - tools in the following years than it
had in fact previously judged would be needed in order to meet the energy-saving
target (Netherlands Court of Audit, 2011). The following example illustrates the
government’s optimism.
Example: Minister stands firm despite high risk of failure to meet policy target
(Netherlands Court of Audit, 2015e)
The Minister of Economic Affairs insisted on abiding by the target of producing 14% of the country’s
energy from renewable sources in 2020, despite the lack of evidence that the government would
indeed be able to meet this target. He said in October 2014 that he was still convinced that the
government was on course to achieve the target in 2020, despite the fact that, shortly after the
Energy Agreement was signed, both the Energy Research Centre of the Netherlands and the
Netherlands Environmental Assessment Agency had suggested that meeting the target for 2020
would be a tough call. About a year later, the 2014 National Energy Outlook included figures from
the same research agencies showing that the target would not be met.
Despite these warning signs, the Minister refused to budge from the same optimistic assessment
made by his predecessor in 2010. This was the year in which the Minister of Economic Affairs had
informed the European Commission, on the basis of the most optimistic scenarios published by
the two research agencies, that renewable energy would be likely to account for 14.5% of Dutch
energy production in 2020. This was the figure at the top of the bandwidth, whereas the figure at
the bottom was 12%. In response to our audit report on the SDE+ scheme for encouraging
renewable energy production, the Minister of Economic Affairs reaffirmed his belief that the
government was on course for meeting the 14% target in 2020.
The Minister did not change his policy as he retained confidence in the most optimistic scenarios.
On paper, the value of the grants that the Minister awarded each year to renewable energy
projects was enough to achieve the policy targets in 2020 and 2023. However, this was without
taking account of practical experience: in practice, many SDE+ projects failed to generate the
projected results or ran into delays. They also tended to generate less energy than they had been
expected to do on paper. Our audits showed that renewable energy projects performed (as part of
26
Or 1.6% per annum in PMEs the SDE and SDE+ schemes) in the period between 2008 and 2014 generated on average 26% less
(Protocol for Monitoring than the maximum possible amount, which was the figure on which the government was banking.
Energy-Saving). See
Appendix 2 for further
information.
31 e n e r g y p o l i c y : t o wa r d s g r e a t e r c o h e r e n c e
The recently published 2015 National Energy Outlook has once again made clear that
the government will not meet the 2020 target set for renewable energy production
(Schoots & Hammingh, 2015). This news has prompted the Minister of Economic
Affairs to alter his policy, and he has now allotted a substantially higher budget to the
SDE+ scheme as from 2016, to ensure that the 14% and 16% targets set for 2020 and
2023 respectively are indeed met (Ministry of Economic Affairs, 2015a). He has also
taken a number of other steps, the effects of which will not be obvious until a later
stage.
There is also good news to report about the efficiency of the government’s energy
policy. Although we have found on a number of occasions that ministers have a
tendency to retain faith in optimistic forecasts of the results of their sustainability
policies, we have also found that they have learned from past failures and have used
these lessons to improve their policies for the future. Our audits of grant schemes for
the generation of renewable energy show that the Minister of Economic Affairs now
takes a greater interest in financial management and the efficiency of the schemes.
This is illustrated by the following example.
Example: Minister takes more interest in financial management and efficiency of grants
awarded for renewable energy projects (Netherlands Court of Audit, 2007b; 2010 and
2015e)
The SDE+ grant scheme for encouraging the production of renewable energy (which has been in
operation since 2011) is well thought-out and shows that the government has learned lessons from
the efficiency problems experienced with previous schemes, i.e. the MEP (Environmental Quality
of Electricity Production) scheme, which ran from 2003 to 2006, and the SDE scheme, which ran
from 2008 to 2010.
The efficiency of the MEP scheme (2003-2006) was an aspect that had not previously received a
great deal of attention. The scheme was permanently open to new applications and its financial
management was not up to standard. This paved the way for financial losses. A key lesson learned
by the Minister of Economic Affairs is that many of the excess profits earned by beneficiaries could
have been avoided if the grants had been linked to actual electricity prices. This was something
that the Minister did do in relation to both the SDE scheme (2008-2010) and the SDE+ scheme (in
operation since 2011). The main restriction with the SDE scheme was that separate budgets were
set for individual energy production techniques, which meant that the scheme acted as an
incentive for both cheap and expensive technologies. When the SDE+ scheme was launched, the
government decided that there should be just one, all-embracing budget and a phased auction
system in which grant applicants were required to compete with each other for the available
grants. As a result, the scheme now encourages firms to generate renewable energy at the lowest
possible cost.
32 algemene rekenkamer
The lack of coherence and prioritisation among the three policy goals has not been
conducive to the effective supervision of the energy industry. Our audits have revealed
that the external regulator, the Netherlands Authority for Consumers & Markets
(ACM), is interested primarily in the aspects of affordability and reliability. However,
the ACM has had difficulty properly discharging its statutory responsibilities for
regulation and supervision. For example, the regulatory process twice became
deadlocked, compelling the Minister of Economic Affairs to intervene. The Minister
did so, however, without explaining the reasons for his decision. This may have had a
lasting adverse impact on market regulation and the tariffs paid by consumers. As
regards the supervision of investments by network operators, we found that the
external regulator took a high-trust approach, relying heavily on the plans formulated
by the operators themselves and the latters’ expertise.
There is scope for improvement in the supervision exercised by the government itself.
The ministries concerned do not take a particularly critical view of the investment
plans proposed by state-owned energy corporations, i.e. Gasunie and TenneT. No
external regulator has been made responsible for monitoring progress in relation to
the sustainability targets set out in section 2.2. It is the Minister of Economic Affairs
who bears prime responsibility both for monitoring the attainment of policy aims and
for ensuring policy coherence and prioritisation. The Minister provides parliament
with policy information on these aspects. We have identified certain shortcomings in
this information on a number of occasions. This makes it difficult for parliament to
exercise democratic control over the aims (in terms of sustainability and otherwise) of
the government’s energy policy. The policy information therefore needs to be
improved.
Minister of Economic Affairs is in turn responsible for formulating policy, laying down
the rules of the game, and assessing the need for major expansion investments.28
Our audits have revealed that the ACM, as the external regulator, finds it difficult to
discharge both its responsibilities. One of the contributing factors is the lack of coherence
and prioritisation (among the various policy aims) during the planning process.
Both of the above interventions were the result of ad-hoc decisions. Both cases
involved a one-off valuation of energy networks that was not based on objective
criteria, thus making it hard to know how the Minister of Economic Affairs had
assessed the disparate interests involved in the process. Both interventions resulted in
a situation that favoured the network operators. As a result, both interventions by the
Minister of Economic Affairs may well have had a lasting adverse impact on the
regulation of the energy market and on the tariffs paid by consumers. We were
interested in finding out whether, in the case of the 2008 intervention, energy
consumers had been afforded sufficient protection against the network operators’
status as monopolists and whether both the efficiency of the network and quality
standards had been safeguarded (Netherlands Court of Audit, 2009a).
The Minister of Economic Affairs takes the view that energy producers, energy
consumers and network operators should, where necessary, come up with their own
interpretations of the open standards, i.e. the definitions of terms such as ‘need’ and
‘reliable’. This is the basis on which the ACM assesses the investment plans. We found
in 2015 that, although the ACM assesses the efficiency of TenneT’s proposed
investments, it does not assess their need. As a result, there are no guarantees that the
proposed investments are actually needed or that the proposed investments are in the
public interest. Thus, there is no comprehensive form of supervision of TenneT’s
investment plans. There is no guarantee that the ACM has weighed up the interests of
the three policy aims. The Minister of Economic Affairs claims that his bill for a new
Electricity and Gas Act will solve this problem. In our opinion, however, the solution
to the problem lies in enforcing the already existing law rather than changing the law.
The Minister’s bill simply formalises the inadequate supervision that already exists in
practice. On 13 October 2015, the House of Representatives ratified the bill without
amending it on this point.
In summary, therefore, the ACM’s prime concern in both its regulatory and its
supervisory tasks is basically to safeguard the affordability of the energy supply.
Although the ACM also supervises the reliability of the energy supply in both the short
and the long term, it does not consistently discharge this responsibility in full, as we
have already seen in this section in relation to TenneT.29 Responsibility for supervising
the attainment of the sustainability targets lies with the government and parliament.
This is a point to which we shall be returning in the next section.
Transmission
Government Business
network of
Public interest sufficient quality Business interest
and capacity (continuity and profit)
Our audits suggest that the government is not sufficiently critical in its assessments of
the state-owned corporations’ plans for major foreign investments. This is illustrated
by the following example.
Example: Insufficiently critical assessment of Gasunie’s and TenneT’s plans for foreign
takeovers (Netherlands Court of Audit, 2012a; 2015a)
The Minister of Finance is the sole shareholder in both corporations. In assessing the business and
public interest of planned takeovers, he is entitled to seek the advice of the Minister of Economic
Affairs as the minister responsible for government policy in this field. Both corporations have made
foreign acquisitions in Germany in recent years. The question in both cases was whether the
government made a critical assessment of these investment plans. In the case of Gasunie’s
takeover of a German party, we were unable to establish whether and how the Minister of
Economic Affairs, as the minister responsible for government policy, assessed whether the
investment plans were in the public interest. In the case of TenneT’s takeover of a German high-
voltage network operator, we concluded that, although the Minister had supported the plans from
the outset, she had not sought to validate her standpoint by undertaking a study into whether the
acquisition was consistent with the government’s aims of securing a reliable, affordable and
renewable energy supply.
We concluded in more general terms earlier on this year that the decision-making
process in relation to these types of investment plans on the part of state-owned
corporations is not always transparent and carefully thought-out (Netherlands Court
of Audit, 2015d). The supervision of this process hardly ever includes any explicit
assessment of the various interests involved. Moreover, given the various
shortcomings in the information required to perform it, such an assessment is not
practically feasible. We found insufficient evidence as to whether investments are in
the public evidence, that the shareholder does not analyse the financial consequences
and risks, and that no systematic record is kept of information on the various stages of
the decision-making process.
This is also true of the above examples: there was a lack of careful planning in the
decision-making process and we found no logical connection between the
assessments and the arguments expressed when it was previously decided to retain the
two corporations in public ownership. In TenneT’s case, we questioned the
consistency of safeguarding the management of the national grid against business
risks by keeping it in public ownership while at the same time allowing TenneT to
undertake foreign activities, even though there were certain risks associated with such
activities and it was not clear whether they were in the Dutch public interest
(Netherlands Court of Audit, 2015a).
37 e n e r g y p o l i c y : t o wa r d s g r e a t e r c o h e r e n c e
6.2.2 Lack of good policy information makes it difficult for parliament to exercise
democratic control
As we have already seen in section 6.1, the ACM bears prime responsibility for
supervising progress towards the two energy policy aims of ‘affordable’ and ‘reliable’.
The Minister of Economic Affairs is responsible for achieving and monitoring the
sustainability aims and reports to parliament on the situation regarding this aspect, in
conjunction with the other energy policy aims. In order for parliament to perform its
scrutinising role, it needs to have access to good budgetary information and reports.
Appendix 1 Court
of Audit publications on the subject of energy
(2006-2015)
Below follows a list of the reports on which this report is based, together with a brief summary of their
contents. See http://www.courtofaudit.nl/english/Themes/Environment_agriculture_and_nature/
Climate_and_energy for more detailed information.
it was adopted in the same way by all EU member states. Against this background, they said that it
was justifiable for the Netherlands to take account of financial interests as any policy that tended to
‘hound businesses out of the country’ could weaken the Dutch economy and would not help resolve
the global clim
Appendix 2 Glossary
Energy The use of energy-bearing substances, i.e. products containing energy in the form of fuel, heat or
power and which act as sources of energy. Natural gas, petroleum, wind power and electricity are
all examples of energy.
Affordability The degree to which consumers are capable of paying for the cost of energy (consisting of the cost
of consumption plus fixed charges such as network charges and tax). There are two important
aspects here, i.e. purchasing power and competitiveness. The term ‘affordability’ may also be taken
as referring to economic efficiency, i.e. static efficiency (the lowest possible marginal cost of
energy) and dynamic efficiency (a permanently lower level of cost in the long term, to be attained
by making optimum use of the various sources of energy).
Reliability The degree to which consumers can be sure that the supply of energy will be large enough (in
terms of both output and infrastructure) in both the short and the long term to meet the demand,
and also that the energy in question can be supplied. In other words, reliability consists of two
aspects: the security of energy supply on the one hand and energy-source security on the other.
Sustainability A renewable energy supply is an energy supply of the highest possible environmental quality. A
renewable energy supply may not have any adverse impacts on current or future generations, the
planet or the economy. Secondary objectives have been formulated in relation to energy-saving,
reducing greenhouse gas emissions and increasing the proportion of energy produced from
renewable sources. Renewable energy sources are inexhaustible over a long period and can be
used without this having a major adverse impact on the environment. Examples of renewable
energy sources are solar radiation, wind power, heat derived from underground sources, river
currents, sea tides and so on.
Renewable energy For the sake of consistency and simplicity, the term ‘renewable energy’ is used in this report rather
/ sustainable than ‘clean energy’. We realise that they are not fully synonymous with each other. The term ‘clean
energy / clean energy’ is sometimes used by people claiming that there are ‘clean’ forms of fossil-based energy
energy and that nuclear power is a clean form of energy. The term ‘sustainable energy’ is consistently used
to refer to a wider concept than renewable energy alone. While a ‘renewable energy supply’
invariably comes from renewable sources, there are other demands it also has to meet. A
renewable energy supply may not have any adverse impacts on current or future generations, the
planet or the economy.
The ‘gross final consumption’ method is used to calculate the amount of energy generated from
renewable sources. This measures the proportion of final energy consumption that is derived from
renewable sources. The final consumption of energy is the energy that is supplied to end
consumers, i.e. manufacturing industry, the service sector, households, the transport sector and
agriculture.
Energy-saving Using less energy to perform the same activities or functions (Statistics Netherlands definition).
The Dutch government has set three energy-saving targets (see below).
44 algemene rekenkamer
Energy-saving The Clean and Efficient Programme launched in 2007 seeks to reduce primary energy consumption
target under the by an average of 2% per annum between 2011 and 2020, compared with the figure for 2009. If this
Clean and target is brought into line with the Dutch Protocol for Monitoring Energy-Saving, the converted
Efficient average rate of energy-saving is then 1.6% per annum. Although the government has not
Programme formulated any binding target since 2010, it has continued to pursue the same policy.
Energy-saving: Energy-saving as measured in accordance with the Dutch Protocol for Monitoring Energy-Saving
actual (PME) (PME). The PME expresses energy efficiency as an annual percentage of primary energy
consumption, and thus indicates the extent to which actual energy consumption is lagging behind
the benchmark rate of energy consumption, i.e. the amount of energy consumed without any
efficiency measures.
Energy-saving: the The Dutch energy-saving target was set in accordance with the definition in article 7 of the EU’s
Netherlands’ EU 2012 Energy Efficiency Directive. Under this Directive, member states are required to reduce their
target energy consumption by 1.5% per annum during the period from 2013 to 2020. The relevant figure
for the Netherlands, after the deduction of exemptions, is 31.5%. This is the figure measured in
accordance with the final consumption method (i.e. excluding production and supply). The only
other savings also included in this target are those based on national policies and not those
resulting from self-sustained developments or EU policy.
Energy-saving The parties to the Energy Agreement have pledged to save an extra 100 petajoules of energy in
target under the 2020 (based on the 1.5% per annum target for energy-saving). The idea is that this extra saving
2013 Energy should be generated by the measures set out in the Agreement. The term ‘extra’ refers to the
Agreement saving in final energy consumption that would have resulted if no Energy Agreement had been
signed. Only the measures set out in the Energy Agreement count towards the attainment of the
target. Consumption is measured with the aid of the final consumption method.
Final energy ‘Final’ means that only supplies of energy to end consumers such as households and manufacturing
consumption companies are counted.
Primary energy ‘Primary’ also includes the consumption of energy in the course of production and supply.
consumption
Reduction in CO2 The reduction in emissions of CO2 and other greenhouse gases throughout the mineral production
emissions chain up to the point of energy consumption, measured in CO2 equivalents.
Supervision Supervision means collecting information about whether a particular action or object complies
with the relevant requirements, forming an opinion on this and, where necessary, intervening as
a result.
Internal The supervision of the parties in the energy sector for which the ministries themselves are
supervision responsible. For the purpose of this report, this mainly involves the supervision of state-owned
corporations by the Ministry of Economic Affairs and the Ministry of Finance, where relevant.
External The supervision of the parties in the energy sector for which a non-ministerial regulator is
supervision responsible. In the case of energy policy, the main external regulator is the Netherlands Authority
for Consumers & Markets (ACM), which is required to supervise compliance with the Electricity
and Gas Act and was recently also made responsible for supervising compliance with the Heating
Supply Act.
45 e n e r g y p o l i c y : t o wa r d s g r e a t e r c o h e r e n c e
Public interest Where energy policy is concerned, the term ‘public interest’ refers to the general policy aim of
securing a sustainable, reliable and affordable energy supply.
Regulatory The aim of the ACM’s regulatory task is to improve the efficiency of network management and also
process to guarantee the reliability of the network. The ACM’s role as a regulator is to set the maximum
tariffs that the network operators are entitled to charge energy consumers. The ACM is also
required to assess the efficiency of the investments undertaken by the network operators.
46 algemene rekenkamer
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Energy policy: towards greater coherence
A review of 10 years of energy policy audits by
the Netherlands Court of Audit (2006-2015)
Audit team The Netherlands Court of Audit
Ms M.L. Streppel-Kroezen (Project Manager) Algemene Rekenkamer
Mr M.P.H.A. Creemers Lange Voorhout 8
Mr J. Doornbos MSc P.O. Box 20015
Ms J.M. ten Kate MSc 2500 EA The Hague
Mr M.A.T. van der Kraan phone +31 70 342 44 00
Mr N.G. van Malkenhorst www.courtofaudit.nl
Translation
Tony Parr
Cover
Design: Corps Ontwerpers, The Hague
Photo: Siebe Swart / Hollandse Hoogte