The transition to a sustainable energy supply is one of the greatest challenges of our time. Governments worldwide are setting ambitious goals to combat climate change and realize a green future. In Europe and the Netherlands, concrete steps are being taken to make the energy sector more sustainable, reduce CO2 emissions, and promote renewable sources.
European targets for renewable energy in 2030
The European Union has formulated ambitious targets to accelerate the transition to clean energy. In 2021, the "Fit for 55" package was presented, which tightens the EU climate goals for 2030. An important part of this is the objective to increase the share of renewable energy to at least 32% of total energy consumption by 2030.
This means a significant increase compared to the current level. In 2020, the average share of renewable energy in the EU was 22%. To achieve the 32% target, the capacity of wind and solar energy will need to grow significantly in the coming years. The European Commission estimates that around €500 billion in investments in clean energy technologies will be needed annually.
In addition to the overarching EU target, member states have also received national targets. For the Netherlands, the target is 27% renewable energy by 2030. This is an ambitious goal, considering the Dutch share was only 14% in 2020. Therefore, significant efforts will be needed to achieve this target.
Dutch Climate Act and CO2 Reduction Targets
In the Netherlands, the Climate Act was adopted in 2019, which legally stipulates that greenhouse gas emissions must be reduced by 49% by 2030 compared to 1990 levels. For 2050, the goal is to reduce emissions by 95%. This act forms the framework for Dutch climate and energy policy.
To achieve the targets from the Climate Act, concrete measures are needed in all sectors of the economy. The cabinet has therefore established sectoral CO2 emission ceilings. These indicate for each sector the maximum CO2 emissions allowed by 2030.
Sectoral CO2 emission ceilings in the Netherlands
The sectoral CO2 emission ceilings are an important steering instrument in Dutch climate policy. They provide clarity to companies and organizations about the expected contribution to emission reduction. The main sectors for which ceilings have been established are:
- Electricity: maximum 12.4 Mt CO2 in 2030
- Industry: maximum 35.7 Mt CO2 in 2030
- Built environment: maximum 10 Mt CO2 in 2030
- Mobility: maximum 25 Mt CO2 in 2030
- Agriculture and land use: maximum 18.9 Mt CO2 in 2030
These ceilings are ambitious and require a significant effort from all parties involved. For the electricity sector, for example, it means an accelerated phasing out of coal-fired power plants and strong growth in renewable generation.
Role of the Climate Agreement in energy transition
The Climate Agreement, concluded in 2019, forms the concrete elaboration of the goals from the Climate Act. The agreement contains a coherent package of measures to reduce CO2 emissions. For the energy sector, several important agreements have been made:
- Closure of all coal-fired power plants by 2030 at the latest
- Scaling up offshore wind energy to 11.5 GW by 2030
- Stimulating solar energy on rooftops and in solar farms
- Development of a hydrogen economy
- Making the heat supply in the built environment more sustainable
The implementation of the Climate Agreement requires a joint effort from government, business, and civil society organizations. Progress is monitored annually and adjusted where necessary.
Monitoring and adjustment via Climate and Energy Outlook (KEV)
To monitor the progress of climate and energy policy, the Netherlands Environmental Assessment Agency (PBL) annually publishes the Climate and Energy Outlook (KEV). This outlook provides insight into the expected development of greenhouse gas emissions and energy consumption up to 2030. Based on the KEV, the cabinet can decide on additional measures if the targets do not seem within reach.
The most recent KEV from 2021 shows that there is still a major task ahead to achieve the 2030 targets. According to forecasts, current policy will achieve a CO2 reduction of 38-48% by 2030, while the target is 49%. Additional measures are therefore needed to achieve the target.
Incentive measures for sustainable energy production
To accelerate the growth of renewable energy, the Dutch government employs various incentive measures. These are aimed at both large-scale projects and small-scale generation by households and businesses.
SDE++ scheme for large-scale projects
The Sustainable Energy Production and Climate Transition Incentive Scheme (SDE++) is the main instrument for supporting large-scale sustainable energy projects. This subsidy scheme compensates for the difference between the cost price of sustainable energy and the market value of the energy supplied. In 2021, €5 billion was available for the SDE++.
The scheme is open to a wide range of technologies, including:
- Onshore and offshore wind energy
- Solar energy (large-scale projects)
- Biomass and biogas
- Geothermal energy
- CO2 capture and storage
The SDE++ has played an important role in the growth of renewable energy in the Netherlands. Thanks in part to this scheme, the installed capacity of offshore wind energy grew from 1 GW in 2015 to 2.5 GW in 2021.
Net metering scheme for solar panels in households
For small-scale solar energy systems in households and small businesses, the net metering scheme is in effect. This scheme makes it attractive to install solar panels by allowing surplus electricity to be fed back into the grid at the same price as the purchase price. The scheme has led to strong growth in the number of rooftop solar panels.
The government has decided to gradually phase out the net metering scheme starting in 2023. By 2031, the scheme will be completely abolished. This means that households will earn less from their solar panels in the future. However, it is expected that the declining costs of solar panels and battery systems will partly compensate for this effect.
Innovation subsidies for green hydrogen technology
Hydrogen is seen as an important energy carrier for the future, especially for sectors that are difficult to electrify. The Dutch government is stimulating the development of green hydrogen technology through various innovation subsidies. For example, in 2021, €70 million was made available for demonstration projects in the field of green hydrogen.
The ambition is to have an electrolysis capacity of 3-4 GW by 2030 for the production of green hydrogen. This requires a significant scaling up of current capacity and further cost reduction of electrolysis technology.
Grid congestion and infrastructure challenges
One of the biggest challenges in the energy transition is adapting the energy infrastructure to the growing demand for electricity and the increase in decentralized generation. The current electricity grid is in many places not designed for the rapid growth of solar and wind energy, leading to grid congestion.
TenneT's investments in the high-voltage network
Grid operator TenneT will invest billions in the expansion and reinforcement of the high-voltage network in the coming years. An investment plan of €13 billion has been announced for the period 2022-2031. Important projects include:
- Construction of new high-voltage connections for connecting offshore wind farms
- Reinforcement of existing connections to transport more power
- Construction of new transformer substations to relieve regional grids
Despite these investments, grid congestion will remain a challenge in the coming years. The lead time for new infrastructure projects is long, meaning grid capacity cannot always keep pace with the growth of sustainable generation.
Congestion management and flexibility markets
To make optimal use of existing grid capacity, efforts are focused on congestion management and the development of flexibility markets. In congestion management, producers and large consumers are financially compensated if they adjust their production or consumption to prevent grid overload.
Flexibility markets offer the possibility to better align local supply and demand of electricity. For example, battery systems or smart charging stations can be used to smooth out peaks in grid usage. The Energy Act, expected to come into force in 2023, should further facilitate the development of these markets.
Energy storage and battery systems for grid stability
Large-scale energy storage plays a crucial role in balancing the electricity grid and absorbing the variability of wind and solar energy. Various pilot projects with large-scale battery systems are underway, such as the 25 MW / 48 MWh battery system that TenneT commissioned in Lelystad in 2020.
Besides batteries, other forms of energy storage are also being considered, such as pumped hydro storage and underground hydrogen storage. These technologies can help to accommodate seasonal fluctuations in energy supply.
Regional Energy Strategies (RES) and local initiatives
The energy transition requires a joint approach from national and local governments, businesses, and citizens. In the Netherlands, 30 energy regions have been formed, each of which has drawn up a Regional Energy Strategy (RES). These strategies indicate how the regions intend to contribute to national climate goals.
The RESs contain concrete plans for:
- The generation of sustainable electricity (wind and solar)
- The heat transition in the built environment
- The required energy infrastructure
The development of the RESs has led to an intensive dialogue between governments, grid operators, businesses, and citizens about the spatial integration of sustainable energy projects. This process has contributed to greater support for the energy transition but has also exposed bottlenecks, such as limited grid capacity in some regions.
Energy saving and efficiency in the built environment
In addition to making energy production more sustainable, reducing energy consumption is an essential part of climate policy. There are significant opportunities for energy saving and efficiency improvement in the built environment.
Energy label C obligation for office buildings
From January 1, 2023, all office buildings in the Netherlands must have at least energy label C. This obligation is intended to lead to a significant improvement in energy efficiency in the commercial real estate sector. Offices that do not meet this requirement may, in principle, no longer be used as offices.
It is expected that this measure will lead to a wave of renovations and sustainability projects in the coming years.
Heat transition visions of municipalities
As part of the energy transition in the built environment, municipalities are obliged to draw up a heat transition vision by the end of 2021 at the latest. These visions indicate per neighborhood when and how the switch from natural gas to sustainable heat sources will take place. This is a crucial step in making the heat supply in the Netherlands more sustainable.
The heat transition visions include, among other things:
- A timeline for making neighborhoods natural gas-free
- An inventory of potential sustainable heat sources
- An analysis of the costs and benefits for residents
- A plan for resident participation and communication
Municipalities face the challenge of finding feasible and affordable solutions for the heat transition. In some neighborhoods, a heat network is an obvious choice, while in others, individual heat pumps or hybrid systems are more promising. The heat transition visions form the basis for concrete implementation plans at the neighborhood level.
Insulation programs and the ISDE subsidy
An essential step in making the built environment more sustainable is improving the insulation of homes and buildings. Good insulation not only reduces energy consumption but is also a prerequisite for the effective application of sustainable heating technologies such as heat pumps.
The government stimulates home insulation through various schemes, including the Investment Subsidy for Sustainable Energy and Energy Saving (ISDE). This subsidy is available to private homeowners and VvEs (Owners' Associations) investing in insulation measures such as:
- Cavity wall insulation
- Roof insulation
- Floor or ground insulation
- High-efficiency glass
The ISDE subsidy covers approximately 20% of the investment costs. In 2021, €124 million was available for insulation measures through this scheme. In addition to the ISDE, local subsidies and loans are also available, often offered by municipalities or provinces.
The National Insulation Program, announced in 2021, aims to insulate 2.5 million homes by 2030. This program focuses primarily on homes with poor energy labels (E, F, and G) and combines financial support with information and unburdening homeowners.