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Wind energy scenarios up to 2020, Developments in the Netherlands in the frameworkof the SDE regulation

By Peter Hoving

Abstract

The European Union has set targets and obliged its member states to generate twenty percent of the energy consumption in 2020 by renewable energy resources. The contribution of the Netherlands is limited to a share of fourteen percent in 2020, but the Dutch government aims to achieve twenty percent despite of its share in the Union’s obligation. The Dutch government relies heavily on wind energy to reach the renewable energy target. Aim for the onshore installed capacity is 4,000 MW in 2020 and the offshore capacity target is 6,000 MW in 2020. In order to reach these targets, the so-called SDE subsidy mechanism exists. The regulation subsidises the financial gap of wind projects. It is unsure whether this SDE regulation, offers enough support to achieve the above targets. The main research question of this study was formulated as follows: Is it possible for the Dutch government to meet the 2020 targets for wind energy, as a part of the renewable energy targets, with the current SDE regulation or should the regulation be altered to create an improved contribution of wind energy? To answer this question, several sub questions were formulated concerning cost developments, capacity developments, and possible supporting subsidy strategies and the implementation of other policy measures. The research questions were answered with help of a specific spreadsheet model. Cost and capacity developments are the main elements of the model. Cost developments depend on learning effects, material costs and economic aspects. Long term expectations of these aspects are combined to sketch cost developments. Together with the electricity price (APX day-ahead base load index), the costs determine the financial gap of wind energy, that needs to be subsidised. A distinction is made between different capacity categories: new onshore wind turbines, new offshore wind farms and repowering. Repowering is defined as a combination of renewal projects for older onshore turbines which are renovated or replaced at the end of their economic lifetime. The capacity categories differ on the cost aspect and required subsidy payments, but also the capacity potential that can be achieved. The results show that in the most favourable scenario, the targets can be reached with an annual budget equal to that of the 2008 budget (€800 million). A scenario following a more realistic view on developments learns that the government should reserve €1.5 billion per year until 2020 in order to reach an installed capacity of 10,000 MW. The best way to limit expenditures is to invest in repowering, followed by investments in onshore projects and at last, building of offshore wind farms. The most important parameters are the investment costs and the electricity price. Higher investment costs cause an increase of the expected expenditures that is more than proportional. The electricity price directly influences the financial gap and thus the required subsidy payments. An increase of the electricity price (for instance due to sustainable developments) leads to a slightly more than proportional decrease of the required budget reservations, depending on the cost effectiveness of each capacity category. A recommendation is to start with investments when costs have become low. However, postponement of investment increases uncertainty and brings along the risk that the target capacity is not reached in time. It is recommended that the Dutch government should formulate its targets on the basis of produced electricity instead of installed capacity, especially since the European targets are also defined that way. Furthermore, the development of wind energy should not only depend on the subsidy mechanism and its functioning. The subsidy mechanism must be specific for each capacity category and barriers for each category must be taken away simultaneously. Municipalities have to improve the public acceptance, while the national government can contribute to wind energy development by the allocation of wind locations and the implementation of faster procedures for wind projects. Strategic grid development is an international point of interest to facilitate wind energy. Following these considerations, the choice for large clusters of wind farms seems to be a step forward, but anyway, the government must be willing to – and capable to – reserve a large amount of money.

Year: 2009
OAI identifier: oai:ub.rug.nl:dbi/4a895096b3901
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