Dutch Lawmakers Consider Debt Hike to Offset Energy Costs

The Dutch Parliament (2de Kamer) is proposing to increase state debt levels to counter energy bills of consumers and industry. A proposal by liberal-left wing party D’66 has received the support of a large majority in the Dutch parliament to assess the options of increasing overall national debt levels by transferring billions of Euros to state-owned company TenneT. The latter is presumably going to result in lower energy bills overall. A proposal has been voted in to assess these options, as TenneT is currently confronted with multibillion-dollar investment needs every year to expand and strengthen the national power grid.

The proposal, championed by D’66 politicians Ilana Rooderkerk and Hans Vijlbrief, is not just an investment, but a beacon of hope for future generations. They view the increase in the national debt as a minor issue, given its current relatively low level.
These moves came after it became clear that power grid investments are exploding. They are currently around EUR195-200 billion, but these figures will probably be much higher in the future, considering raw material costs, labor costs, and inflation. Present investments, which are fixed costs, are slated to increase consumers' energy bills by EUR600 per year.

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The rather remarkable feat of these developments is that the current proposal by D’66 to lower consumer and industry energy bills comes after the same party, a long-time partner in several coalition governments over the last years, has been pushing renewable energy, especially solar and offshore wind, based on the theory that ‘green electricity will be almost for free”. Until now, these facts have not been countered by anybody, as even the current parliament still wants to continue to invest in offshore wind while costs are spiraling. The connection of offshore wind to the onshore grid is already needed at EUR88 billion.

Costs and debt factors have been disregarded until now by the overwhelming majority in the Dutch parliament, even in the current right-wing government. It seems there is a significant blind spot in any of the current energy transition strategies in the Netherlands. While the Dutch-based industry is on life-support, more energy-intensive companies are leaving or putting their operations on ice; Dutch politicians still believe in the “energy-transition fallacy” of being energy-independent and receiving energy for free. This 'energy-transition fallacy' refers to the unrealistic belief that the transition to renewable energy will not come with significant costs and that the energy will be readily available and cheap.

In the last weeks, several major chemical companies, such as LyondellBasel, have stated that they will leave the Netherlands, actively ending their current high-profile operations. They all state that extremely high energy prices are currently the main factor in this decision. Energy prices are almost twice as high as in Germany or three times higher than in France. At the same time, it is incomprehensible that the Netherlands exports vast volumes of electricity to its neighbors at much lower prices than Dutch clients need to pay. The call for a much more level playing field is growing, as indicated by plans to have international clients (Germany, France, Belgium, UK) also pay for the grid expansion. A 'level playing field' in this context refers to a situation where all parties pay a fair and equal price for the energy they consume, regardless of their location or the source of the energy.

Statements made by Ilana Rooderkerk that an increased national debt is not going to be on the energy bills of customers are right, but the end result is still the same. Debt will need to be repaid so that taxes will be increased. This could potentially lead to a heavier tax burden on the citizens and businesses. At the same time, D’66 politicians are again putting their hopes on civil service reports about the effect of higher debts. Vijlbrief states that an investment of EU3 billion per year will decrease consumers' energy bills by EUR150 per year, while grid tariffs will decrease by 50%. The latter will lead to 15% lower energy bills for the industry. Looking at the last 15 years, in which the same party has been instrumental in pushing offshore wind and solar and paid for a long list of consultancy reports, the main conclusion should be that it will not happen. Until now, no assessment from the Dutch ministries or government-paid consultancies has been even close to reality.

As liberal party VVD member Silvio Erkens, now a member of the government, stated in the media, it is very interesting to see that the party that was pushing for increased energy bills in the former government to push industry to go green is now proposing the opposite.

By Cyril Widdershoven for Oilprice.com