When will we be completely switched over to green power in the Netherlands?

Current issues related to economy, (responsible) investment, pension and income: every week an APG expert gives a clear answer to the question of the week. This time: Martijn Olthof, investor with the ABP Netherlands Energy Transition Fund, on the question of when we will be completely switched over to green power in the Netherlands.

The Netherlands is stepping up its production of green power. Last year, almost half of the electricity in the Netherlands was generated from renewable energy sources. Solar and wind, among others, supplied 48 percent of total electricity production. Five years ago this was 16 percent, according to CBS figures reported by the Financieel Dagblad. The biggest growth is in solar energy. Over 400 percent more solar panels were installed in five years, generating almost 500 percent more energy by 2023.

In addition to sun and wind, which together already account for almost half of total electricity production, the Netherlands also generates electricity through biomass and hydropower. Previously, fossil fuels such as natural gas and coal were mainly used for this; since last year, these energy sources have been in the minority. The question is: how will this develop further? When will the Netherlands be completely switched over to green power?

Low-hanging fruit

“The first 50 percent is a lot easier than the last 50 percent,” Olthof tells us. He is referring to the low-hanging fruit that has largely been picked. “Take the production of green electricity through solar power. The installed capacity has expanded considerably in recent years. Based on installed capacity per inhabitant, the Netherlands was actually the world leader last year. But yes, of course, you are greening the easy hours and not the hard hours. At least, not yet. When there is no sun or not enough wind, you also have to generate green electricity, because the demand for electricity is still rising sharply.”

Olthof grabs the figures from Netbeheer Nederland. “The electricity demand is currently about 120 TWh. In the various scenarios of this association of all electricity and natural gas grid operators in the Netherlands, you can see what the demand could be in 2030, 2040 and 2050. In 2050, in all scenarios you are between 200 and 300 TWh per year, with the lowest scenarios being the least realistic in my view. In short, I think we’re more likely to go toward 300 TWh per year. That’s two and a half times the current supply. Or put another way; if we’ve greened 60TWh now, we’re at 20 percent of what is needed.”

Betting on multiple horses

Olthof is convinced that in order to meet the increasing demand, we will have to bet on multiple horses. “Grid capacity is under considerable pressure already. So that capacity has to be increased. However, due to the nitrogen requirements for construction, the expansion of the power grid is significantly delayed. We also need to look at other solutions, such as nuclear power and power storage.” Olthof sees nuclear energy primarily as a basic supply to meet the increasing demand for (green) power. “Solar and wind are good green energy sources, but they do not always provide what we need. Plus, it is difficult to store solar and wind energy in a cost-effective way. The reliability of supply is much greater at a nuclear power plant. The plant can produce energy continuously. Day and night, under all weather conditions. Moreover, nuclear energy is available whenever there is a need. Even if in the long run we manage to get the vast majority of our energy from wind and sun, nuclear power plants can be a solution for the last, relatively small part of the energy supply.”

Still, there are drawbacks to nuclear power. “If we decide to build a plant now, it will take at least ten years before it will be operational. So, the government’s short-term goals, such as reducing CO2 emissions by almost 50 percent before 2030, are useless.” Hydrogen as a short-term alternative then? Olthof doubts it. “Just look at mobility, which is being electrified en masse. Even though it was not long ago that we thought the hydrogen car would become a good competitor to the electric car. You also see the same development in freight traffic: budgets are largely going to electrification.” A similar trend can be seen in the heating and cooling of homes and utility buildings, says the APG investor. “Heating and cooling homes with hydrogen systems happens minimally; it is only being used for small projects so far. There, too, the electric heat pump wins out, alongside heat networks and the gas-fired boiler.”

The ultimate goal

That brings Olthof to the question of what we really want. “Is your ultimate goal to green the entire electricity sector as soon as possible? Or is your ultimate goal to also get the electricity mix in the sector as large as possible, because all kinds of other parts of the economy are also switching to electricity? I would say the latter, where we also have to keep looking very carefully at how we can better match supply and demand at different times. There are opportunities there. If companies with an industrial process can purchase power when the price is low, i.e., at the times when there is a lot of power available, and supply power back at the times when the price is very high and they don’t need it themselves, then they can make money with that. That’s a good incentive.”

Incidentally, in large tenders for wind farms, among other things, Olthof regularly sees questions about matching supply and demand come up. “If you supply power, who will get it? That has to be explained in detail. A good development.” However, such tenders are lengthy processes, Olthof acknowledges. “There is plenty of development, and of course, it is very good that the Netherlands has made electricity production substantially more sustainable in recent years. After all, we were lagging behind quite a bit in this regard. But going completely green? That will be a while yet. The focus must be on the right mix. The energy crisis will not be over until there are enough sustainable alternatives available, in the form of heat, green natural gas, electrification, etc. That transition will not be fully completed before 2040. For example, until 2040-2050, we will still need natural gas from wherever we can get it.”