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Netherlands SDE++ subsidy to be reduced with value of Guarantees of Origin

19/02/2020

On 17 February 2020, Eric Wiebes, Dutch Minister of Economic Affairs and Climate Policy, announced plans to determine the value of the guarantees of origin (GoOs) for solar PV and wind on a yearly basis and to reduce the Sustainable Energy Transition Incentive Scheme (SDE++) subsidy by taking the GoO value into account in determining the annual correction amount (i.e. the market price for solar PV or wind). 

Minister Wiebes made this announcement in a letter to the Dutch parliament on progress of the SDE++ subsidy scheme, which replaced the SDE+ subsidy scheme. In earlier correspondence, the Minister repeatedly indicated that this reduction, if implemented, would only apply to new projects that have not yet obtained subsidy award decisions. Minister Wiebes confirmed this in his recent letter, which stated that the subsidy reduction will not affect projects (including solar PV and wind) that already received a subsidy award decision prior to the SDE++ subsidy application round in autumn 2020.

The Minister indicated that during the subsidy term of the SDE++ award decisions that will be issued as a result of the 2020 autumn subsidy application round the correction for the GoO value will not exceed EUR 7 MWh, being the amount of the preliminary correction for 2020 as recommended by the Netherlands Environmental Assessment Agency (PBL). Depending on market circumstances, the correction may be lower than EUR 7 MWh in certain years. The correction will be restricted to GoOs for solar PV and wind. 

For other techniques, such as gas or biomass, the market is either not sufficiently liquid or the value of the GoOs is considered too low. For these techniques, the Minister stated he does not envisage a reduction in the SDE++ subsidy during the subsidy term of the SDE++ 2020 autumn round award decisions.

In 2015 the predecessor of the PBL, advised that there should only be a reduction of the subsidy with the value of GoOs if the value exceeds EUR 3 MWh and a transparent GoO index is available. The first condition has now been met. According to the PBL in 2018, the value of GoOs for Dutch wind and solar PV amounted to between EUR 6.50 MWh and EUR 7.50 MWh with solar PV GoOs being EUR 0.20 MWh cheaper overall. 

For 2019, no values have yet been published, but market parties expect prices at the top end of this range. However, since GoOs are for a large part traded in bilateral agreements, the GoO price is not transparent. The Minister therefore aims to explore the introduction of mandatory reporting obligations in the applicable GoO legislation in order to obtain information on the GoO price that can be used in future subsidy rounds (i.e. through disclosure of anonymised PPAs subject to NDAs).

The PBL acknowledges that the GoO price may be different when a solar PV or wind project starts its operation, as opposed to the GoO price at the time of the subsidy application (e.g. due to an increased volume of GoOs becoming available from new installed solar PV and wind capacity). 

In order for the preliminary and final correction amounts to reflect changes in the GoO price, the PBL in 2020 aims to develop a method for a yearly determination of the GoO value in a consistent manner, to be applied for the first time in autumn 2020 to determine the preliminary 2021 correction amounts.

Authors

Portrait of Cecilia Weijden
Cecilia van der Weijden
Partner
Amsterdam
Portrait of Maurits Rabbie
Maurits Rabbie
Advocaat
Amsterdam
Portrait of Marcellina Rietvelt
Marcellina Rietvelt
Advocaat
Amsterdam