Subsidising corporate profits derails decarbonisation in the Netherlands

The same logic has been applied to energy transition policies. Renewable energy investors are earning handsome profits from public subsidies and increasing energy prices, which have seriously delayed the energy transition. While solar and wind energy may be on the rise, the proportion of renewables in the energy mix is still far below the European average.3 Moreover, the Dutch government is planning to phase out subsidies for small-scale solar from 2025 onwards, which, as we will see, risks undoing the recent growth in decentralised renewable energy. Without public ownership and democratic control of the energy sector, it seems unlikely that the Netherlands will be able to decarbonise and deliver clean, affordable energy for all.

Until the end of the 1990s, energy was largely considered a public matter. The government was dominant in the electricity sector, with the national association of ‘Cooperating Electricity Producers’, consisting of four public power firms, Nuon, Delta, Essent and Eneco, largely responsible for the entire Dutch power system. These firms decided where and when power plants were built, which fuels were purchased and how power was transported over the high-voltage grid, which they also managed. This meant that the power price was determined jointly. Gas extraction, which has caused thousands of earthquakes in the Northern province of Groningen, has traditionally been outsourced to the two fossil energy giants Shell and ExxonMobil, together earning 64.7 billion euros in recent decades.4 However, energy transportation and supply were in the hands of government-owned GasUnie.

Then in 1998, the Dutch government decided to liberalise the gas and electricity sectors, opening them up to foreign companies. The sectors were privatised, with public companies sold off to private actors. Electricity production, transmission and supply were unbundled, with different actors charged with responsibility for each formally separated sector. While the management of gas and electricity infrastructure remained in public hands, production and supply of energy were privatised. Over the years, municipal and regional governments sold their shares in Nuon, Delta, Essent and Eneco to multinationals such as Vattenfall (Sweden), RWE (Germany) and Mitsubishi (Japan). As a result, public authorities lost the ability to own and govern energy generation. This is reflected today in their reluctance to own and operate renewable power plants.

By 2021, electricity generation had been concentrated in the hands of five big power producers: Vattenfall, Eneco, RWE, Uniper and Engie. Around 30 energy retail companies sell power to businesses and households; some of these are owned by the same five electricity companies. The Consumer and Market Authority (ACM) has been given the task of overseeing both sectors and ensuring that market policies are adhered to, even if this is at the expense of climate policy. For example, the ACM blocked the government’s decision to shut down five ageing coal-fired power plants, claiming the decision amounted to a 'cartel agreement' and violated the rules of a 'free energy market'.5 In response, the Dutch government bypassed this ruling by demanding 40 per cent efficiency from coal-fired power plants, which was practically unachievable.6 In 2017, the last coal-fired power plant was shut down.7 The conclusion: this kind of climate action has not happened because of energy liberalisation, but in spite of it.

The liberalisation and privatisation of the Dutch energy sector was encouraged by European Union policies, largely for the purpose of accommodating Dutch business interests. Powerful companies had long complained that they were losing out to German industry because of higher energy prices. It was argued that the Netherlands must remain competitive in the European and international market because market forces and competition between energy providers would ensure lower prices. It was also claimed that households would benefit from lower energy tariffs and the opportunity to choose between suppliers. Households were given this choice in 2004, although 95 per cent of consumers surveyed said they did not see any benefit in it.8

For many citizens, however, energy bills went up. Market policies have allowed energy companies to pass on the higher purchase price of gas to consumers more quickly, leaving consumers less protected from price fluctuations than those in neighbouring countries. Meanwhile, taxes make up almost a third of a household’s gas bill.9 In turn, households in the Netherlands pay more than twice as much for gas as the average EU household.10 When it comes to electricity, Dutch households pay on everage almost 30 per cent more than their European counterparts.11 In the early 1990s, electricity prices in the Netherlands were below the European average. Since the privatisation wave, the Netherlands has consistently been among the most expensive countries.12 As a result, around 2,000 households were cut off from gas and electricity in 2022.13

That said, the cost of producing power has gone down thanks to privatisation. In 2008, the Ministry of Economy concluded that electricity production had become cheaper. However, academic research on the effects of electricity privatisations across Europe shows that this so-called ‘efficiency gain’ is often the result of cost-saving measures.14 Consider, for example, the estimated 10,000 jobs in the power sector that were cut in the liberalisation years before 2005.15 Such cost savings did make power generation cheaper. However, the benefits ended up as profits in the pockets of shareholders, while households were saddled with ever-higher bills.16
Liberalisation advocates also promised to increase innovation and enhance service quality. Yet as the Dutch research firm CE Delft pointed out in 2003, market policies have increased spending on advertising and marketing and decreased spending on research and development, innovation and quality improvements. Other studies referred to by CE Delft also conclude that ‘large-scale market players are reluctant [to] take the lead in new energy technologies as the status quo has worked in their favour in the past.’17 This all begs the question of how, then, market actors are engaging with the energy transition.

57 per cent of the Dutch population now believe that energy supply should come into public hands.26 However, many energy ‘experts’ in the Netherlands are still convinced that the sector is better off privatised, arguing that system change towards a public system would be too lengthy a process. This view ignores the fact that the Netherlands lost precious transition years precisely because of market forces and privatisation. As the population is increasingly in favour of a clean and public energy model, labour and environmental justice organisations could build support for growing public capacity in the energy sector. As a first step, they could make the case for insourcing renewable energy production and supply, instead of outsourcing this. Insourcing would not only increase public control, it would also ensure that knowledge and infrastructure around the energy transition come under collective management.

Finally, the struggle for public energy should go hand in hand with demands on the government to defend and fulfil people’s right to energy via progressive tariffs that take people’s energy needs and ability to pay into account. Moving from regressive to progressive tariffs would make it possible to provide every resident with a tax-funded basic energy budget. It would also enable policy-makers to increase tariffs for non-essential consumption. In this way, the Netherlands could build a more energy-conscious culture, while at the same time forcing highly polluting companies to cut their emissions.