In my first postI linked to a TEDx talk by an architect who showed a lot of innovative ideas to construct more sustainable buildings and cities. In this post I will focus on ways the construction industry is enabling him and his colleagues to actually build them. Reducing the energy use and increasing the energy generation capacity of buildings is a central theme, but the focus is shifting towards more integrated approaches. In this post I will focus on energy, because I think it still remains the question whether the Dutch regulatory framework is facilitating the transition towards energy neutral and energy producing buildings.
Increasing the energy generation capacity of buildings
It is becoming increasingly clear that solar power is reaching grid parity for consumers in The Nethterlands, according to some the price of solar power has fallen below grid parity for consumers already. The Dutch are becoming totally enthousiastic about collective purchasing of solar power. In 2009 Urgenda started the collective purchasing action called we want solare (Wij Willen Zon). Currently there are over 60 active collective purchasing actions in the Netherlands. Even now, more local community energy companies are starting everywhere in the Netherlands.
For those who won’t or can’t afford the upfront investment in solar panels a growing number of solar as a service companies are starting. Zonline, for example, offers consumers solar panels paid by a fixed price per kilowatt hour electricity produced. They’ve only just started, but looking at Dutch consumer prices for electricity (around 21 to 23 Eurocent per kilowatt hour, about 70% of which are taxes) and the growth rate of it’s US partner Sungevity it promises to be a booming business. Other companies, like Rooftop Energy are applying the same business model to the business market. Which is a bit more difficult as companies pay a lower rate for electricity. Still the first examples of local governments using solar lease to get solar on their rooftops are popping up. For business placing solar on your own rooftop can be part of their CSR strategy too.
Different forms of sustainable heating are catching up too. Sometimes (old fashioned ) based on using the waste heat of waste incinerators, but also based on heat pumps (air-to-air or air-to-water) or geo-thermal power.
Reducing energy use
Although solar energy is the sexiest kid on the block, it surely isn’t the only one.
Stimulated by the energy label for buildings and rising energy prices a growing number of companies are offering help to property owners to reduce their energy use in existing buildings. Most of them demand upfront investments by the property owner. A few are exploring new business models and let property owners repay their investment through a reduction in their energy bill. In the commercial property market (offices, swimming pools) energy service companies (ESCo’s) are emerging. ESCo’s are offering a way to reduce the energy use budget neutral or even with a direct reduction in costs for the property owner or tenant. The upfront investments are done by the ESCo. The reduction in energy use can be achieved by changes to the installations, but also by adjustments to the façade of the building.
Some companies are even exploring business models that combine ESCo’s with green lease agreements. Which is a logical combination, as even the most energy efficient building will use a lot of energy if the tenant doesn’t change it’s habits.
Examples for the residential market include WAIFER and Qurrent. WAIFER says it can renovate a home within weeks and is currently renovating around 2500 homes from housing corporations in the Rotterdam area. Qurrent advertises as a new kind of energy company: one that wants to sell as little energy as possible.
Dutch regulatory framework
The Dutch regulatory framework for the construction industry used to consists mainly on construction. As energy generation is increasing because of the rise in popularity of solar panels, amongst others, the regulatory framework for the energy industry is becoming increasingly pressing. Energy regulation is mainly focused on centralized energy production making little use of lessons learned in other environmental policy fields or in other countries. Despite the subsidy for sustainable energy and many policy changes The Netherlands are lacking behind in sustainable energy.
For example users of sustainable energy have to pay the same amount of energy tax as users of fossil energy. This means sustainable energy has to be subsidized to be able to compete with fossil energy at wholesale prices. For cars the Dutch government has chosen a different strategy making fuel efficient cars more attractive using tax incentives. Looking at the sales figures of hybrids like the Toyota Prius this has proven a very successful strategy.
The high energy tax on (sustainable) energy does make investments in energy efficiency and solar power more attractive, especially for consumers. This will put a growing pressure on the 2 billion Euro in energy taxes the Dutch government collects from users of residential buildings each year.
To make things worse for government budget some community owned energy companies have stopped paying energy taxes on energy used by their members/investors. They claim that there is no difference between people growing their own food and transporting it to their home via public infrastructure and producing your own energy and using public infrastructure to get the energy to your home. It is not yet known if judges will agree, but it does show that current legislation is hindering people who try to provide their own energy together with their neighbors. Pretty strange if you consider the fact that some Dutch politicians are complaining about the nimby-behaviour of Dutch citizens.
Changes for Dutch government
Things can be arranged differently as the Dutch government has a well established system of reaping the benefits of our natural gas supplies. Through EBN, a subsidiary of the Ministry of Economic Affairs, the Dutch government offers the possibility to provide up to 40% of the necessary capital for the exploration and production of natural gas and oil. Dutch government earned around 6 billion Euro from this investments in 2011 alone. So why not use the same model to finance sustainable energy now that it has become a profitable alternative?
This alternate business model, based on the exploration and exploitation of sustainable energy, would earn a growing income for the Dutch government as opposed to the decreasing income if more inhabitants will change to solar power as a primary source of energy. It can also decrease the funds and manpower necessary for subsidizing alternate sources of energy, thus reducing the costs of reaching the sustainable energy goals set by the Dutch government.
For solar power it can help in decreasing the costs and improving the efficiency of the installations. Take for example my own neighborhood. An average house can uphold about 6 till 9 solar panels, while larger installations are relatively cheaper to install. I would love to be able to combine my installation with the neighbors and exchange the energy generated. Current legislation makes that financially unattractive if not impossible, whereas there would be a valid business case for combining our solar energy systems under a different regulatory framework.
Similar cases are abundant all through the Netherlands, not only for rooftop solar PV installations, but also for the production of biogas or heat recovery from waste water treatment. Adjusting the regulatory framework would also open up opportunities for other technologies like using the heat generated by roads or datacenters to cool and warm our buildings.
Due to the current regulatory framework for energy those types of innovation need subsidy way to long and large scale application is pushed to the future setting Dutch companies on a disadvantage in the international market.
What can we learn from the above? I think the best lesson to be learned is that it’s time to shift pardigm. With sustainable energy becoming competitive with fossil energy (despite existing subsidies and tax breaks for fossil fuel) there are chances for both Dutch government, society and entrepreneurs if we can apply lessons learned from other policy fields to sustainable energy.
For example the government could increase the amount of sustainable energy produced by variating the amount of energy tax paid for sustainable energy and fossil energy. The downside of this policy is that part of the benefit will go to foreign producers of sustainable energy and not towards more sustainable energy production in The Netherlands.
Changing the energy tax system in such a way that no energy tax has to be paid on energy produced by your own solar panels, windturbine or part of the solar road, does have a lot of potential to increase sustainable energy production in The Netherlands. It will bring possibilities to rationalize the decision to invest for consumers. Combining solar installations with your neighbors, using noise barriers next to highways for large scale solar pv installations (like Solar Green Point is promoting) or using heat collected from highways to keep buildings warm in the winter and cool in the summer.
To speed up the development even further and to yield some of the financial benefits the government could use part of the profits from oil and gas production for co-investing in sustainable energy production. Like some local government are already doing.
This way the government gets more than a double dividend. The first benefit will be that the amount of necessary subsidies for sustainable energy can be reduced. The subsidy can be focused on innovative technologies, like tidal power or offshore wind. Dutch government will get a growing revenue base from investments in sustainable energy production to compensate for the expected downward trends in energy taxes. The governmentbudget can be safeguarded even more if existing tax breaks and subsidies for fossil fuels are removed or decreased, like Maria van der Hoeven executive director of the International Energy Agency calls upon.
For investors and entrepreneurs in sustainable energy the co-investment from the Dutch government acts as an assurance that Dutch policy won’t change overnight, just like the current investments by EBN in oil and gas do for fossil fuel companies.