A sympathetic idea. But it will neither work nor help. This is how experts characterize the SP’s proposal to nationalize the Dutch energy sector. According to this party, now is the time to reverse the failed privatization of the Dutch energy sector and to nationalize energy companies.
SP leader Lilian Marijnissen called it immoral this week that the Netherlands is transferring 23.5 billion euros to ‘energy companies with large profits, without us getting any say in return as a society’. Are the market fundamentalists from the cabinet, as Marijnissen calls them, wrong? Would the Dutch energy supply be better off once it is back in government hands? What does it cost? And what does it yield?
‘We are not dealing here with the excesses of market forces, but with the excesses of scarcity. There is simply a worldwide shortage of gas’, says the Groningen professor of energy economics Machiel Mulder. “That won’t go away once these companies are nationalized.”
An understandable reflex, energy consultant and Middle East expert Cyril Widdershoven calls the idea. ‘But nationalization on the demand side does not affect the supply. In other words: the gas price simply remains high.’
Significant parts of the energy sector are still in government hands, says Mulder. Such as the network operators and Gasunie. Only the production is no longer, although that is not entirely correct either, because Vattenfall is a state-owned company, albeit Swedish. And because of the price ceiling, there is already partial nationalization, says the professor. Namely the risk. Due to the maximum prices, the government takes over part of the business risk, so that fewer energy companies go bankrupt, for example because customers can no longer pay.
The nineties
The question is whether a possible nationalization will lead to much improvement. In the 1990s, when the production companies were still state-owned, you heard many complaints about high energy prices, says Mulder. ‘The principle is also correct: if you allow market forces, you will work more efficiently and prices will fall.’ And large government agencies do not always function well. ‘Just look at the Tax and Customs Administration, a huge government organization where a lot goes wrong.’
Transferring an entire sector to one owner is dangerous anyway. ‘You run the risk of wrong decisions being made en masse,’ says the professor. Now there are several companies that make independent decisions based on their own analyses. Some of those decisions are wrong and a company can fail. This has happened to a limited extent in the Netherlands so far, only about 100 thousand customers have been affected. Liberalization is therefore also risk spreading.
Nationalization is expensive and will far exceed the 23 billion mark of the price ceiling, says Widdershoven. If the government pays the market price for those companies, then you have to start from the earnings per share times twelve to eighteen. ‘I can assure you that the amount is now a lot higher than what we sold the Provincial Limburg Electricity Company for at the time, so to speak.’
Under duress
You can also choose to do it ‘Saudi Arab way’ and just say: everything now belongs to the state, says Middle East specialist Widdershoven. ‘So under duress. Then lawyers count themselves rich. And Brussels, which is in favor of liberalization, will not allow it either. If the Netherlands takes such a radical step, I can assure you that all head offices of other foreign concerns will have left the Netherlands within a week.’
Nevertheless, it has recently happened in Europe: Germany nationalized gas giant Uniper and France takes control of EDF. But Uniper was about to fall over and had to be rescued and EDF also dangled above the abyss. In addition, the governments already had a strong finger in the pie.
Nationalization therefore does not seem a feasible idea for both practical and financial reasons. Also take a look at the Bergermeer gas storage, says Widdershoven. There has been talk of a possible nationalization for months, but it is not happening. The Russian gas supplier Gazprom and energy company Taqa from Abu Dhabi are still in it, even now that the Netherlands is filling the gas stock itself. The main reason is the legal consequences of incorporation.
The construction of strategic gas reserves could very well be done in government hands, says Martien Visser, lecturer in energy transition at Hanze University of Applied Sciences Groningen. Contrary to current gas storage facilities, strategic stocks are in principle only used in emergency situations, when shortages threaten. Just as is now happening with strategic oil stocks. The construction of strategic gas reserves is not commercially interesting, because they cost a lot of money and are hardly used, says Visser, who last year de Volkskrant already argued for construction, together with neighboring countries.
sun and wind
And in the future? Could all planned wind farms in the North Sea not come into the hands of the government? Widdershoven laughs at the other end of the line. ‘Companies that build wind farms are well-oiled machines when it comes to purchasing materials and technologies. They are already complaining that they are almost unable to get enough steel and labour.’ Think about what would happen if Dutch civil servants had to do this, says the analyst. ‘Suppose you make a kind of NAM for wind and solar. Then you get Groningen 2.0 at sea, including cost overruns and black holes into which money disappears.’
Jeroen de Haas, former CEO of Eneco, thinks it is a missed opportunity that there has not been more government involvement in offshore wind. “Perhaps a public company would have been more effective, but if you want to start it now, it will only lead to more delays.” He also calls the re-nationalization of existing energy companies too drastic, although he would have preferred that they had not all been sold by the government at the time.
Widdershoven thinks it’s best to sit still for a while. “Any change to the existing system now works in Putin’s favour.”
Scandinavia: the state is the owner
In the Scandinavian countries there is hardly any discussion about the nationalization of energy producers. An important reason is that the state has never left the sector. For example, energy giant Vattenfall, which has a market share of 50 percent, is wholly owned by the Swedish state. The government also owns network operator Svenska Kraftnät, which currently earns billions due to high demand in the densely populated south of the country. The network manager transports electricity from North to South.
In Norway, too, a large part of energy production has already been nationalized. The state wholly owns energy producer Statkraft and also owns three-quarters of the shares of oil and gas producer Equinor.
That doesn’t mean the market isn’t participating. Both Sweden and Norway are connected to the European energy market, which means that consumers in the south pay as much as in Germany. In Sweden, more than a hundred companies are active on the energy exchange. They buy from producers and sell to producers. The state also has a finger in the pie here, because Vattenfall itself also resells to consumers and has a large market share.
Further nationalization is only possible by disconnecting Sweden from the European market, but only the small left-wing parties are interested in that. However, there is a discussion about what to do with the large profits. The government has already instructed the network operator to compensate users in the south.
Jeroen Visser
Germany: no permanent nationalization
Germany is still completely in we want to buy thatmode. Although the motto in this crisis, and of the current Chancellor, is a chick English: you’ll never walk alone. Since Russia turned off the gas and energy prices soared, Berlin has pumped at least 40 billion euros of taxpayers’ money into the energy sector to keep it afloat, 29 billion of which in the nationalization of gas giant Uniper. Another 200 billion euros is available to keep consumer prices low. 95 billion euros went to other aid packages and many billions more are in the air.
In the short term, all those hundreds of billions mainly result in a comfortable feeling of security under the wings of the state. “We have the successful example in Germany of the rescue of Lufthansa during the corona crisis, where the state recently sold its interest again at a substantial profit. It can be the same with Uniper. But it could also be that the state has bought a bankruptcy. Soon other companies will also need rescue or nationalization, and then the debate about the future of the sector will start here too.’
Only Die Linke wants permanent nationalization. In particular, the liberal ruling party FDP and opposition leader CDU are already pushing for a rapid exit strategy for the state. In the longer term, Germany wants to return to the previous situation: separate network operators and energy suppliers, both predominantly private.
Remco Andersen
France: regulated tariffs
French consumers have been able to choose their own energy supplier since 2007, but the state still has influence on the market, mainly through regulated tariffs. These rates only apply to energy company EDF, but competitors generally adjust their variable rates accordingly.
Since last autumn, the government has been protecting French households against exploding energy prices with maximum tariffs on gas and electricity.
To strengthen control, the government decided to re-nationalize the former state-owned EDF. That started this month. EDF is one of the most important French energy producers, and it manages, among other things, the nuclear power stations. But the company is deeply in the red; it is estimated that debts could reach 65 billion euros by the end of this year.
The financial problems have been further exacerbated by the emergency measures taken by the French government. EDF had to supply more electricity to competing suppliers at low rates, while the company had to import energy itself at the high market price. In addition, a large part of the nuclear power plant park has come to a standstill due to maintenance and corrosion, with which EDF is estimated to lose 18 billion euros.
With the nationalization, the government wants to enable investment in ambitious long-term projects, such as the construction of six new nuclear power plants, and simplify new measures to curb prices.
Eline Huisman