Solar panels have become much cheaper and so the subsidy for solar power can be reduced. That was the intention of the previous cabinet, and the intention even ended up explicitly in the coalition agreement, exactly five years ago this month.
Nevertheless, the old familiar netting scheme is still proudly standing, while the initial plan was to cut back on the subsidy from 2020. But that was first 2022, then 2024 and now 2025. A financial windfall for the 1.5 million residents who now have solar panels on the roof.
The bill to reduce the subsidy was on the agenda of the House of Representatives this month, but it is now clear that the parliamentary debate will not be held until the end of this year at the earliest. The question is raised in the House of Representatives as to whether the scheme is in line with European rules.
Six questions about the difficulties surrounding the solar panel subsidy.
1 What does the netting arrangement entail again?
If you have solar panels on your roof, you can immediately run your dryer with the generated electricity. The power that is not used immediately goes to the power company. That solar power is then offset (netted) against the electricity consumed at another time. That could be a few hours later, when the sun has disappeared behind the horizon and the lights and television come on. No tax is paid on this ‘exchanged’ electricity and that is the subsidy from the government.
These are serious amounts. According to the Budget Memorandum, the 1.5 million owners of panels will pay the government 252 million euros less in energy tax this year.
The netting scheme has been in existence since 2004 and over time the costs of solar power have fallen sharply. If you now put ten panels on your roof, you will lose about 4,500 euros, according to the Milieu Centraal information agency. In a favorable location, the ten panels yield an average of 510 euros per year. In the first year that is even 770 euros. Previous research by PwC concluded that people are willing to invest in solar power if they can recoup the costs within nine years.
2 How does Minister Jetten intend to cut back on the scheme now?
In the current bill of Minister Jetten (Climate and Energy, D66) In 2024, all generated solar power can be canceled for the last time for the electricity that will be used later. In 2025, only 64 percent of the company’s own production may be netted. As a result, the tax benefit decreases. The energy company pays a fee for the remaining 36 percent of solar energy produced on the roof, which is determined by the energy minister at a later date.
The netting will also decrease in the following years: in 2028 only 46 percent may be netted and three years later there is no longer a tax advantage at all: a compensation is then paid for all solar power.
3 Why should the netting arrangement be more sober?
Due to the fall in the price of the panels, the investment in solar power sometimes pays for itself within six years, which Jetten’s predecessor, Eric Wiebes, called a form of ‘over-subsidisation’. And that is not only expensive for the government, but also does not lead to the best climate policy. The government thinks there will then be less money left for supporting other sustainable energy.
But that’s not the only argument. The success of the netting scheme also has losers. Those are the people who don’t have solar panels; in practice they contribute to the government subsidy through tax. People without solar panels are also partly charged with the extra costs that energy companies and network operators have to incur to absorb that solar power and return it later. It is not clear exactly how much money this concerns in total. The subsidies of the current 1.5 million households with solar panels are in any case partly provided by the 6.5 million households with bare roofs.
4 Why is the austerity taking so long?
The options for former minister Wiebes were limited because he was unable to come up with a new arrangement that would lead to a lot of extra work at the tax authorities. Subsequently, there were many dissenting voices in the energy sector, housing corporations and environmental organizations: should we abort a scheme that has been so successful? Are solar panels still attractive to tenants? And how often is there over-subsidisation?
These discussions also took place in the House of Representatives, of course. When the cabinet fell at the beginning of last year, the proposal disappeared from the political agenda and we had to wait for the new energy minister. This spring, Jetten announced that the phasing out of the netting scheme would start from 2025. Later than Wiebes had planned, but the austerity progresses much faster in the first years.
5 Has that solved all problems?
Discovered this summer Home Ownership Association that some energy companies have started netting per month and no longer per year. Because solar power reaches its peak in the summer months, monthly netting is much less attractive for consumers. Then his tax benefit decreases because he can net less electricity. The feed-in fee for the ‘too much’ produced electricity is in many cases not very attractive, although the rates at the various energy companies vary widely.
Jetten has now amended the bill in such a way that energy producers are obliged to make annual netting. That has always been the intention of the legislator, the minister wrote to the House of Representatives last month, although it was not explicitly stated in the law.
6 Can the more austere scheme be introduced now?
We will have to wait and see, because the House is questioning whether the new regulation is in line with European regulations. The reason is, among other things, an investigation by the law firm Allen & Overy on behalf of the energy companies. Conclusion: the regulation is “in conflict for several reasons” with the so-called Electricity Directive of the European Commission, which has been in effect for three years.
This directive encourages healthy market forces and aims to avoid energy poverty. The popularity of solar panels means that electricity can be very cheap at certain times of the day. This is the case, for example, in good weather at the weekend, when the demand for electricity is relatively low. Energy companies then receive a lot of solar power and have to give back ‘free’ power at a later time, which then has a higher price.
The ever-increasing costs of the energy system will then continue to partly end up with vulnerable households. Questions about this from Member of Parliament Henri Bontenbal (CDA) received last week an answer from Jetten. The minister states that the new regulation, which will actually limit netting, is in line with the Brussels directive. Also, emphasizes Jetten, the Council of State, which assessed the bill, did not notice anything about “a possible conflict … with the Brussels frameworks”.
A version of this article also appeared in the newspaper of October 29, 2022