Grant Scheme for the Environmental Quality of Electricity Production ('MEP grant')

• Inadequate management to encourage green electricity production
• Conclusions

Inadequate management to encourage green electricity production

Wind energy producers over-subsidised

At the request of the House of Representative, the Netherlands Court of Audit has audited the Grant Scheme for the Environmental Quality of Electricity Production. This scheme, also referred to as the 'MEP scheme', was designed to promote the generation of green electricity. It came into force in July 2003 and stopped accepting grant applications in August 2006. We were asked us to express an independent opinion on the MEP scheme's performance and results.

Conclusions

Through the provision of the MEP grants, the Minister of Economic Affairs focused solely on achieving the policy goal agreed with the European Union of generating 9% of the electricity consumed in the Netherlands each year from renewable sources, e.g. biomass, solar energy, wind energy and water power, by 2010. The Minister, however, failed to devote sufficient attention to ensuring that the goal was consistent with other aspects of sustainability policy, such as the goal that energy supply must be secure, clean and affordable. In practice, the MEP scheme was not always consistent with these other energy policy goals. Firstly, the structure of the scheme assumed that much of the green electricity generated would be produced from biomass. Whether, however, there will be sufficient sources of sustainable and affordable biomass in the coming years is uncertain. In this respect, it cannot automatically be assumed that this form of energy will help secure supply. Secondly, electricity generated primarily from biomass is not completely CO2-neutral or clean. In the cases of certain types of biomass - palm oil, for example - the CO2 emissions over the production chain as a whole are in fact as high as when fossil fuels are used. Thirdly, the way in which the MEP scheme operates in practice conflicts with the principle of affordability. We found that the grants awarded to energy producers were too high in certain cases. In other words, more was paid than the producers needed to offset their start-up investments.

The Minister also paid insufficient attention to the financial management of the MEP scheme. Spending on the scheme was inadequately monitored by the Ministry. This is particularly important because the MEP was an open-ended scheme: there was no budgetary ceiling and no limit to the number of businesses able to apply or the extent to which they could use the grant. Financial management of the scheme was therefore difficult. As a result, monitoring and supervision by the Ministry of Economic Affairs were particularly important.