Energy crisis shows: The Netherlands has been living above its means for too long

Monday was the day. Russia partly closed the gas tap to the Netherlands. The state-owned company Gazprom no longer supplies GasTerra, because this Dutch trading house refuses to pay in rubles.

This had been feared for months, but the cabinet immediately responded reassuringly. GasTerra was prepared, which is why the Russian decision “has no consequences for the physical supply of gas to Dutch households”, said Minister Rob Jetten (D66, Climate and Energy). And “expectedly” also not for the availability of gas for the business community.

The cabinet’s reassuring words were widely criticized, especially from the business community. Is the government aware that this is a real crisis? And: there may be enough gas now, but is that still the case in the winter? Also for companies? And what if neighboring Germany will also receive less gas from Russia?

Energy experts and representatives of companies that consume a lot of gas have accused the government of not preparing sufficiently to deepen the crisis. The cabinet must quickly set up a crisis organization, says employers’ organization VNO-NCW. There is also a plea to lift the restriction on coal-fired power stations, so that they produce more electricity and the gas that is saved can be stored. And, you hear, the cabinet may consider keeping the Groningen gas field open for longer.

Is the government really too lax? Many concerns focus on the gas supply. The gas storage facilities must be 80 percent full in order to be assured of enough gas next winter. Normally, gas suppliers fill it up on their own: they buy gas in the summer when it’s cheap, store it and sell it in the winter. But now that gas is already so expensive in the summer, companies are not interested in it.

‘Not a convincing strategy’

The cabinet is allocating billions of euros to encourage companies to fill all stock capacity in the Netherlands. The big question is whether this will work everywhere. Members of the House of Representatives of the coalition are also concerned about this. “I miss a convincing strategy,” CDA member Henri Bontenbal wrote on Twitter. “Unfortunately, I detect little urgency at the cabinet,” tweeted Silvio Erkens (VVD).

Jetten announced on Thursday to prepare for all scenarios for this winter† At his ministry, “different teams come together almost every day”.

The previous government is particularly to blame, says Frans Rooijers, director of the CE Delft research bureau. “Filling gas storage should have been mandatory for gas suppliers much earlier, just like in other countries. This was wrongly not considered when closing the Groningen gas field.” Now the government cannot suddenly impose that.

Rather compensate pump holders than car drivers

In recent decades, the government has given the gas market as much freedom as possible: this was also possible because the Netherlands had its own gas stock in reserve. Now the cabinet has to actively steer the market, which is new for the Ministry of Economic Affairs. Herman Vollebergh, professor of Economics and Environmental Policy in Tilburg: “That trend has started. Due to the energy transition, there is a broader feeling that the government should rule again.”

But finding a solution to this crisis is not easy. For the time being, the cabinet is reacting very ad hoc, says entrepreneur and researcher Jan Paul van Soest of organization De Gemeynt. “In The Hague, people are insufficiently aware that in a complex energy system everything is connected with everything. If you push one down – gas for example – something else – polluting coal or shale gas – goes back up.”

That is why the cabinet must be honest about the time that everything costs, says Van Soest. “It really takes years to get rid of dependence on, say, gloomy rulers in Russia and Saudi Arabia.”

Because more sustainable energy from sun and wind is not possible in the short term, two politically very sensitive measures are now on the table again: keeping ‘Groningen’ open longer and more coal power.

‘The Netherlands is too rich’

These measures can quickly provide relief and should therefore be seriously considered, says gas expert René Peters of TNO. “The Netherlands is actually too rich. We can afford to leave gas in the ground and buy very expensive other gas. The government is now paying 2 billion euros in compensation to the owners of four coal-fired power stations to operate them for the rest of the year. Naturally, turning on the coal-fired power plants increases CO2emissions, but it is a temporary crisis measure.”

According to Rooijers (CE Delft), the government is talking too calmly about the crisis. He believes that Jetten should take measures to reduce energy consumption. Like a car-free Sunday, the lights out in government buildings at night. “Visible measures that reinforce the feeling of crisis and that encourage people and companies to reduce their energy consumption.” That is good in this crisis and against climate change.

We leave our gas in the ground and buy very expensive other gas elsewhere

As far as saving energy is concerned, despite the high prices, there is still a lack of urgency in The Hague, says energy expert Kees van der Leun of Common Futures. His consultancy worked with the renewable energy industry association NVDE on a plan to save 5 billion cubic meters of gas in one year, almost the amount that came from Russia. “Climate policy is going in the right direction, but I miss the urgency in the short term. It is urgently needed to save gas and oil quickly, with hard targets from The Hague, and regular communication about progress.”

According to Rooijers, it is too simple to let all the coal-fired power stations run at full capacity again. “These high prices are the prices needed to become sustainable, to produce a CO2-free system. The government must therefore say: get used to it and act accordingly. Invest in sustainability. Now we just carry on as if nothing is wrong.”

Also read: Six questions about the gas shutdown by Gazprom

Excise duty on petrol

No one denies that there is a serious energy crisis. But many measures to alleviate it clash with that other crisis: global warming. That may be a reason for Jetten not to resort to alternatives such as coal-fired power stations now. Or to significantly lower excise duties on petrol, as Germany implemented this week. More expensive energy is more likely to lead to savings and to more investments in sustainability: from insulation at home to greening in industry.

Lowering the price of energy props up demand for it. That could fill Putin’s war chest again and make investing in savings and alternative energy sources less attractive. It is according to several economists better to keep the price high and to compensate people who get into trouble directly.

“If the government pushes the price now, it will go against the sustainability agenda,” says Rooijers. “Prefer to compensate gas station operators than car drivers.” Only then will the behavior change. “Such a high price is very annoying, but last week there was the longest traffic jam of the year on the Dutch roads.”

The thorny issue for the cabinet in the near future is: how far should government support go? Extra help for companies? Permanently low excise duty for the motorist? The Netherlands is an energy importer. The high prices make the country as a whole poorer. That bill can only be redistributed, not wiped out.

Poorest households

“The market trends are annoying,” says Professor Vollebergh, “but as far as climate is concerned, they are going in the right direction. That feeling may also play a role in The Hague. The only thing that is really worrisome is the problems of the low incomes. It is good that something is being done about it.” In March, the cabinet decided to give the very poorest households 800 euros extra compensation. But the group that gets into trouble is probably larger.

According to Peters (TNO), citizens and companies are already adapting their behavior due to the high prices. “But we also have to be realistic. If the price rises too fast, they cannot afford to make it more sustainable.” And with such price increases, according to Peters, the question is whether ‘you can still keep the economy alive’.

Vollebergh notes that this crisis shows that we use too much energy and too much CO .2 expel. “We live beyond our means. That was already clear in agriculture, in the food supply, and it is now also clear in the field of energy.”

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