Innovation and institutional change: the transition to a sustainable ...

176 Chapter 6
After the opening of the Dutch retail market for green electricity in July
2001 the number of green electricity customers increased from about
250,000 to approximately 800,000 early 2002 and 1.4 million in January
2003. The sharp increase was caused by aggressive marketing campaigns for
green electricity customers, pricing strategies that even led to green
electricity offered below the price of conventional electricity (made possible
by the favourable fiscal measures for green electricity), and the focus on
green electricity as a tool for energy companies to attract new customers and
establish their retail brand in anticipation of full liberalisation of the
electricity market.
Support system dismantled due to opening up of green electricity market
Liberalisation of the market for green electricity also generated a not
intended side-effect. The attractive compensation for green electricity, which
consisted of restitution of the regulatory energy tax and a producer
compensation for renewable electricity, the strong rise in customer demand
for green electricity and the difficulty of initiating domestic renewable
electricity facilities led domestic producers to increasingly import renewable
electricity 23 . Also foreign energy providers started to offer green electricity
to Dutch customers as from 2002 on renewable electricity exported to the
Netherlands could qualify for the green certificate scheme and consequently
become eligible for exemption from the regulatory energy tax. The result
was that the growth in demand for green electricity after liberalisation was
mainly satisfied by green electricity of already existing installations for
renewable electricity generation, especially hydropower and biomass
facilities (Kroon, 2002: 26; Reijnders, 2002). Differences in support schemes
for renewable energy around Europe contributed to this, with only in the
Netherlands the support system was mainly based on fiscal measures,
whereas in most European countries the main schemes were supply oriented
feed-in tariffs or demand oriented quota obligation or renewable portfolio
standards (van Sambeek and van Thuijl, 2003). Although the threat of
companies exploiting the mismatch between different policy frameworks
was pointed out early (Boots et al., 2001), the strong rise in imports was not
anticipated by Dutch government. Public and political discussion regarding
the leakage of tax money through imported green electricity led to
abolishment of the demand-oriented fiscal scheme in 2003. The system was
replaced by subsidies for the electricity generated from facilities using
23 If specific contracts were made with foreign suppliers regarding renewable electricity, this
contracted electricity was also eligible for the exemption of the regulatory energy tax and
production subsidies could be received. Provisions in the Green Tax Act (WBM in Dutch)
prohibited making distinction between renewable production in and outside the
Netherlands (Kroon, 2002: 10).