From natural gas to sunlight

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Solar panels at sunset

On 20 September ABN AMRO’s Group Economics department published a report entitled Na aardgas komt zonneschijn: de uitdagende overgang naar een duurzame energievoorziening in Nederland (‘From natural gas to sunlight: the challenging transition to a sustainable supply of energy in the Netherlands’). The necessary energy transition – from fossil to renewable energy – will require changes in terms of supply, consumption and economic impact. At present, hard choices are being made in the Netherlands to satisfy the mandatory climate goals and become CO2-neutral by 2050. The report describes the opportunities and threats facing the country in this energy transition.

Hans van Cleef, Energy Market Economist at ABN AMRO and author of the report, answers four questions about the energy transition.

How does Group Economics at ABN AMRO view the energy transition?

Hans van Cleef: ‘The energy market is in motion all over the world. Part of the reason is the emergence of “new” forms of conventional energy, such as shale oil, shale gas and Liquefied Natural Gas. Another factor is the emergence of renewable energy such as wind and solar power. At the same time, other methods of generating energy are being abolished: coal and nuclear power, for instance. An example here in the Netherlands is the reduction of the gas output from the Groningen gas field to prevent the earthquakes there from worsening. The combination of these various developments is helping to scale back the dependence on fossil energy in favour of renewable energy.’

Is it possible to transition directly from fossil to renewable energy?

‘This is an easy one: no, that’s impossible. This change will require a transition in how people think, and perhaps more importantly how we consume energy.’

So how long will it take to switch to renewable energy?

‘No matter how much we’d like to do it quickly, the transition will take time before sufficient capacity is available for sustainable energy. Until then we’ll still need conventional fuels such as oil and gas. As I’ve already explained, this transition is about more than just switching from fossil fuels to renewable energy. The economy needs to change. Fossil fuels are very important to the Dutch economy. The proceeds from natural gas go directly to the Dutch treasury, and fossil fuels play a vital part in Dutch industry: the ports, aviation, heavy industry and households, for example. Since the energy transition will impact the Dutch government budget, it’s simply impossible to realise the change quickly. However, the share of renewable energy has grown in recent years, and this is set to accelerate during the years to come.’

What will the energy mix be during the transitional period?

‘The increasing share of renewable energy will take precedence in the energy mix. This means that despite the fact that renewable energy is still more expensive than conventional fuel the supply of electricity to meet the demand will initially be generated using renewable energy. The remaining energy requirement will then be supplied using conventional fuels. This will be given shape as follows: the Netherlands (and Europe) must endeavour to reduce the amount of coal used as quickly as possible. Coal is more harmful to the environment than gas. That’s why Group Economics believes that from 2030 forward only gas will be used for backup capacity. Gas may also serve to generate power for regions that cannot provide an affordable and reliable source of renewable energy. The preference is for green gas, if necessary Dutch gas might be used to supplement it.’

Click here to download the report Na aardgas komt zonneschijn: de uitdagende overgang naar een duurzame energievoorziening in Nederland.

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