SDE+ subsidy for PV projects in the Netherlands soon no longer needed

UTRECHT – With costs of PV-installations going down steadily and oil dominated  electricity prices going up, solar power prices will beat those of coal or other power plants by 2021 in the Netherlands. SDE+ subsidies, which are too high, will be no longer needed. Though there are some concerns about extremely low margins in materials and operation & maintenance prices, which can lead to operational problems.

That’s what experts and keynote speakers at The Solar Future NL 2018 predict. The 10th annual edition of Solarplaza’s leading business and strategic conference for the Dutch solar energy market will be held in Utrecht on Thursday 17 May.

,,The first grid parity solar power plant in the Netherlands will be possible in 2021,” says Benedikt Ortmann PhD, managing director of BayWa r.e, one of the major solar supply companies in Europe who recently partnered up with Dutch market leader GroenLeven. BayWa r.e. recently opened such a plant, where generated solar energy is cheaper than power of traditional power plants, in Spain. At the moment the plant generates electricity at 2.6 cents per kWh. ,,No coal or nuclear power plant can beat that price,” Ortmann says.

In Germany - world leader in solar energy - the all-in tariff for solar power is 4,3 cents per kWh, including subsidies. ,,But the solar radiation in Germany is the same as in The Netherlands,” Ortmann says. ,,That’s why I foresee that we will have the same situation in both countries in a few years.”

Analysis company IHS Markit states that solar power doesn’t have to compete with other power plants in the next two years because of the SDE+ subsidy in The Netherlands. This offers highly attractive compensation and removes the need for it to compete.

In the SDE+ 2017 spring round, for projects to be installed through 2020, PV projects bid for 4.1 cents to 9.9 cents per kWh of subsidy on top of the electricity price. As SDE+ assumed an electricity price of 5.9 cent per kWh, this gives an effective price between 10 cents to 15.8 cents per kWh, IHS calculated.

,,In comparison, this places PV projects in the Netherlands quite above awarded tenders in France and Germany. The solar conditions in the Netherlands will keep PV generation costs quite above wholesale electricity prices for the foreseeable future,” says Sam Wilkinson, Research Manager for the Solar and Energy Storage Research group at IHS Market.

Ortmann agrees, but he thinks this will be possible after 2020. ,,This year or the next year solar in The Netherlands still needs subsidies. But the SDE+ subsidies have been too high. It was a good decision of the Dutch government to subsidise solar energy in order to build up a pipeline to reach its targets in CO2 reduction. It paved the way to grid parity. But now they are getting closer to the targets and I predict SDE+ will end at 2020. Also because electricity prices are tending to go up again, due to the oil prices going up.”

Increasing renewable power generation raises the probability of negative power prices.

During windy and sunny periods the increasing feeding of renewable energy to the grid, combined with low demand, can cause negative power prices on the wholesale market. In Germany this has occurred several times already.

In The Netherlands this hasn’t occurred yet. ,,But the minimum price in 2017 was lower than in 2016, which is a result of the growing amount of renewable generation,” says Wilkinson.

Ortmann isn’t afraid of negative power prices. ,,They shouldn’t upset us,” he says. ,,It means we have more electricity than demanded and that will open up incentives for battery storage. That is what we want. We want to have so much renewable energy that we can afford to invest in batteries in order to stabilise the grid and we can shut down coal and nuclear power plants for ever.”

Prices of solar panels and inverters have been decreasing over the last decades. Currently, PV projects in the Netherlands are being installed for around 80 eurocents per watt, IHS calculated. ,,We believe that this will stay rather stable over the next year. Solar costs have entered a more stable period, with strong growth in major global markets keeping demand in line with supply, and trade tariffs restricting price declines,” Wilkinson says.

More price declines however, can cause problems for the lifecycle of installations, says Peter Colpaert, founder of Belgium PV service company Entek. In the Netherlands Entek is helping property developer WDP to install and maintain 30 megawatt of PV installations on warehouses. ,,Prices have reached the bottom and installation and operation and maintenance contractors have to work with narrow margins which are too low,” he states. ,,The consequences are inferior materials and ill-considered choices. I predict some low bid tenders will get in trouble the next few years. I foresee skeletons falling out of the closets and hard lessons to be learned.”