Dutch Ignore Warnings, Impose ‘Super Profits’ Ceiling On Solar Power

India’s ‘windfall profits’ levy on oil refining firms has found an echo in Netherlands. Except that the Dutch have proposed a price ceiling on renewable energy producers to curb excess profits.

The government of the Netherlands announced a €130/MWh (US$136) profit ceiling for solar and wind generation as part of the EU’s established ‘intramarginal levy’ scheme to curb excessive energy profits. For solar energy generators, the ceiling will apply to projects with a  capacity of 1MW or more, corresponding to a PV plant with around 3,000 solar panels.

The continent has been racked by massive energy cost hikes, leading economies to inflation levels not seen in a generation, linked mostly to the Russian invasion of Ukraine and the EU measures to cut dependence on Russian gas.

The Dutch levy has gone beyond the €180/MWh limit proposed by the European Commission in September, scheduled from 1 December 2022 to 30 June 2023. The EU hopes that members can raise upto €117 billion annually from the cap that could be used to subsidise energy costs for their citizens. Netherlands has also announced they will do the same.

Starting the process in Netherlands will be an implementation law that will be presented to the Dutch House of Representatives in early  2023 with a provision for retrospective action from December 1.  That could possibly lead to all sorts of legal complications that the government is trying to manage by discussing with industry associations in advance.

Earlier, trade association Solar Power Europe had voiced concerns around planned caps, and pushed for  higher €180/MWh ceiling, closer to the €240 levels planned for biomass fired generation, for instance.   With solar having dropped in prices signficantly, in the oast three years when most capacities have also come up, industry insiders had also felt that it was an unfair way to prevent the sector still in its infancy in many ways. And would slow down future deployments possibly.

The Dutch government says that at the time of the planned investments, the market price was between €40 and €70/MWh, and that with a €130/MWh ceiling adequate profits will still be made. That is not far off the mark, but will certainly leave many solar developers who were looking forward to accelerating expansion and retiring debt faster more than a little frustrated.