Rabobank Industry Note #320 - June 2012
An Outlook for Renewable Energy in The
Rabobank International
Food & Agribusiness
Research and Advisory
clara.van.der.elst@rabobank.com
+31 30 71 24507
paul.bosch@rabobank.com
+31 30 71 24439
www.rabotransact.com
Contents
Something has to change
Why is the Netherlands
lagging?
The need for additional
renewable energy
investment
Investments required under
the accelerated investment
scenario
Barriers to the accelerated
investment scenario
Conclusion
Appendix
1
A.o. from Napels, Italy
2
Of which 50 percent is deemed to be
of organic origin and thus renewable
3
Stimuleringsregeling Duurzame
Energie
Netherlands
The Next Investment Wave
Rabobank expects a new wave of investment opportunities in renewable
energy in the Netherlands to start around 2014. Solar PV, offshore wind,
onshore wind and co-firing biomass are forecast to be the technologies
benefitting most from an increased stimulus for renewable energy. We
calculate the additional investment required to reach the agreed renewables
target for 2020 to be EUR 24 billion, which is on top of the EUR 12 billion that
would be spent under a business as usual scenario. Of the additional
investments, solar PV accounts for the majority with EUR 13 billion, offshore
wind would require EUR 7 billion, and onshore wind and biomass co-firing
1 would each account for EUR 2 billion of investment.
2 The driver for the new investment wave will be the clear deviation of
progress against the 2020 target for renewables, which should become
evident in 2013. Based on Rabobanks calculations, the Netherlands is set to
7 miss its 2020 targets for renewables: at current rates of investment
renewable energy is forecast to represent just 9 percent of energy output by
2020, compared with a target of 14 percent.
9
The deviation of progress against the 2020 target will, in our view, trigger a
10 number of responses to address current barriers to renewables: ineffective
11 policies, removal of support for wind, and a lack of progress on energy
12 efficiency. We believe the government will recast renewable energy policies
around 2014, due to the EU increasing pressure on member states that are
lagging behind renewable energy goals, more vocal public support for
renewable energy, and cost declines in renewables equipment resulting from
technological and scale advances.
Something has to change
With only just over 4 percent of energy generation coming from renewable sources in 2010,
the Netherlands lags most other European countries. The agreed target to increase the
share of renewables to 14 percent by 2020 is therefore relatively high: more than three
times the 2010 contribution (see Figure 1). The Netherlands has made little progress since
2008, when renewable energy stood at just over 3 percent. Aided by a 20 percent rise in
(imported)1 household waste combustion2 and a lower energy use, overall renewable energy
consumption in 2011 crept up to 4.2 percent.
The main policy instrument to enable the Netherlands to achieve this target is the SDE (+)3.
Rabobanks analysis concludes that the SDE (+) has not been very effective, and largely as
a result, we forecast that without any change in the policy approach, renewable energy
generation will be stuck at 9 percent of the energy mix in 2020. We see 2014 as a potential
tipping point for Dutch renewables, as the gap between actual and targeted progress will by
then become very clear, and political changes in combination with lower costs will create a
new wave of investment opportunities. Offshore wind, onshore wind and solar appear to be
the best placed technologies to capitalise on the next investment wave. A greater use of
biomass will also be required to achieve the target, although whether this is the right choice
for the long-term remains to be seen.
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An Outlook for Renewable Figure 1: EU renewable energy shares; 2010 baselines and targets for 2020
Energy in The Netherlands percent
50

45

40

35

30

25

20

15

10

Renewable energy in 2010 Additional renewable energy 2010-2020

Source: National NREAPS, 2010

technology and any mix within the three end use

Box 1: The EU 20-20-20 directive for renewable
energyHow it works
In 2009, the EU adopted the 20-20-20 Directive, which
stipulates three targets for the EU in total per 2020: 20
percent of energy use from renewable sources, a 20
percent reduction on greenhouse gas emissions as
compared to 1990 and a 20 percent increase in energy
efficiency. Under the Directive the target for the
Netherlands is for a 14 percent of renewables in the
energy mix by 2020. The target can be achieved by any
renewable energy
categories: heating and cooling, electricity and transport.
The European member states submitted National
Renewable Action Plans in 2010-11 on how to achieve
their respective targets. The share of renewable energy
in total energy use by 2020 is not only dependent on the
amount of renewable energy consumed in 2020, but of
course also on the final overall energy consumption by
then. This depends mainly on economic growth,
population growth and the energy intensity of the
economy.

Why is the Netherlands lagging?

Rabobank sees various reasons why the Netherlands will struggle to achieve the 2020
renewable energy target. Firstly, because the SDE (+) design has a number of shortcomings
and does not align with the investment required by the original plan stated in the Dutch
NREAP4. We also believe the SDE(+) tends to rely too heavily on biomass-sourced
technologies. Finally, we view the assumptions regarding the underlying energy demand
and possible energy efficiency gains as being too optimistic.

Rabobank has modelled three scenarios to assess different renewable energy investment
outcomes for 2020:
The Dutch National Renewable Energy Action Plan (NREAP), which was the original
plan for renewable energy investment;
A business as usual scenario, which projects forward to 2020 the levels and
patterns of renewable energy investment seen to date;
And an accelerated investment scenario, based on a concerted effort to reach the
2020 target, starting in 2014.

The original plan: the NREAP

4
National Renewable Action Plan
http://ec.europa.eu/energy/renewable
s/transparency_platform/doc/dir_2009
_0028_action_plan_netherlands.zip
The Dutch NREAP is an obligatory but non-binding pathway detailing how the Netherlands
would reach the 14 percent target in 2020. In this plan, biomass including biofuels and wind
would each contribute roughly half of the additional energy generated. Most of the wind
energy generated would be offshore. For biomass, the plan details the limited availability of
biomass in the Netherlands and consequently the substantial feedstock imports required.
Figure 2 shows which technologies were expected to contribute to achieving the 2020 target
under the NREAP. Notwithstanding, in 2012 there is already a material difference between
the renewables investment and what has between achieved in 2012 it is already quite
clear that this scenario is effectively out of reach.

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An Outlook for Renewable Figure 2: Targeted additional output growth under the Dutch
Energy in The Netherlands NREAP; shares by technology, 2010 to 2020
percent

Other 1 Geothermal
4

Biomass 23 Solar 1

Onshore
wind 16

Biofuels 10

Biogas 10
Offshore
wind 30
Heatpumps
5
Source: ECN Renewable Energy Projections as Published in the National
Renewable Energy Action Plans of the European Member States, 2011

The business as usual scenario

Rabobank projections under a business as usual scenario arrive at a 9 percent renewables
share by 2020, at the low end of other recent forecasts5. This implies the Netherlands will
achieve only half of the growth required from 4 to 14 percent. The results of the business as
usual scenario projections are compared to the Netherlands NREAP scenario in Figure 3.
The business as usual scenario assumes an extension of current policy settings and levels,
implying a slow conversion of onshore wind and biomass grants into realised projects, and
no new offshore wind farm subsidies. We have incorporated a high but declining growth rate
for solar PV, starting with 100 percent in 2012, following recent price declines. We assumed
the blending requirement for biofuels to be met throughout the period.

Figure 3: Projected gap in renewable energy generation to 2020

target, 2010-2020
Percent
16
14
12
10
8
6
4
2
0
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Planned renewable energy (NREAP)
Business-as-usual forecast renewable energy Rabobank
Source: NREAP, 2010; Rabobank, 2012

What is holding back renewable energy investment?

SDE budget has been grossly underspent

The Netherlands Government has mostly used three policy instruments to aid investment in
renewable energy projects: the Support policy Renewable Energy (SDE), the Energy
Investment Deduction (EIA) and the Blending requirement (bijmengverplichting), which
applies specifically to transport (see Figure 4). The SDE accounts for the bulk of the
available subsidy budget.

5
Planbureau voor de Leefomgeving/
ECN Sep 2011 Effecten van het
kabinetsbeleid voor Milieu en Klimaat;
http://www.pbl.nl/publicaties/2011/eff
ecten-van-het-kabinetsbeleid-voor-
milieu-en-klimaat.

Page 3/12 | Rabobank Industry Note #320 - June 2012

An Outlook for Renewable
Energy in The Netherlands
Figure 4: Policy overview Netherlands
Policy name Description
Approved projects win a fixed 8-15 year subsidy
SDE covering the gap between generation cost and the
actual electricity price
Energy-saving or renewable energy investments
EIA qualify for a one-off 41.5% corporate tax deduction,
generating an around 10% return on investment
Blending Legal requirement to blend biofuels with petrol,
requirement consumer pays or benefits from any price differentials
Source: Rabobank, 2012

The SDE(+) policies result in a relatively slow building rate: the combined SDE subsidies for
renewable energy build under the 2008, 2009, 2010 and 2011 programs amounted to only
EUR 80 million (see Figure 5), while the total cumulative budget -covering the lifetime
subsidies of projects granted- amounts to EUR 9 billion. Figure 6 displays the differences
between budgeted, planned and realized capacity over recent years, where a significant
amount of budgeted capacity has already been withdrawn. As projects granted in a given
year generally have a three to five year time limit in which they need to be built, we
estimate that a further share of this pipeline will fail to be realised.

Figure 5: Cumulative SDE budget excluding offshore; actual

annual cumulative spending, 2008-2011
EUR million

10,000

8,000

6,000

4,000

2,000

0
2008 2009 2010 2011
Total budget available Total annual spend for SDE projects
Source:AgentschapNL annual reports SDE, 2009-2011

Figure 6: SDE (+) budgeted capacity excluding offshore wind,

2008-2010
ktoe
2,500

2,000

1,500

1,000

500

0
2008 2009 2010
Completed Forecast realisation Out of the pipeline
Source: AgentschapNL annual report SDE 2009-2011; Rabobank, 2012

SDE spending delays

The SDE is proving ineffective for a number of reasons, some of which vary per technology,
and these are set out below.

Biomass
Biomass has attracted the lions share of funding, but at levels that preclude profitability,
hence creating a sizeable gap between intended and realised renewables capacity.

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An Outlook for Renewable
Energy in The Netherlands
6
Calculated by Bosch en Van Rijn for
Netherlands Wind EnergyAssociation
7
Rabobank Reaching 10c/Kwh and
BNEF/Rabobank Foundations for
Growth Nov 2011
8
KEMA/ECN;
http://www.kema.com/nl/news/pressr
oom/press-
releases/2011/Particuliere_zonnestroo
m_in_Nederland_kan_in_2020_vervee
rtigvoudigen.aspx
Investment under the latest SDEs, and especially the 2011 SDE+, has been geared towards
biomass-fuelled energy generation (see Figure 7). Of the applications granted in 2011, 79
percent of energy output in ktoe was granted to biomass, of which 90 percent was for green
gas or upgraded biogas. The SDE+ was described by the previous government as
technology neutral, or not favouring one category over another, as grants were price
tender-based. However, the relatively high amount directed to green gas points out that,
strictly speaking, this was not the case. Gas was a separate category and can only be
generated with biomass.
Figure 7: Production funded under SDE+, 2011
percent
Onshore
wind 12 Offshore
wind 0
Hydropower
0
Solar PV 8
Other 0
Heat pumps
0
Geothermal
1
Biomass 79
Source:Rabobank, 2012
Costs for the co-feedstocks that are used in manure co-digestion (for biogas), such as corn,
have risen over the years. Rabobank calculates a cost per KWh for biogas generated
electricity of EUR 0.14-0.20, assuming agricultural manure co-digested on a 50-50 basis
with grains. Rabobank believes that a large majority of the SDE+ 2011 biogas and green
gas projects have tendered for and been granted support at too low a level to be financially
viable. As a result these projects will not be realised, leaving another gap in the build-out.
Onshore wind
The onshore wind category is responsible for the biggest chunk of the gap between
budgeted and completed renewable energy projects; we estimate a gap of around 1250 MW
spread over the 2008 to 2010 SDEs. A few elements are at play here. We believe the main
reason for the delays is the Not In My BackYard (NIMBY) opposition that can arise on a
provincial, town council or residential level. This is of course also related to the high
population density of the Netherlands. Only 52 percent6 of approved onshore wind projects
are actually built, measured from the stage when land has been secured.
Furthermore, the price-tendered structure of the 2011 SDE+ carries a disadvantage for
onshore wind project developers, who can only apply after obtaining a building permit. The
substantial costs for the permit application need to be incurred before taking a chance on
success in the funding round.
Finally, the fixed limit of 2200 maximum production hours that will be subsidized is also
counterproductive for onshore wind. This issue is expected to be addressed in the 2012
SDE+.
Offshore wind
Offshore wind has effectively been sidelined in the process. Offshore wind had its own
dedicated category within the SDE in 2009. Since then the original NREAP target of 5GW of
offshore wind by 2020 has been dropped by the government, which deemed this too
expensive. While offshore wind costs have not yet declined much, we believe these will do
so on the back of scale increases7. In addition, the delays caused by the NIMBY-effect in
onshore wind underline the need for offshore wind in the energy mix.
Solar PV
Rabobank expects significant growth in solar. In the 2011 SDE+, small scale solar was not
supported. However, residential solar PV is now proving financially viable for residential use
without subsidies8. The reasons are twofold. In the past few years solar panel costs have
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An Outlook for Renewable
Energy in The Netherlands
9
National Renewable Energy Action
Plan NL p. 109
10
Agentschap NL, May 2012,
Statusdocument bio-energie 2011:
http://www.agentschapnl.nl/nieuws/st
ructurele-groei-productie-bio-energie-
zet-door
declined dramatically on the back of scale increases and manufacturing overcapacity, with
costs more than halving in 2011 alone. The cost of solar PV per KWh has now been
calculated by Bloomberg New Energy Finance as being lower than offshore wind. In addition
the electricity generated by solar PV for own use is exempt from energy taxes, adding an
effective incentive of EUR 0.11 per KWh in 2012. We therefore expect residential solar PV to
show high growth rates between now and 2020 without inclusion in the SDE.
Policy solutions to the slow rate of renewables investment
Reflecting on the experiences in realising renewable energy investments since the NREAP
was prepared, Rabobank has identified the following policy-related factors as posing risks to
achieving the 2020 target:
Subsidy levels need to rise
In general, subsidy levels have been too low to attract uptake or financing required
to meet an investment trajectory that will allow the 2020 target to be met. This
applies to biogas, to onshore and to offshore wind and has been a reason for solar
in the past. This could be seen as a positive for government finances in the short-
term, but simply creates a greater strain on public finance in coming years.
Price tenders push out viable projects
The recent structure of the SDE with a price-tendered auction is aimed at
generating renewable energy capacity at least cost. While this helps governments
ensure windfall profits seen in other policy systems are avoided, in reality, the
share of granted applications actually being realised is low. Part of the budget is
thus consumed by projects that are not going to be able to attract financing, which
pushes out other projects.
Reduce the heavy reliance on biomass it is not sustainable
A major advantage of biomass is that in most applications it provides energy
continuously, as opposed to intermittent sources such as solar and wind. This
makes it inherently attractive to those responsible for the integrity and continuous
operation of the electricity grid. Notwithstanding, we see four drawbacks with the
heavy reliance on biomass in the energy mix.
o High proportion of variable costs make economic lifetime less predictable
Renewable energy running on biomass has a different financial structure
compared to wind and solar energy. With biomass, most of the costs are
feedstock related and therefore variable, while with wind and solar
projects, the bulk of costs are fixed. This means that, once built, solar and
wind facilities can be assumed to keep running, while a biomass facility
will be shut down should variable costs become too high.
o A lot of biomass feedstock will have to be imported
With the Netherlands having the lowest percentage of forest land cover
within the EU and a high population density, even the Dutch NREAP
estimated that by 2020, 38 percent9 of the required biomass would need
to be imported. Compared to solar and wind, this implies a high
dependency on other countries and a lower sustainability profile.
o Less likely to become cheaper
As many EU members are banking on the use of imported biomass to
attain their 2020 targets, we believe that prices of suitable feedstocks will
be under upward pressure. Also, we believe the long term trend for
commodity prices globally is upward in general. All in all, this makes the
scope for future cost declines in biomass-sourced renewable energy
smaller compared to other technologies.
o Biomass already represents the vast majority of supply
At the moment10, biomass accounts for 75 percent of the total renewable
energy share. Developing a mix of energy technologies would diversify
supply and increase energy security.
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An Outlook for Renewable Increase focus on solar and wind
Energy in The Netherlands Cost developments in solar and wind have seen continuous decreases and are
likely to display further cost declines as both technology and deployment scale
progress (see Figure 8). Solar in particular has seen a dramatic 50 percent to 70
percent module price fall in the past year alone and prices are forecast to halve
further by 2020. Onshore wind is forecast to see an annual cost decline of low-to-
mid single digits, driven by technology advances and price pressure from China.
Offshore wind is still in its infancy and has the potential for a 20 percent to 35
percent price decline in this decade in our view. A way to overcome the onshore
wind NIMBY objections might be to focus on repowering existing onshore wind
turbines, as the bulk of the Dutch turbines now installed are of a relatively small
size.

Figure 8: Cost of renewable electricity production versus wholesale electricity prices, 2007-2020f
EUR/MWh

500

450

400

350

300

250

200

150

100

50

0
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Onshore Wind Offshore Wind
Solar pV NL Wholesale electricity price (base load)
Source:CBS, Rabobank, 2012

Lack of progress on energy efficiency implies a greater need for renewables

The EU Directive allows states to incorporate the effects of future energy savings policies
that are not yet in force . As a result, the total final energy consumption in the Netherlands,
on which the Dutch NREAP is based, is forecast to be almost flat between 2010 and 2020.
In Rabobanks view this picture is overly optimistic as the Netherlands is yet to adopt a
significant amount of new energy savings policies. In addition, the NREAP forecast was
based on base year data that was below the actual number11. This means that energy
efficiency is not going to contribute to meeting the 2020 target as envisaged in the NREAP,
implying a larger than anticipated need for renewable energy investment.

The need for additional renewable energy investment

We believe that the gap between planned and realised renewable energy investment will
become strikingly apparent in 2013. Widespread recognition that the Netherlands is not on
track to meet its 2020 target should lead to public and EU pressure to facilitate increased
investment in renewables. Rabobank has calculated an accelerated investment scenario
based on a mix of technologies that would enable the Netherlands to get back on track to
achieve its 2020 renewable energy goal. In this scenario we see a shift from smaller scale
or decentralized opportunities in the short term to more large scale opportunities after
2014. As shown in Figure 9, this scenario affects on- and offshore wind, co-firing biomass,
and solar.

In the accelerated investment scenario we have assumed:

Increased stimulus of residential solar PV, both financially and in terms of
supportive public education and coordination. Financial stimulus for commercial
11
CBS: solar PV.
http://www.cbs.nl/nr/rdonlyres/f1ed1
Increased national planning power for siting wind turbines.
85c-1da7-4b70-9203-
13ab6c895688/0/2010c89pub.pdf

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An Outlook for Renewable A renewable energy obligation for electricity suppliers, effective from 2014
Energy in The Netherlands onwards.
The conclusion that opposition to onshore wind cannot be overcome in half of the
projects will drive renewed government support for offshore wind.
For biofuels, we have assumed that the anticipated blending rates will be met
throughout the period to 2020.

Figure 9: Contribution of additional capacity in accelerated

investment scenario by technology, 2011-2020
MWp, MW, ktoe
18,000
16,000
14,000
12,000
10,000
8,000
6,000
4,000
2,000
0
Solar PV Onshore wind Offshore wind Biomass
(MWp) (MW) (MW) (ktoe)
Business as usual Accelerated investment
Source: Rabobank, 2012

We have included technologies in which we believe a catch-up effort is still possible, both in
a planning and a financial sense. For the categories not described below, we have assumed
no difference between the business as usual and the accelerated investment scenario. We
expect the following developments:

Solar PV
We assume a rise in installed panels from around 110MWp currently to 16GWp per 2020.
This is achieved by an above 100 percent growth rate between 2012-16, declining to 30
percent in 2020. We believe this will be possible given the low starting point in the
Netherlands relative to other European countries. For instance, Germany installed 7GW
alone in 2011. We expect residential solar to pick up as people understand that acceptable
returns are now possible on the back of low panel prices without subsidies. As panel prices
decline and support for renewable energy becomes more substantial, we expect policy to
become more favourable towards commercial PV and we forecast commercial solar to take
off in the Netherlands from the middle of this decade. We believe commercial PV will be
financed by project finance and corporate financing.

Offshore wind
Despite the recent government withdrawal, we believe offshore wind will come back to the
table, as there are no alternatives to large-scale renewables deployment. Timelines for
developing offshore wind are long, however, and apart from subsidies, it will probably be
necessary to adjust planning permissions to achieve the additional 1.7 GW of offshore wind
that we forecast. This would bring the total offshore wind capacity to 2.7 GW by 2020. An
additional reason for including offshore wind in the mix is the high Dutch industrial expertise
in this field, currently mostly put to work in the UK and German markets. Offshore wind will
be 100 percent commercial, and financing will take place via project finance, vendor finance
and a declining share of corporate financing.

Onshore wind
We forecast only a slight increase in onshore wind from a cumulative installed capacity of
3.3GW in the business as usual scenario to 4.8GW in the accelerated investment scenario.
The low rate of additional growth is because we expect siting to remain a difficult process.
Our forecast under the accelerated investment scenario is lower than other market
watchers. To achieve 4.8GW by 2020 we raised our annual granted capacity from roughly
200MW to 600 MW by 2013 and increased the success rate to 75 percent from 2014
onwards. We see project finance as the main financing tool in onshore wind, representing
70 percent of total.

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An Outlook for Renewable Biomass co-firing
Energy in The Netherlands Rabobank forecasts a rise in biomass co-firing to around 14 percent of coal use by 2020,
with a new supplier obligation being instrumental to achieving this. We expect the required
investments to be 100 percent commercial, and the vast majority to be financed on-balance
(corporate) by utilities. While the majority of biomass is expected to be used in co-firing,
more dedicated biomass facilities being built is also likely.

Investments required under the accelerated investment scenario

Boosting the rate of renewables deployment to reach the 2020 target is only possible with
additional investment. Rabobank has calculated the need for an extra outlay of EUR 24
billion between 2013 and 2020, or roughly EUR 3 billion to EUR 4 billion annually on
average, on top of what is already in place and assumed under the business as usual
scenario. The total investment required to reach the 14 percent target by 2020 would
amount to EUR 36 billion.

By technology, the associated investment levels are a total of EUR 16 billion for solar, EUR
13 billion more than under the business as usual scenario; EUR 10 billion for offshore wind,
of which EUR 7 billion is additional to the business as usual level; EUR 2 billion for onshore
wind, all of which is additional; and EUR 3 billion for biomass, including EUR 1.7 billion
additional (see Figure 10).

Figure 10: Annual investments under realistic and accelerated investment scenario, 2014 vs. 2016,
2018 and 2020
EUR billion
5

0
Biomass

Biomass

Biomass

Biomass
Solar PV

Solar PV

Solar PV

Solar PV
Onshore wind

Offshore wind

Onshore wind

Offshore wind

Onshore wind

Offshore wind

Onshore wind

Offshore wind
2014 2016 2018 2020
Business as usual Accelerated investment
Source: Rabobank, 2012

All in all, we expect project finance to provide EUR 15 billion of financing, (utility or
commercial) corporate to provide EUR 7 billion, equipment vendors EUR 1 billion and private
residents EUR 11 billion (for solar PV). Estimated financing requirement by type for each of
the four technologies for the total amount required under the accelerated investment
scenario is charted in Figure 11.

Two things should be kept in mind in considering the investment numbers. The costs are
expenses that will be put forward by renewable energy investors, not the government. In
addition, comparing the required investment outlays does not say much about the costs per
KWh of the actual energy produced: these are affected by the expected lifetime of the
facility, the efficiency rate, the actual location etc. For instance, a wind turbine has a 15-
year lifespan, while a solar panel roughly doubles that. For simplicity, we have assumed
required capital expenditure costs to remain stable, except for solar, where we have
assumed a 50 percent decrease between 2011 and 2020.

With regard to the associated subsidies, we forecast the total annual cash outlay will rise
from the current level with EUR 350 million in 2013 to EUR 3 billion in 2020. This is the
combined amount for business as usual and accelerated investments. We believe a large
amount of the unspent cumulative EUR 9 billion budget from the 2008-2011 period is still

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An Outlook for Renewable included in government budgets and could be used without creating additional budgetary
Energy in The Netherlands pressures.

Figure 11: Estimated total financing requirements to 2020accelerated investment plus business
as usual scenarios
EUR billion

Ven Res Ven

0.4 0.1 0.5

Cor

Offshore
Cor

Onshore
0.8

wind
Total financing 3.2

wind
Ven
0.9
Cor
7.0 Res Pro
Pro 6.9
11.2
2.7

Cor Pro
0.5 0.4

Pro

Biomass
4.7
Solar

Pro
14.7

Res
11.1 Cor
2.5
Residential Project finance Corporate Vendor
Source: Rabobank, 2012

Barriers to the accelerated investment scenario

The accelerated investment scenario is based on what we consider is likely and still possible.
However, there are barriers that realisation of this scenario would need to overcome,
including:

Macro-economics
Like most other eurozone members, the Netherlands is affected by the financial crisis and
has put severe austerity measures in place. The Netherlands will see elections in September
as the previous government fell over proposed budget cuts. An increased budget for
renewable energy subsidies therefore would likely have to come at the expense of other
government expenditures. However, although budgets from previous subsidy rounds since
2008 have largely remained unspent, we believe subsidies for projects still in the pipeline
are included in the budget. When freed, as projects fail to get built within the required
timeframe, these funds could be put to use. In addition, compared to some other countries,
energy consumers in the Netherlands still only pay a relatively small amount towards
supporting renewable energy directly, although this is scheduled to change by 2013.

Financial regulation (Basel III)

Project finance has been a popular vehicle to fund renewable energy projects. Today,
project finance is constrained by the lack of long-tenored funding available in the treasury
market. In addition, the Basel III banking legislation, which will be implemented between
2011 and 2018, stipulates stricter guidelines around project finance. In Germany, Denmark
and the UK, specific finance facilities for renewable energy have been set up by the
government to absorb some of the difficulties in attracting longer term project finance
funding.

Integration with the electricity grid

Both for centralised -such as offshore wind- and decentralised renewable energy facilities,
significant adaptations have to be made to integrate projects with the electricity grid. The
intermittent nature of solar and wind energy also imply that non-renewable electricity
supply levels will fluctuate more. Increasing the share of renewable energy in the overall
energy mix will require significant grid investments, improved grid management and more
flexible back-up facilities. In addition, recent research suggests that the cheapest way of
dealing with at least part of the intermittent electricity supply is by building far better

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An Outlook for Renewable exchange and trading networks in Europe. Instead of storage, national peaks and troughs
Energy in The Netherlands are managed by im- and exporting.

Importing renewable energy

Recently, the Dutch government announced that it is considering the import of renewable
energy to help keep renewables on track with the 2020 target. However, the EU directive
stipulates that imported renewable energy will only be counted towards the 2020 target if
the generating facility has been built after the directive came into force. As a result existing
Norwegian hydropower, for instance, cannot be included. The use of imported renewable
energy that does qualify under the Directive would reduce the need for some of the capacity
identified in the accelerated investment scenario.

Conclusion
Although it will be challenging, we believe there still is a window in which the Netherlands
can come close to meeting its 2020 renewable energy target. Under our accelerated
investment scenario the technology winners will be solar PV, offshore wind, onshore wind
and biomass. We expect project finance, utility or commercial corporate finance and private
persons to provide the majority of financing required.

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An Outlook for Renewable Appendix
Energy in The Netherlands The SDE accounts for the bulk of the available subsidy budget. However, when looking at
actual annual expenditures in the third part of the table below, the MEP policy is still
responsible for the almost all of the government subsidies (see Figure 12). The MEP was the
predecessor of the SDE until 2006 and was superseded by the SDE in 2008. More detail on
SDE budgets, the completion rate and expenditures is provided in Figure 13.

Figure 12: Dutch government funds associated with policies, 2008-2012

EUR million

Annual budget available for approved projects

Policies 2008 2009 2010 2011 2012
SDE 1,500 3,801 2,100 1,500 1,700
EIA 139 145 150 151 151
SDE Offshore wind 0 5,384 0 0 0
Total funds approved for projects to date
Policies 2008 2009 2010 2011 2012
SDE 413 2,424 1,768 1,500 na
EIA 122 78 98 na na
SDE Offshore wind 0 4,400 0 984 na
Total annual actual government subsidy spend for SDE, MEP and EIA projects
Policies 2008 2009 2010 2011 2012
MEP 2003-2006 492 620 600 na na
SDE 2008-2010 na 2 23 54 na
EIA fiscal deduction, assumed equal to funds approved
SDE Offshore wind 52 69 68 na na
Source: Agentschap NL annual reports, 2009-2011; Rabobank, 2012

Figure 13: Budgeted, approved and actual capacity and actual annual government subsidies
SDE 2008 2009 2010
Budgeted (EUR million) 1,459 8,201 2,126
Budgeted (MW)* 651 1,634 611
Approved (MW)** 151 1,218 602
Completed (MW) 126 119 18
Delta budgeted - realised (MW) -525 -1,515 -593
Of which offshore wind (MW) 0 600 0
Of which still planned, excluding offshore wind (MW) 25 499 584
Actual subsidies (EUR million) in 2010 for SDE realised MW in
15 8 0
2008-2010
* Based on an average cost per technology per MW
** Excludes withdrawn projects
Source: Agentschap NL annual reports 2009-2011; Rabobank analysis, 2012

This document is issued by Coperatieve Centrale Raiffeisen-Boerenleenbank B.A.
incorporated in the Netherlands, trading as Rabobank International (RI). The information
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Page 12/12 | Rabobank Industry Note #320 - June 2012