Support Policy Instruments for Offshore Wind Power in the Netherlands

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Abstract

In the Netherlands, the developing of offshore wind power (OWP) systems is one of options for electricity generation from renewable energy sources (RES-E) for the transition to a sustainable energy system. In 2015, the European Wind Energy Association (EWEA) announced that around 6500 MW of total offshore wind capacity required in the Netherlands could be realized by 2030. The relatively low commercial maturity of OWP technology and also some distinct technological features (e.g. long lead-time, high capital cost) of OWP lead to certain market barriers which consequently result in market failure. The Dutch government has applied economic policy instruments, as public resources, in order to overcome all the market barriers. Despite the fact that several support systems are being implemented by the Dutch government, they could not meet the predefined objectives. Up until 2017, only 957 MW was implemented and supplied to the grid. Primary literature study confirms that the lack of investment by investors is one of the most important reasons for this failure. Therefore, this study was conducted to investigate the efficiency and effectiveness of economic policy instruments when it comes to stimulating investment in new OWP projects in the Netherlands by adopting a sustainable and distributive justice approach. This study is composed of four main parts: the literature review, the case study, the analysis, and the design. The review illustrates that FiT and TGC have been the most commonly implemented policies among EU member states over the last 25 years. Also by literature review four criteria are identified for the evaluation of those four suggested policy instruments. Effectiveness, efficiency (static and dynamic as well), and certainty for investors are the most common criteria for evaluation of policy instruments. Equity in terms of distributive justice is the fourth criterion to be considered in more recent evaluations. The case study confirms that Feed-in Tariff (FiT) and Tradable Green Certificates (TGCs) are the two main policy instruments implemented in the Netherlands. The lack of political stability is seen as one of main reason why they failed to meet their objectives. A multi-criteria analysis (MCA) was applied as the decision-making method for selecting applicable support system in sustainable way. Sustainable development implies that social, economic and environmental aspects must be equally considered whilst not compromising one particular aspect. This method is well-known as a method in which all criteria have equal weight. This analysis addresses the fact that while there is not one concrete policy instrument to meet objectives effectively and efficiently at the same time, one improved and adjusted (dual) FiT system is a proper policy instrument that could stimulate investment in OWP projects in the Netherlands in the new future. The last part of this thesis includes the design of the new recommended support system (dual FiT) to enable responsible innovation in OWP development.