Dutch industry is fully committed to lower energy costs

Not a week passes or you will hear the ‘alarm bell’ from Dutch industry. It warns of an approaching downfall. The most important culprit: high energy prices. This threatens energy-intensive chemical complexes, such as Chemelot and the port of Rotterdam, or companies such as fertilizer manufacturer Yara and plastic manufacturer Dow.

In terms of energy prices, the Netherlands is « off the path, » warned chairman of industrial branch association FME Theo Henrar NRC. « The basic industry is in danger, » says De Vemw, the association for large energy users. In The Hague, too, plenty of echoes of those emergency cries sounded, turned out to be in the Lower House at the end of last week. « The dark clouds of de-industrialization are above our country, » said the VVD. « We are the leader in the market prices of our industry, » said the ChristenUnie.

The House of Representatives spoke about the industry just after it came out that two smaller chemical companies close in the port of Rotterdam: pigment multinational Tronox and plastic manufacturer Lyondellbasell. The latter explicitly pointed to high energy prices as a cause.

Industrial companies and lobby organizations seized this to make their point again. Now Ingrid Thijssen, chairman of VNO-NCW, said that the industry is destroying. On Friday, the Dutch refineries subsequently entered a cry for help De Telegraaf: They would be « on ». This also includes Shell, which had already announced earlier in the week that they are looking again at the profitability of the company’s European chemical factories.

The industry explicitly asks the government to intervene. The timing is no coincidence. The European Commission is working on measures to maintain European industry, with the aim of becoming more independent of the US and China. The spirit of the times is ripe, you can say, for the perspective of the industry. Closer to Huis, the cabinet aims to decide on 11 April about the budget update for the coming six months, the so -called Spring Memorandum. Countless sectors therefore lobby for their position.

The industry is fully committed to the in their eyes unfair energy costs that it has to do with in the Netherlands and argues for the return of certain subsidies. To what extent does the industry have a point? And what could the government do?

Unjustified fine

In short: it is true that energy prices in the Netherlands are relatively high, says Pieter Boot of the Center for International Energy Policy. Throughout Europe, these are higher than on other continents: last February the gas price in Europe came to the highest level in two years. At the moment it is around 40 euros per megawatt hour, where the price rarely exceeded 30 euros before 2021. A consequence of the loss of Russian gas.

The Netherlands is again relatively expensive within Europe. This is partly due to higher net rates. Boot: « The Netherlands has a problem that other countries do not have. Because of our past with gas, we are now lagging behind with the electricity grid. » Gas requires a different infrastructure for transport, storage and transit then electricity. Countries such as France have been heating their houses for years through the electricity grid and have to expand them a lot less.

The costs of increasing the power grid, which is necessary for the energy transition, will be estimated at a total of 295 billion euros until 2040. The net rates, from which those investments are paid, are fairly proportional in the Netherlands between citizens and companies compared to other countries. « In Germany, households pay almost the full network costs for the industry. There is a lot of hassle about that, » says Boot.

The Netherlands also has relatively high taxes on energy compared to neighboring countries: with electricity, according to data from the European Commission, this can go up to around 20 percent of the price, with gas that is even higher. According to the industry, it all contributes to the fact that since 2021 production in the chemical industry has fallen by almost 20 percent, at the basic metals 14 percent, according to figures from Statistics Netherlands.

In addition, there is overcapacity in chemistry. In China, many production locations have been added in recent years, which means that European companies have had to deal with more competition. Now that gas prices in Asia are much lower than in Europe, multinationals see the attractiveness of their European locations decreasing. Lyondellbasell and Tronox explicitly referred to this global overcapacity.

Specifically, the industry has a few requirements: it wants to get rid of the extra, national tax on co₂-Moet, which has been in the Netherlands since 2021 and has an effect for the first time this year. Companies find this CO₂-Tax an unjustified fine is now running more sustainable than expected. They also want lower net rates for industry.

In addition, the industry refers to a compensation scheme for CO₂-Costs for large power consumers, which has been used varying in recent years. This indirect cost compensation (IKC) was abolished by the Rutte IV cabinet, because it is in fact a fossil subsidy. At the time, this ensured the lion’s share of major price differences with Belgium, France and Germany: in the Netherlands companies paid 95 euros per megawatt hour electricity, in Germany that was 46 and in France 32, according to research by the E-Bridge Bureau. A company like Zinksmelter Nyrstar stopped production in the Netherlands, but continued in Belgium.

After criticism, the IKC was temporarily reintroduced last year by then climate minister Rob Jetten (D66) – Nyrstar started running again. Before that, the cabinet took 186 million euros. This is not yet recorded for the period after 2025, and the industry is now lobbying for that.

Noise

So far the story of the industry. Where you can add some nuances, says Herman Vollebergh, professor at Tilburg University and researcher at the Central Planning Bureau (CPB). « In fact, we have an adjustment problem, because the industry no longer has cheap gas contracts. » Moreover, says Vollebergh, the Netherlands does have high energy taxes, but the question is to what extent companies that actually pay. « Then you have to look at exemptions. »

And there it will be difficult. The precise tax regulations that countries have rigged for their industry are often difficult to compare and not transparent, both Vollebergh and Boot say. « When I worked at the Ministry of Economic Affairs fifteen years ago, I also tried to find out if our companies pay more, » says Boot. « You didn’t find out: those countries really don’t tell what exactly those companies are settling on net rates. »

Vollebergh also thinks that the electricity rates in the Netherlands are on the high side. All kinds of factors play a role on the electricity market, he emphasizes, and also the IKC and a former discount that the industry obtained until 2023 on transport costs for electricity.

Yet it is easy to listen to the loudest voice, Vollebergh warns. « You especially hear the losers, » but not every company experiences the same amount of disadvantage. For example, there are a number of large energy-intensive companies that at the same time are large recipients of various sustainability subsidies, such as Shell and ExxonMobil. Some companies also benefit from tax exemptions that ‘can rise considerably’ (fossil subsidies).

Another opposition in the industry lobby came from a group of prominent economists in mid -March. According to the economists, including Barbara Baarsma (University of Amsterdam) and Hans Stegeman (Triodos Bank), it is only logical that the size of the industry in the Netherlands will decrease. The era of abundant Gronings and Russian gas is over, and the energy transition gain ground as a location location. In Spain, for example, a lot of cheap green electricity is available, just like in Sweden. There, industrial companies will probably settle in the future, while energy scarcity will remain in Western Europe. If politics decide that the certain sectors wants to retain and provide support, then that must be coordinated European, the letter writers say.

Finally, according to them, the lobby is partly of companies that have made great profits in recent years, explicitly pointing to Shell and Yara. Furthermore, the energy-intensive industry would contribute relatively limited to GDP: around 1 percent.

The criticism of economists touches the political question: how do you divide the burdens that pop up now that there is no more cheap gas and the energy transition has to be financed? « The focus is now on the pain of the losers and how we should compensate for that pain, » says Vollebergh. « That is not how we should look at this. The transition has been going on for a long time, and if we don’t care, we will miss the opportunities for the development of new industry. » As far as he is concerned, the money has to go there.

Boot also argues for making sharper choices. « Imagine saying: we want one refinery, one steel factory, one beer brewer. What do you have to do to ensure that it remains attractive for those companies? » Not choosing is « cowardly, » he says. « I understand it is difficult, but it is too easy to say that it is not possible. »

The critical sounds from the industry find their resonance in politics. In recent action plans from Brussels, the European Commission makes keeping the industry a spearhead. Europe is looking for solutions for the influx of cheap, Chinese products through protectionist taxes on non-European products.

The fear is that European industry will fall differently and thus makes the continent more dependent on abroad, such as the US and China. The European Commission has also called on Member States to lower energy taxes (on electricity), so that European industry becomes more competitive.

Stiller, and more cautiously, the discussion is slowly starting in the background about better coordination about which industry where best works: what if the continent exploits the strategic benefits within Europe optimally? When Sweden and Spain, with abundant green electricity, make steel, and the Netherlands focuses on drones? Public politicians do not want to burn themselves. CPB director Pieter Hasekamp argued this in so many words in an opinion piece that he published on Friday afternoon in Het Financieele Dagblad.

‘German route’

The politics in The Hague is now not deaf to worry from industry. In the coalition agreement, the government already put a line through the intended extra co₂-League and the increase in energy tax for large users of the previous cabinet. In the meantime, the House of Representatives has called on the cabinet to quickly come up with a plan of action to restore ‘a level playing field’ with our neighboring countries.

The coalition seems to want to bring the IKC back and also in the CO₂-to make adjustments. This week, the House of Representatives supported a motion that asked for an exception for companies that cannot make it more sustainable due to an absent net connection. Minister Sophie Hermans of Climate and Green Growth (VVD) said that such exceptions are difficult to implement, because then it must be investigated per bearer who cannot make it more sustainable and whoever does not want.

The expansion of the power grid is a more complicated, and more expensive, problem. Shifting with the costs of the network rates towards Burgers is sensitive. Another option is the ‘German route’: the intended coalition has just announced that it wants to borrow hundreds of billions for, among other things, the extension of the net.

In The Hague, almost the entire House of Representatives (except Ja21 and FVD) supported a slightly different solution this week. Tennet lends money for investments on international capital markets through equity. Via a kind of gift, a so -called ‘capital deposit’ to Tennet, the network operator could borrow against cheaper interest rates. This contributes, the House of Representatives, at lower net rates, because TenneT can finance so net expansion cheaper. However, such a deposit continues the national debt.

Finance Minister Eelco Heinen (VVD), who positions himself as a strict enforcer of budget rules, is probably not a fan of this. Climate minister Hermans is still standing still about her preference in the financing of the power grid and said he would consider all options in the spring memorandum.

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