ACM Explores the Introduction of a Feed-In Tariff for Electricity Producers

Published on Oct 31, 2024

The Dutch energy regulator (ACM) is exploring the introduction of a feed-in tariff for electricity producers to ensure a fairer distribution of rising grid costs amongst all users of the grid.

The energy transition requires a shift away from fossil fuels and a significant increase in renewable electricity. As demand for transport capacity is expected to grow significantly in the years ahead and available transport capacity on the electricity grids is currently already scarce, far-reaching measures will be required to reinforce and expand of the grids. At present such investments are being financed by the regulated transport tariffs charged by the grid operators to electricity consuming parties.

The tariffs that grid operators charge to the parties that are connected to their grids are laid down by law in the Electricity Tariff Code (Tarievencode Elektriciteit). It sets maximum tariffs for transport of electricity. At this moment these tariffs only apply to electricity consumers. Producers are excluded. The reason for this exemption lies in the fact that a feed-in tariff for producers was not considered necessary at the time because producers were used to pass on their costs to end users. Moreover, since a large part of the Dutch electricity demand came from abroad, a feed-in tariff for producers was undesirable since it would have led to a competitive advantage for foreign electricity.

Feed-in tariff options

The ACM believes it is now time for a different and fairer distribution of the rising grid costs through the introduction of a grid tariff for electricity producers (a "Feed-in Tariff") and has commissioned research firm CE Delft to explore different variants of a Feed-in Tariff and their effects on electricity producers and the energy market. A link to the CE Delft report can be found at the end of this article.

While the ACM has not yet decided on the exact structure of the Feed-in Tariff, it is anticipated that a future feed-in tariff may be based on one of the six models examined by CE Delft. These options include:

  1. Standard tariff: fixed component based on the contracted capacity of the connection (kWcontract), and highest monthly peak load (kWmax);
  2. Peak-use tariff: fixed component based on capacity adjusted for peak hour injection into grid;
  3. Volume based tariff: variable component based on production feed-in tariff differentiated by time of grid use, taking kWcontract and kWmax into account;
  4. Location based: combined peak-use and volume-based tariff, taking kWcontract and kWmax into account;
  5. Volume based tariff: based on the production volume (kWh); and
  6. Deep connection costs: one-off CAPEX increase based on grid connection capacity.

Reaction of stakeholders

Support for the introduction of a Feed-in Tariff is divided. Grid operators are generally in favour and see it as a good development. However, Energie Nederland (the leading association for Dutch energy producers and suppliers) is strongly opposed, fearing that the tariff could disrupt the energy transition and compromise the affordability- and security of electricity supply.

NedZero and Holland Solar (branch associations for wind and solar energy producers) are also opposed. They believe that if there will be a Feed-in Tariff, then that tariff should only apply to new projects for which a final investment decision has yet to be taken, to ensure that the business case for existing projects remains unaffected. In addition, they advocate for an exemption for offshore wind projects because offshore wind projects do not technically qualify as a grid (but instead as radial non-redundant connections), and article 42a of the Electricity Act 1998 stipulates that no transport tariffs may be charged to producers connected to the offshore grid. Instead, NedZero and Hollar Solar believe that the costs of the offshore grid should be borne by subsidies, tariffs for offshore electricity consumers, and borne by the grid operators that operate the onshore grid.

Next steps

While details about the scope of the proposed Feed-in Tariff remain uncertain, its introduction appears inevitable. The ACM expects to publish a draft decision to introduce a Feed-in Tariff in 2025. Once released, it is expected that interested parties will be given the opportunity to give their view on the proposal through an internet consultation.

Press publications by the ACM, the CE Delft study report, and views of industry associations can be found via the corresponding links (only available in Dutch).