Who beats the Dutch tax department? Understanding 20 years of lobby about energy self-supply and collective net-metering
– Henk-Jan Kooij –
There have been various attempts to organize renewable energy production in a collective way in the Netherlands, for example through collectively owned wind turbines and solar PV on collective roofs. Most of these social innovations did not work due to legal issues and tax rules. However, one innovative model provided space for solar PV on collective roofs, namely the postcode rose (PCR, postcoderoos). This biography briefly describes the creation, development and lobby for improvements of this social innovation.
1. Green energy versus grey energy
Compared to ‘grey’ energy, ‘green’ energy is relatively expensive, as negative externalities such as contributing to climate change or air pollution are not calculated in the price of ‘grey’ energy based on fossil fuel sources. As a consequence, ‘green’ renewable energy (RE) faces difficulties in entering the energy market. To enable and encourage the production of renewable energy, regulations need to be changed or created to make this happen. Changing governmental rules is never easy, especially if they go against the vested interests of both government and energy sector.
The postcode rose is a model which enables collective net metering for citizens away from their individual property or roof. Citizens within the borders of one postcode and adjoining postcodes. The regulation provides a tax discount on the energy tax for the citizens that collectively own the renewable energy production, for example through a cooperative or homeowner association (VVE).
2. Three attempts for grassroots innovation for collective RE production
I. Self-supply and de Windvogel
In 1998, Dick van Elk of cooperative de Windvogel started the organisation SGEP (Samenwerkende Groene Energie Producenten) to make consumption of self-produced RE possible, but this first initiative was never successful. Years later, in 2009, de Windvogel initiated a successful pilot project on self-supply with ENECO energy company, it was not continued after 1 May 2010. This was continued in 2011 with another energy company, called ANODE, which included the energy self-supply of 200 members of the wind cooperative. Essentially, the reasoning was that, although the electricity was not produced near the owner, the owner should have the right to use the electricity self, without interference of the Tax administration, framed as the lettuce-model (kropje sla model). To make this possible, the cooperative provoked a test case to see whether this was legally sound. In 2012 the Tax inspector did not approve and ruled against self-supply. De Windvogel objected at the Tax judge in The Hague, and tried to work via Parliament. In July 2013 the judge rules in favour of the Tax inspector. Anode appeals, but the judge ruled again in favour of the Tax administration.
II. Nijmegen-Lent: Solar PV park on rooftop of municipal owned schoolbuilding ‘de Ster’
In 2011, the initiative for collective PV on a roof started in Nijmegen-Lent, on the school building De Ster, where Felix Sommerdijk initiated Zonnepark Nederland, an organisation where the municipality and inhabitants of Lent were enrolled to install PV on this roof. Sommerdijk was the co-owner of the company 4 New Energy Solar Systems, together with Loek Janssen. Together with the owner of the school building – the municipality of Nijmegen – he initiated a collective solar PV, installed on the roof of the school building, together with Liander (the net operator), but owned by individual citizens from the neighbourhood. This was a pilot case to test the tax system, and the initiative reckoned on political support, as also the Ministry of Economic affairs was in favour. 23 August 2012 was the big launch of the solar park, together with national MP Jolande Sap. However, it turned out that the tax administration was not willing to cooperate, which failed the project. However, the individual members were saved by the municipality of Nijmegen, who ‘bought’ all the PV panels of the individual citizens.
III. ‘Virtual balancing’ (virtueel salderen) at Homeowners Associations (VVE’s) in Amsterdam
In 2011, the municipality of Amsterdam announced to start with a project for Owners associations to collectively produce electricity. In the spring of 2012, three pilot projects (de Vrolijke Eik II, Nieuwe Kerkstraat and Renswouderstraat) started for ‘virtual balancing’ (virtueel salderen), in order to use collective roofs to have a tax benefit through balancing production and consumption. Possible for individual home owners (behind the meter), but not for Owners associations (before the meter). The majority of roofs in Amsterdam are collectively and not individually owned, so this would make it difficult to reach PV production targets. Energy company NUON and grid operator Liander participated, and the solar panels were installed by Zonnestroom in September 2012. The pilot project was not continued after 2012 (Project by Gemeente Amsterdam and Alliander).
3. Attempt to change the tax regime
As the projects were not successful in providing a working innovation for collective RE production, there were multiple attempts to change the regime:
- In November 2008, MP Samsom (PVDA) requested a research on the possibilities of self-supply (also framing it according to the Lettuce-model), which was approved by parliament. The response by the Minister of Economic Affairs, Maria van der Hoeven, was reluctant and proposed other means to increase local support for wind energy projects.
- In June 2011, MP Samsom (PVDA) tried to change the law (via the Crisis- en herstelwet) to enable collective production of electricity for members of cooperatives, but the minister and parliament did not cooperate.
- End of June MP Jansen (SP) tries the same via a resolution (2011 June 29 Tweede kamer. Motie Jansen c.s. Voorzienings- en leveringszekerheid energie). But this was not carried out by Cabinet.
- December 2011, MP Samsom and Jansen pose a motion on Self-sufficiency (zelflevering), but a small majority rejected the amendment 76-74).
Dissolution of parliament in 23 April 2012 induced the so-called Spring agreement (Lenteakkoord; 26 April 2012). This budget agreement introduced a subsidy on PV installations individual households and promised research to test feasibility of collective net metering (salderen).
The innovation: the introduction of the Postcode Rose as a model for collective RE production
After the elections of 12 September 2012, the new cabinet presented an Energy tax discount for cooperatives that produce their own local energy in their coalition agreement. This formulation was translated literally into the Energy agreement of 2013. This agreement was signed by a broad coalition of societal organisations, including business organisations, environmental organisations and was supported by government. The agreement introduced the Postcode Rose (postcoderoos), which demarcated the range of citizens who could join a collective RE project. It stipulated that citizens participating in energy cooperatives or Homeowner Associations, could enjoy an Energy tax discount of € 7,5 ct/ kWh excl. VAT. This energy tax was originally an environmental taxation scheme (Regulating Energy Tax), installed in 1996, as a kind of CO2 taxation, but never named this way. In 2004 it was transformed into an the Energy Tax, as part of the general environmental taxation scheme.
From 2014 onwards, umbrella organisations ODEdecentraal and HIER opgewekt develop knowledge files on the PCR, what is was, how it worked and how to implement it. This led to a codified model, which was essentially the same at many locations, but turned out differently due to different local situations (e.g. support from local and regional government, businesses etc.).
The PCR was formalized unaltered in the Tax plan for 2014, except for an amendment which enable ten years of tax certainty, that was lobbied for by the energy cooperatives. According to the the vision of cabinet (2013), citizens appreciate the possibility to produce their own RE. Furthermore, local energy had the potential to contribute to the goals of the national energy policy, and could be a source of innovation and ‘energy-consciousness’. Consequently, citizens participating in collective production of RE would be rewarded with net metering and PCR tax discount.
Immediately after the approval of the Tax plan, energy cooperatives in the Netherlands started to express their concerns: the business case for a PCR was too thin due to the ‘allegedly’ double VAT, there should be long term certainty towards 15 years, the spatial demarcation should be municipal borders instead of postcode rose zones, the problems with the compulsory and costly second connection should be solved, entrepreneurs and self-employed should be able to join a PCR. Indeed, research of Atrivé (2014) confirmed the unfeasible business case.
4. Garnering support to create feasible collective solar roofs
In 2014, the chairman of Morgen Groene Energie cooperative and the chairman of the national lobby organisation for community RE, ODE decentraal, negotiated with the Ministries of Economic affairs and Finance (including the Tax Administration) to improve the feasibility of the PCR on the basis of the business case of Energy cooperative Morgen Groene Energie. The negotiations centred around the feasibility of the PCR model as initially calculated for the Energy Agreement, and in particular the optimistic assumptions on the costs of a PCR business case by government were subject to debate. The employees of the Ministry of Economic Affairs were very cooperative, as it was their minister who signed the Energy Agreement. The minister himself also repeatedly expressed that this regulation had to become a success and that he was dedicated to make this happen, but that patience was needed to see how this new regulation worked out in practice. The employees of the Ministry of Finance were there to communicate the exact rules and regulations around the PCR and were figuring out how to implement this new regulation in practice, in a coordinated manner that was workable for the Tax Administration.
In addition to the negotiations with the ministries, they informed MPs on issues. As a result of these negotiations, the costs for the second grid connection were resolved, entrepreneurs were allowed to join and 15 year certainty was. The ministries did not adequately respond to the feasibility issues of the PCR, to great frustration of Morgen Groene Energie and ODE decentraal. The biggest issues was the VAT, the sole responsibility of the Tax administration, which had a negative impact upon the feasibility of the business case. Both chairmen of Morgen Groene Energie and ODE decentraal were well-connected with several parties within parliament, and consequently, they knew that there was a majority in parliament that supported further improvements to the PCR. However, the ministries of Economic affairs and Finance had already taken action to improve the regulations of the PCR, so there was no political need for them to add regulations to the PCR regulation.
To push the MPs and ministers of Economic Affairs and Finance to improve the feasibility of the PCR, Morgen Groene Energie and ODE decentraal used the media attention given by the TV program EenVandaag on 25 October 2014. In addition to the media attention, they mobilised their contacts within parliament, and also their contacts at the SER standing committee (safeguarding the Energy Agreement of 2013) who could directly communicate with the Minister of Economic Affairs. In addition to public appearances, the chairs of Morgen Groene Energie and ODE decentraal continued negotiating with employees of the ministries of Economics and Finance and exchanged calculation examples in the form of spreadsheets to prove the unfeasibility of the business case of the PCR. These calculations were put online and were communicated with the wider community of energy cooperatives, also via blogs and the website of umbrella organization HIERopgewekt. Also, energy cooperative Morgen Groene Energie kept on communicating with the Tax Administration about their fiscal construction concerning the VAT.
In September 2015, director of the SER standing committee, Ed Nijpels, negotiated with the cabinet for a tax benefit of 9 cent/kwh, pushed by umbrella organisations such as ODEdecentraal. During the presentation of the budget for 2016, a 9 cent tax benefit would be implemented from 2016 onwards, which made it possible to develop feasible business cases for collective solar projects. However, an amendment on the 2016 Tax plan by Schouten, Grashoff and Van Weyenberg (17 November 2015) proposed to exempt PCR projects from tax, which was adopted by the House of Representatives. In addition, this amendment adopted the possibility of locating the production installation not only in the centre of the PCR, but also in one of the ‘leafs’ of the PCR. Nowadays, the PCR has also been named ‘postal code caterpillar’ (postcoderups).