The cabinet has fallen. Less than a year after the coalition formed a government, the Netherlands is heading for the next elections. It's not the first cabinet to fail to reach the finish line, and it certainly won't be the last. But it did get me thinking about the similarities between the energy transition and politics. And if you think about it for a moment, there are some major similarities. I will highlight three.
From centralized to decentralized
It is not so long ago that we had such large political parties in the Netherlands that a coalition with a large majority in the Lower House could already be formed with two parties. The PVDA, for example, always had more than 35 seats until 2002. The later CDA even always had more than 50 seats until the late 1980s. After the last three elections, however, we needed at least four parties to form a coalition. Furthermore, we saw the number of political parties increase significantly in recent years. In 2021, a record number of 37 political parties participated in the House of Representatives elections. That's 37 parties seeking to raise their profile and represent their constituencies.
This fragmentation of politics could be compared to the change in the energy and electricity mix. The generation of energy is also more fragmented. With the advent of solar and wind power, electricity is generated much more decentrally than before. Earlier, we had large power plants (mostly coal and gas plants) that served many consumers from a single point. Due to the fragmentation of our energy supply, we also run into challenges such as predictability and availability of space on the power grid. Finally, not only do we have many more producers (from coal and gas plants to wind and solar producers), but many of those producers are consumers themselves. It makes both politics and the electricity market a lot more complex.
From long to short
An important advantage of large political parties is that it creates room for these political parties to make long-term policies. This is possible under the assumption that you are not at the helm for just one reign, but are able to work on a dossier for a longer period of time. In the current political landscape, the focus is mainly on trying to satisfy voters in the short term. After all, there are always new elections coming up. This is at the expense of long-term policies.
With more solar and wind, not only is our electricity being generated more decentrally, but the supply of energy is becoming more volatile - or movable. The sun does not shine 24 hours a day, and wind supply can also vary from hour to hour. Renewable energy, like Dutch cabinets, is often "outgoing. That in itself is not a problem, but it requires much more effort from energy companies and grid operators. They have to make sure that the electricity grid is not overloaded and also that the demand for electricity can always be met. So here too, (investment) policies are needed that look beyond the current (short-term) generation of energy and ensure that electricity grids continue to meet requirements in the future.
Need for stability
With new elections approaching, the current outgoing administration will likely continue to govern on those issues that the House of Representatives believes cannot wait. And there are quite a few. Important decisions await in the areas of security/defense, nitrogen, migration, and the budget for the coming year must also be finalized. Many a voter yearns for longer stability in policy. Something that would also be embraced by businesses because many investments for the further future - for example, in making business processes more sustainable - are not going ahead now. Not only because market conditions are uncertain, but also because political risks for companies in our country have increased sharply in recent years. Companies no longer know where they stand, and that has a paralyzing effect.
Stability is also needed for our energy supply. More solar and wind in the energy mix leads to a more volatile supply than traditional energy sources. A more volatile supply is not a problem at all, as long as the energy system is prepared for it. This means that as more solar and wind enter the mix, there must still be sufficient alternatives for the times when this is not the case.
This can be done in part by storing the electricity in batteries, for example. For now, the possibilities for long-term storage of electricity are limited. It is therefore necessary that flexible power plants also remain available that can generate electricity when solar and wind power or storage cannot. The pressurized nuclear, coal and gas power plants can - if necessary - provide a constant "base-load" of electricity. Finally, major investments are needed to expand the electricity grid to (continue to) achieve further electrification of our energy demand, and stability.
Is the energy market learning from politics?
Both politics and the energy market have become quite fragmented in recent years. In addition, the focus has shifted from long-term to short-term. Finally, the need for stability is increasingly urgent in order to unlock large-scale investments. It shows that there are many similarities between politics and energy markets. One major blackout in Spain recently showed what the consequences of a failing energy system can be for society and the economy. Let us hope that the fall of Cabinet Schoof I is also not a harbinger of the failure of the electricity market in the Netherlands and that any comparison on this point is flawed.
This column was written in a personal capacity by Hans van Cleef.
