Stop lobbying to stimulate self-consumption

The energy sector is lobbying for a subsidy on self-consumption by households. Self-consumption is electricity consumption that is supplied by your own solar panels. It is clear that self-consumption is beneficial for the payback period of the investment in solar panels on the roof. But the claim that this would be good for the transition is nonsense. It is mainly an indirect, unfair subsidy. It is also an ineffective subsidy and sometimes even a subsidy that delays the transition.

The lobby for subsidies for self-consumption is broad. Last year, Trilemma already pointed out a letter from NVDE, Energie Samen, Holland Solar, HIER, Energie-Nederland, Netbeheer Nederland and Energy Storage NL. In that letter, the seven organizations called on politicians to develop flanking policies to increase self-consumption of generated solar power.

On 1 April this year, a letter from the Consumers' Association, Nature & Environment, the Homeowners' Association, Aedes, the Housing Association and the Environmental Defense Department followed up with a call to the government to keep solar panels profitable for citizens. The Consumers' Association wants a subsidy in the form of a fixed fee per kWh returned for a period of fifteen years (for a maximum of 3,000 kWh per year). The Consumers' Association is therefore not advocating a subsidy for self-consumption, but does say that the proposed scheme encourages consumers to use as much of the generated electricity themselves as possible. The association states that the subsidy amount is determined in such a way that self-consumption yields approximately twice as much as returning.

The NVDE responded to these proposals from the Consumers' Association and advocated the establishment of a new subsidy scheme that encourages people to use a larger portion of their generated electricity themselves, for example through a home battery or an energy management system. The story of NVDE and many others is simple. A kWh of production from solar energy on the roof, which you do not use and return to the grid, is worthless. But if you use that kWh yourself by increasing or moving consumption, you suddenly save 30 cents per kWh.

The appeal is therefore that households can still invest in solar on roofs, provided that they consume a large share themselves. In addition, the overloaded network would then be less burdened and the coal and gas power stations would have to operate less. In short, a win-win-win situation. Good for the wallet, good for the network and good for the climate.

A simple and convincing story delivered by a broad front of energy companies and grid operators. Who dares to oppose that?

Of course it is correct that a household with solar panels on its roof, which adjusts its consumption in such a way that it does not have to supply back, takes less from its supplier. Instead of supplying back for 0 cents per kWh, 30 cents per kWh is saved. But one makes a mistake in thinking if one concludes on the basis of that comparison that this is also beneficial for society as a whole and for the energy transition.

It may well be that with solar panels on the roof, electricity can be generated for around 5 cents per kWh. But that is electricity that is generated at times when electricity is worth little or nothing. Even a negative price is possible. The 30 cents per kWh is the rate that a supplier can offer to supply electricity at any time. So also on cold, dark winter evenings. Moreover, the consumer can choose how much electricity he takes and when. And that 30 cents per kWh includes a hefty tax. Firstly, the VAT of 21%, but also an energy tax of over 12 cents per kWh (including VAT).

So by consuming the production from solar energy on the roof itself and thereby saving 30 cents per kWh, the household benefits from avoiding tax and from the fact that the supplier's rate is a rate that applies for all hours of the year. The household benefits, but it does not lead to more prosperity and other households pay the bill. The lower income for the state from energy tax and VAT is ultimately paid by all citizens. And the higher purchase costs for the supplier are paid by households without solar energy on the roof.

The background to the broad lobby is of course the abolition of the netting scheme, which makes the payback period for households with solar on their own roof considerably worse. That is annoying, and so there is a frantic search for solutions to ease the pain. The problem with this is that no honest story is being told. The suggestion is made that solar on roofs would still be cheap and that solar on roofs can become profitable with a few clever tricks.

The 'self-consumption trick' can be called an indirect subsidy. It is then a subsidy that will mainly benefit citizens who are somewhat more prosperous than the average Dutch person. People with their own home, some savings in the bank and perhaps an electric car in the driveway. The average Joe pays the bill. That is extra painful, because there is no affordability problem at all, as Peter Mulder of TNO clearly explained during the round table discussion on affordable energy bills. He said that there is only a distribution issue. The problem lies with people with a low income in a home with poor energy quality.

An additional problem with the framework that solar energy on a roof is still profitable if one consumes a lot oneself, is that it creates false expectations. Suppose that the Jansen family decides to buy ten panels after hearing that story. They calculate that they can use a large part themselves and arrive at an expected payback period of twelve years. That is certainly not a goldmine, but the Jansen family does not see that as a big problem. The savings interest rate is also low and so the family has the idea that they are doing something good for the transition.

But then. First of all, that 30 cents per kWh turns out to be a bit high. Suppliers now offer electricity for about 25 cents per kWh. Suppose that the energy tax is then reduced. If the energy tax were to be abolished completely, electricity would only cost 13 cents per kWh. So the Jansen family realizes in 2027 that they are not saving 30 cents per kWh, but only 13 cents per kWh with self-consumption. The payback period suddenly shoots from twelve to about 25 years. In short, the Jansen family will never earn back the investment, feels cheated and, with an opportunistic lawyer and fellow sufferers, a mass claim is quickly filed.

The idea of ​​shifting electricity consumption to times when the price of electricity is low is the right idea. The point is that this idea applies to all households, regardless of whether or not they have sun on their roof. If you have a boiler, it is sensible to heat water when the price of electricity is low, for example at 1 p.m., so that you can shower later. You can call the boiler a solar boiler, which sounds nice and green, but it remains a regular, old-fashioned electric boiler. A device that we actually want to get rid of, because heat pumps have a much lower energy consumption. (The idea of ​​a subsidy for a solar boiler is promoted by Vattenfall , among others.)

A similar story applies to the home battery. If you have a home battery, it is wise to charge it when electricity prices are low and discharge it when prices are high. Again, it does not matter whether or not there are panels on the roof.

And what if those panels are on the roof? Well, they should continue to produce as long as the electricity price is positive. If the electricity price is negative, then it is best for society as a whole to switch off the solar panels. It is unwise to continue producing, even if that energy can be stored in the boiler or in the home battery.

Dealing with solar on roof, home batteries and shifting consumption in this way leads to the lowest costs and to the lowest emissions for the system as a whole. The business case for an individual household looks, as already explained, different.

An extra kWh generated at a time when electricity is worthless, does not become more valuable by storing it or using it yourself. It also does not help to share that kWh with neighbors. If electricity is worthless, it is wise to store or use electricity, but not to start producing more electricity.

Shifting consumption to moments of low electricity prices is beneficial. Stimulating self-consumption is not. Stimulating self-consumption of solar energy on the roof will also lead to additional energy consumption. The electric boiler disguised as a solar power boiler was already an example of this. Another example is air conditioning. There are already many households with many solar panels on the roof, who are considering purchasing air conditioning after the end of the net metering scheme. In that case, no consumption is shifted but additional energy consumption is added. The energy transition obviously does not benefit from this.

In addition, all these devices also have to be produced (resulting in additional energy consumption and emissions) and installed by skilled workers, who are already in short supply.

At the moment, companies that offer the sale of, for example, home batteries in combination with an energy management system (EMS) are springing up like mushrooms. An EMS is an operating system with software that can be used to control devices, such as a home battery or a boiler. But the charging station on the driveway can also be connected to an EMS. The companies that offer this promise mountains of gold and short payback periods.

Now, there is nothing wrong with intelligently controlling these types of devices, but in practice, these EMS systems will be used to maximize self-consumption. It may well be that charging the car or heating the water in the boiler is started at 9:00 in the morning, because the panels on the roof start producing. Especially if the panels are facing east. The goal is to prevent feeding back into the grid. From a social perspective, that is a bad idea. Electricity is often still relatively expensive at 9:00. Producing as much as possible is of course good, but storing electricity in a battery or heating water in a boiler is highly unfortunate.

EMS is a clever device, but using EMS to increase self-consumption is profiting at the expense of others.

It has already been explained that households should respond to the market price of electricity. Only then will they contribute to an affordable electricity supply and a successful transition. But in practice this is not so easy. In order to ensure that the market price is passed on to households as effectively as possible, the energy tax on electricity should first be abolished or at least significantly reduced.

Secondly, households should opt for a dynamic energy contract. Making a dynamic contract mandatory seems impossible and undesirable. Impossible because legislation requires that households must be able to opt for fixed-price contracts. And undesirable because some consumers cannot bear the risk of price peaks or periods of very high prices.

There is no perfect solution, but there are possibilities. A possible solution was previously described in Trilemma . The idea that Sjak Lomme launched is to combine dynamic contracts with a financial hedge . He explains that with such a hedge, the consumer and supplier agree on a fixed price for a profiled or non-profiled volume, whereby that price is settled with realised hourly prices. So if the (volume-weighted) average hourly prices are higher than the fixed price, the supplier pays the difference to the buyer and if the market prices are lower, the buyer pays the difference to the supplier.

This solution offers freedom of choice for consumers, including to agree on fixed prices, while there is always an incentive for consumers to respond to the market price. They do not have to do so, but the possibility is always there. However, it is also a somewhat complex solution, which will encounter a lot of resistance if it were to become mandatory.

A simpler idea is to redefine peak and off-peak hours. Peak hours are now usually defined as the hours between 07:00 and 23:00 on weekdays. This traditional definition has worked well for many years, mainly because it is simple and clear for households. However, this definition has long been outdated, especially due to the large share of solar energy. The high prices now occur in the early morning and in the evening. Peak hours could then be defined as the hours between 07:00 and 10:00 and between 17:00 and 22:00 on weekdays. It is by no means a perfect solution, but it is an idea that can be implemented relatively easily.

As long as the energy tax remains in place, as long as households can opt for fixed-price contracts and as long as suppliers find it difficult to distinguish between households with a different profile in their pricing, it is inevitable that households will not be exposed to the perfect incentive of the current market price. At the same time, households will be allowed to direct their behaviour towards reducing their own energy bill.

In this situation, households will sometimes be stimulated to display behaviour that will reduce their own bill, but will make the electricity supply as a whole more expensive. In practice, this situation can never be completely prevented. And it does not have to be that bad. It is an observation that must be understood when energy policy is being shaped. It also means that these unavoidable inefficiencies should not be reinforced, for example by introducing a subsidy on own consumption.

It must be noted that solar energy on roofs in households, even after the netting scheme has been abolished, is still stimulated by an indirect subsidy. This indirect subsidy is still quite large, as long as the high energy tax on electricity consumption remains. This indirect subsidy is also still quite large if households use a lot of electricity at times when the sun is shining, however unfair that may be for households with just as much solar energy on roofs, who are super economical with their electricity consumption, for example because they do not want a car or air conditioning.

At the same time, it is clear that the rollout of solar on roofs in households can stagnate considerably as a result. The question is whether that is a bad thing. If it is determined that solar on roofs is necessary for the transition and if it is determined that the rollout of solar on roofs cannot be delayed, then there is an excellent alternative. In that case, maximum efforts could be made for larger solar on roof projects. Projects with around 100 to 200 panels that could be realised on the roof of a sports hall or apartment complex.

Energy cooperatives are eager to provide advice and assistance to such projects. If necessary, the subsidy for such projects should be increased. The advantages of these projects compared to small projects with ten panels on the roof of one home are legion. The projects are cheaper per installed panel, they deliver more energy for a lower investment. The required subsidy is therefore lower. There is no perverse incentive to invest in additional devices that consume energy or in unnecessary home batteries. There is less demand on skilled workers. And the climate objectives are achieved sooner. That is a win-win-win-win situation.

The government, but certainly also the electricity sector, should communicate well about solar on roof and self-consumption. Support is important. But support is ultimately only achieved with an honest story. Such an honest story can consist of the following messages:

Purchasing batteries or devices that lead to additional consumption with the aim of minimizing feed-in is bad for the energy transition.

1. Save energy.
2. Investing in solar panels on a roof is possible, but be aware that circumstances may change and the investment may not be recouped.
3. If you still want to invest in rooftop solar, it is better to invest in larger rooftop solar projects, for example through a local energy community.
4. Shift your consumption to times of low market price, which is normally associated with a large supply of sustainable electricity, not with whether you or your neighbors happen to have some electricity left over.
5. Consider a dynamic tariff. If a dynamic tariff is too risky, you can consider adjusting your consumption to the market price. It does not give you a direct financial advantage, but you do contribute to low system costs and a successful transition.
6. If you have solar energy on your roof, you can try to minimise the amount of energy you feed back into your home by adjusting your consumption. This is good for your energy bill, but there is a good chance that you will then incur costs that others will pay.
7. If you have solar panels on your roof and the market price is negative, it is wise to switch off your panels for a successful energy transition.
8. Purchasing batteries or devices that lead to additional consumption with the aim of minimizing feed-in is bad for the energy transition.