The outgoing Dutch cabinet wants to abolish the existing net metering scheme – the so-called ‘salderingsregeling’ – for solar panels. The bill passed the House of Representatives before the November election and was discussed at the Senate on Tuesday, with the vote planned for next week.
Why you need to know this
Whether you bought a new house or want to reduce your electricity bills, you probably considered investing in a solar panel set. In the past few years, Dutch solar panel installations have surged, driven by the benefits offered by the net metering law. The outgoing government thinks it’s time to abolish this rule.
According to the outgoing minister for climate and energy, Rob Jetten, “the measure was a success, but is no longer needed,” he wrote in a post on X, the day ahead of the debate. The measure, intended to stimulate the adoption of solar panels, has contributed to their installation in millions of Dutch households. Trade associations within the solar industry align with the government’s position.
By contrast, consumer associations and some political parties advocate for keeping the measure in place. Given the lower price of panels, lower-income families can now access them, so they should be able to enjoy the benefits. But how does the salderingsregeling work?
How did the net metering law work?
When producing electricity with solar panels, you use part of the electricity yourself. The rest goes to the electricity grid. The law stated that energy companies must deduct from the electricity bills the amount of electricity that users fed back into the grid. As a result, you paid for the resulting balance of the two. This way, households with solar panels paid less for their electricity than those without. Theoretically, the annual energy cost would be zero if one generated as much electricity as one used. Therefore, the salderingsregeling drove solar panel installations, reducing the investment’s payback time.
Why does the government want to gradually phase out the net metering scheme?
The main reason for the government to phase the law out is its high cost. Minister Jetten underlined during the debate how the measure would cost €700 million annually up until 2030. With this scheme in place, the government loses out on taxes paid on electricity. Whereas a household without solar panels pays VAT over every kWh it consumes, those with them pay much less. Consequently, the outgoing Rutte IV cabinet decided to gradually decrease the tariff for selling extra power generation to the grid by nine percent per year, starting from 2023 and completing the phase-out in 2031. Since the bill hasn’t passed yet, the original plan has changed, and full benefits still stand for 2024, and potentially for longer.
How does the phase-out work?
If the law gets approved, the government envisions decreasing the tariff more than initially planned, as it keeps 2031 as the deadline. From 2025, only 64 percent of the energy fed to the grid will be deducted from the energy one consumes. The remaining 36 percent is not worthless; households with solar panels still receive some money on that share. The government decided that households feeding back power to the grid must receive a ‘reasonable compensation’. In previous proposals, such compensation was at least eighty percent of the basic cost of electricity, excluding tax and surcharges. Official numbers will come as and if the law passes.
A report by the Dutch website www.energievergelijk.nl, underlines how, between January and December 2023, prices of electricity and gas fell by 46 percent. Furthermore, according to the website, on February 5, those with a dynamic contract paid 22 cents per kWh, while those under a fixed pricing contract paid 24.5 cents. Dynamic energy contracts depend on market fluctuations, while fixed pricing establishes a price beforehand.
How is solar panel yield going to change?
If you have solar panels installed on your rooftop, you might be wondering how the phase-out would affect you. We simulated the evolution of solar panel yield with the new law in place. To do so, we took into account these factors:
- An arbitrary price of electricity per kWh of 25 cents;
- An annual solar production of 4,000 kWh;
- A percentage of self-consumption of 25 percent, so a quarter of the 4,000 kWh;
- A reasonable compensation of seven cents per kWh of electricity.
The yield of solar panels in the coming years will be derived from three components: the yield from self-consumption, net metering, and reasonable compensation. Accordingly, self-consumption is equal to the amount of kWh consumed per the price of electricity – in this case, 1,000 kWh x 25 cents. Net metering yield is the number of kWh fed into the grid – in this case, 3,000 kWh – per the percentage of electricity deducted with the net metering per the price of electricity. The yield from reasonable compensation is calculated by multiplying the number of kWh fed into the grid per the leftover percentage per seven cents.
The graph below shows how yield would vary over time as the percentage of electricity subject to net metering decreases. Over time, the yield from self-consumption remains the same, while the one from net metering falls to zero, and the earnings from reasonable compensation steadily surge.
How did the debate go?
Several party representatives underlined the necessity of keeping the law to avoid losing pace on the energy transition. Farmer’s Party (BBB), leftist Groenlinks-PvdA, and the socialist party were among those who expressed their concern. With different positions, they fear that citizens – especially poorer households – would stop investing in solar panels despite their lower prices.
After them, it was Minister Jetten’s turn to reply. He argued that the salderingsregelingen rule is outdated and expensive since it was established when solar panels were costly. In his view, keeping the scheme means not having the chance to use the money for other initiatives, and new solutions must be found in the upcoming budget laws.
Senators will vote on the matter next week. Given the positions expressed during the debate, the law seems unlikely to pass, with 44 senators out of 75 likely voting against it. Minister Jetten promised to send a letter with additional explanations to convince and answer the questions raised. It’s up to senators to decide next Tuesday, then.