Preliminary results of 2021 SDE++ subsidy application shows high market interest

The preliminary results of the 2021 SDE++ subsidy application round have shown remarkably high market interest. Although the number of applications is approximately the same as submissions in 2020, the total claimed amount almost doubled, which is an indication of the increased size of the projects that applied for subsidies in 2021.

Preliminary results SDE++ 2021

The SDE++ subsidy scheme offers an operating premium feed-in tariff subsidy for renewable energy and other CO2 reduction technologies that aims to compensate the difference between the cost price of the technology and the market price of the avoided CO2. Priority is given to the applications with a lower cost price, so project developers are provided with an incentive to realise their projects at the lowest costs possible. Each SDE++ subsidy round opens in several application phases.

For 2021, the first application phase (up to EUR 60 / tonne of CO2) and the second phase (up to EUR 80 / tonne of CO2) mainly consisted of applications for CCUS and solar (i.e. large solar-PV systems on rooftops). The third phase (up to EUR 115 / tonne of CO2) consisted mainly of applications for CCUS, solar PV projects and e-boilers. During the fourth and final phase (up to EUR 300 / tonne of CO2) mainly applications for geothermal, biomass and fermentation, CCS, CCU and e-boilers have been submitted.

For the SDE++ 2021 application round a total budget of EUR 5 billion was made available. The Netherlands Enterprise Agency received 4,109 subsidy applications for a total budget claim of EUR 12.1 billion (compared to 4,112 applications for a total budget claim of EUR 6.4 billion in 2020). Therefore, it can be concluded that applications for larger projects have been submitted during this SDE++ round, a trend that was already noticeable in 2020.

Solar remains the technique with the highest number of submissions (3,915 applications for a total of EUR 2,276 million). It should be noted, however, that according to a recent evaluation of the predecessor of the SDE++ subsidy scheme, which was the SDE+ subsidy scheme in effect from 2011-2020, the percentage of non-realisation of solar parks is noticeable. Together with the RVO, the government will examine what measures can be taken to tackle the main reasons for non-realisation (being inadequate roof structures and grid congestion).

The technique with the largest budget claim is carbon capture storage and utilisation (CCUS), with a total claim of EUR 7,345 million (more than three times higher than the figure of EUR 2.1 billion for 2020). What is remarkable is that only six submissions have been made for onshore wind projects.

The following is an overview of the applications for the different technologies.

Preview SDE++ 2022 and 2023

This year, the SDE++ application round will be open from 28 June to 6 October 2022. The total budget for this round will more than double to a total amount of EUR 13 billion. This year, a number of new categories will become eligible for subsidy, such as hydrogen production installations that are directly connected to a wind or solar park (electrolysis installations that are directly connected to the electricity grid were already eligible for SDE++) and hybrid industrial glass furnaces and industrial heat pumps (with a minimum of 3,000 full load hours).

The evaluation of the SDE+ subsidy scheme has shown that as a result of the phased opening, which aims at cost-efficient deployment of resources, the development of certain techniques that are less cost efficient but nevertheless essential over the longer term, lags behind. Examples include geothermal energy and potentially CCS and hydrogen. For this purpose, the SDE++ scheme will be amended from 2023 in such a manner that every technique will have a reserved budget (i.e. a 'fence system'), which ensures that the technology for which the fence is intended has a higher chance of receiving a subsidy grant. As this envisaged amendment of the SDE++ scheme requires state aid approval, discussions with the EU Commission will be initiated soon.

SDE++ post 2025

The SDE++ is the most important scaling-up instruments for the expansion of renewable electricity. After 2025, however, renewable energy will no longer be eligible for the award of SDE++ subsidies. Although certain technologies, such as solar PV, may no longer need subsidies by 2025, this will not be the case for other renewable technologies. The Minister of Climate and Energy has therefore ordered studies into how renewable electricity development can be stimulated after 2025.

In view of the considerable steps that still need to be taken to reduce CO2 emissions, the high level of interest in the SDE++ and the increased size of the projects can be considered good news. The final results of the SDE++ 2021 should be published at the end of spring and the results of studies into future incentive scheme for renewable energy are expected to be published before the end of 2022.

For more information on SDE++ subsidy applications and the renewable energy sector in the Netherlands, contact your CMS client partner or local CMS experts: