The Netherlands is finding out just how expensive offshore wind power really is. Last year the Dutch government paid 4.5 billion euros ($6 billion) in subsidies to wind producers. With a population of only 16.6 million, the Netherlands subsidizes wind production at an astounding cost of $370 per Dutch resident. This is unsustainable for the Dutch government, which has decided to reduce its own costs and transfer the subsidy costs to Dutch electricity consumers.
Since 1996, the Dutch government has been providing an 18 euro-cent (24 cents U.S.) per kilowatt hour subsidy to wind power producers. To put these subsidies in perspective, the average retail price for US electricity is only 10.60 cents per kilowatt hour. In other words, American electricity rates are less than half the Dutch’s wind subsidy.
These overly-generous subsidies are one reason that electricity rates in the Netherlands are more than US $0.25 per kilowatt hour—more than double the $0.106 average retail price per kilowatt hour in the United States.
One problem with the Netherlands’ generous subsidies is that both electricity customers and taxpayers end up paying for them through higher rates and higher taxes. Because the costs have grown so great, the Dutch government is working to transfer the cost of the subsidies directly to electricity customers through higher electricity rates. Even though rates are already high in the Netherlands, they will increase even more to pay for the wind subsidies.
With such lavish subsidies are driving up the cost of electricity, it is understandable that the Duke of Edinburgh this weekend called wind power a “fairy tale” and “an absolute disgrace.” English energy customers, like Dutch customers, are seeing their electricity bills rise thanks to taxes used to pay for more wind subsidies. Last year electricity customers in England paid an average of £90 (US $143) a year to subsidize wind farms and other renewable producers.
The wind industry claims that wind is now cost competitive with natural gas. The Dutch experience suggests otherwise. If wind were cost competitive, it wouldn’t need subsidies and special favors in Europe or the United States.