2023-06-26 08:11:11
What does it mean for Dutch industry that cheap energy is readily available in countries with more sun, wind and space? A possible consequence is that part of the industry will move abroad, say researchers from CE Delft on Monday in the report Exploring a fossil-free industry, written on behalf of the environmental organization Natuur en Milieu.
Countries that generate renewable electricity and thus make the popular green hydrogen can sell it to companies in the Netherlands. Such as Tata Steel, which wants to use the hydrogen to convert iron ore into pig iron and then turn it into steel. But why shouldn’t countries that have iron ore and green energy, such as Australia and Brazil, start producing their own pig iron? Tata can buy that pig iron to make steel, but will pay more for it than for iron ore.
An important factor is that renewable energy will become cheaper in countries with a lot of sun, wind and space than in the Netherlands, say the researchers. Even if the Netherlands has 70 GigaWatt of wind energy in the North Sea in 2050.
Significant for the Netherlands
“Wind at sea is relatively expensive compared to solar panels,” says Bettina Kampman, energy and fuels researcher at CE Delft. “In the South, the sun is higher and shines all year round.” She calls the deteriorating competitive position due to energy costs ‘drastic for the Netherlands’.
‘From an economic point of view, this means that energy-intensive products that are easy to transport can no longer be produced competitively in the Netherlands’, the report states. If such semi-finished products are relatively expensive in the Netherlands, it is cheaper to import them. This applies, for example, to aluminium, zinc, pig iron, ammonia, methanol and synthetic fuels. But also for polymers, from which plastics are made.
Sculpture Anne Blaak
A preview of the future
Europe can maintain its basic industry, but only at higher costs than imports. It is therefore a choice between cheap products and independence from other countries’, the researchers continue to write. To keep companies here, industrial policy will be needed, for example in the form of subsidies.
Last year, the Aldel aluminum factory in Groningen went bankrupt and the chemical industry and the production of fertilizer and zinc were scaled down due to high energy prices. The researchers call this a preview of what might happen in the future.
At the same time, new developments offer good opportunities, says Michèlle Prins, program leader for sustainable industry at Natuur & Milieu. “Especially for companies that create a lot of added value and use relatively little energy.” This is the case, for example, in the manufacturing industry, which produces machines, car parts, solar panels or batteries. The reverse is true for refining: it costs a lot of energy and yields relatively few extra euros. Furthermore, the recycling industry, for example, will grow considerably.
More expensive energy than the US and China
Energy costs are important, says Martijn Broekhof, head of climate, energy, innovation and sustainability at the Association of the Dutch Chemical Industry (VNCI). But the Dutch energy-intensive industry has been unable to compete on energy prices for some time, he notes. “Since the United States started drilling for shale gas, our gas costs have been higher than there. Furthermore, the Groningen gas has disappeared. They can also produce cheaper in China and the Middle East.”
“The fact that companies do invest here is because we also have lasting advantages,” he continues. “Such as the deep-sea ports, the good connections with the hinterland, the industrial infrastructure and the highly educated employees. That all counts.” Kampman of CE Delft agrees.
Ammonia from Egypt and Norway
Broekhof calls the possibility real that the Netherlands will import more ammonia, an important substance in the chemical industry. “That also happened last year because of the high gas prices in the Netherlands. The ammonia then came from Egypt and Norway. The American Inflation Reduction Act also encourages companies to produce green hydrogen in the US. This invites more investment in the US chemical industry, possibly at the expense of the Netherlands.” You can make green ammonia from green hydrogen.
The report, which was received by Minister Micky Adriaansens (economic affairs and climate) on Monday, outlines how Dutch industry can become fossil-free in 2037. “That sounds radical, but it isn’t,” says Prins. “Brussels wants the industry to be climate neutral by 2039. This research goes a step further, namely going back to zero fossil fuels two years earlier.” Kampman: “To achieve that, you have to ensure that clean production is a better revenue model for companies than fossil production.”
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