IEEJ：December 2017○ｃIEEJ 2017
Special Bulletin
A Japanese Perspective on the International Energy Landscape (354)

December 15, 2017

Dutch Energy Transition Focusing on a single “E” principle,“Environment protection”
Ken Koyama, PhD
Chief Economist, Managing Director
The Institute of Energy Economics, Japan
Between December 10 and 14, I visited the United Kingdom and the Netherlands for talks withlocal energy experts and industry people on the international energy situation involving mainly
Europe. The talks included interesting discussions on a future energy supply and demand structurereform or energy transition facing the Netherlands. In the following, I summarize my personal
impressions on the matter based on the discussion with the experts:
According to BP statistics, oil in 2016 accounted for 47% of Dutch primary energy supply,
followed by 36% for natural gas and 12% for coal. Fossil fuels thus capture 95% of Dutch primaryenergy supply. Renewable energy including wind accounted for only 4% and nuclear energy for 1%.
Non-fossil energies’ share is limited at present.
As for oil as the largest energy source for the Netherlands, the country depends almost fully onimports in the absence of domestic oil resources. Regarding natural gas as the second largest energy
source, however, the Netherlands produced 40.2 billion cubic meters against 33.6 Bcm inconsumption in 2016, indicating a net export position. Natural gas is thus the cornerstone of theNetherlands’ domestically produced energy.
Playing a central role in Dutch natural production has been the Groningen gas field, one of thelargest gas fields in Europe. The gas field was discovered in 1959 and started production in 1964. Its
development and production reportedly paved the way for the development of the North Sea oil andgas field development later. Thanks to growing production in the Groningen gas field, Dutch gas
production peaked at 82.3 Bcm in 1977 and remained in a 60-80 Bcm range for more than 30 years,
allowing the country to export gas to its neighbors while satisfying domestic demand. The gas field
has played a key role in supporting energy supply and the economy in the Netherlands.
However, a major change has occurred at the Groningen gas field. Since the 2000s, gas
production has growingly been alleged to have caused frequent earthquakes around the gas field,
developing into a social problem. In November 2015, the Dutch government came up with a policyof limiting Groningen gas field production to 27 Bcm per year at last. It has gradually toughened therestriction in response to the growing social problem. In October 2016, the government lowered theannual production ceiling to 21.6 Bcm. Some people have branded the restriction as insufficient andcalled for a further reduction in production. How the government would respond to such call has
been attracting attention. In fact, Dutch gas production declined rapidly from 68.6 Bcm in 2013 tothe abovementioned level of 40.2 Bcm in 2016.

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Through the talks in the Netherlands, I acknowledged that production at the Groningen gas fieldis certain to sharply decrease, though with no specific level known, and that how to make up for thegas production decline is the most important energy challenge facing the Netherlands.
A priority energy source expected to solve the challenge is renewable energy including windpower. The Netherlands has already proceeded with large-scale onshore wind power development
and now is expected to launch offshore wind power development in the future. As wind and otherrenewable energy power generation has seen a rapid global fall in power generation costs and emits
no carbon dioxide, renewable energy is expected to make great contributions to the Netherlands’building of a low-carbon society. A particularly interesting fact is that the Netherlands is consideringa large-scale scheme to cooperate with neighboring countries in developing the entire North Sea,
known for oil and gas production center, into a CO2-free wind power generation region, without
limiting offshore wind power development to waters off the country, to secure its own electricity
supply.
Another interesting point is that the Netherlands is planning to take advantage of its existing
natural gas infrastructure to use gas energy other than domestically produced natural gas. Short tomedium-term options include LNG in which international trade has been expanding. Known as an
agricultural giant, the Netherlands is also considering using abundant domestic agricultural residues
for biogas production. A long-term option under discussion is a power-to-gas concept in whichsurplus electricity emerging from expanding wind power generation and an electricity demand
pattern change would be used for producing CO2-free hydrogen for existing gas infrastructure. In
this respect, a scheme to develop a green hydrogen economy is under consideration.
Through the talks in the Netherlands, however, I felt that Dutch energy experts were seeking anenergy transition including a shift from domestically produced gas to renewable energy andhydrogen only in the context of reducing CO2 emissions or building a low-carbon society. As amatter of course, a key purpose of the energy transition is to reduce carbon emissions. Like a mantra,
however, they repeated CO2 emission reduction, decarbonation and a sustainable society. My
impression is that the Dutch situation differs sharply from the Japanese situation. When I asked if
how to make up for a decline in the domestic energy production that has played a key role should beviewed as a key energy security problem, my discussion counterparts acknowledged this point for
the first time.
Energy security concepts differ from country to country. The Netherlands has had rich domesticgas resources, has been considering domestic or regional renewable energy as an alternative tonatural gas, can depend on regional energy cooperation using the existing energy supply network
linking itself to neighboring countries, and benefits from abundant energy supply in the glut-ridden
international energy market. Through my discussions with Dutch energy experts, I felt that thesepoints led them to pay little attention to energy security. Rather, carbon reduction has been
apparently established as the most important agendum for the Dutch government and industry,
resulting in energy transition discussions focusing only on the context of carbon reduction.
The Japanese situation is different. Based on changing domestic and overseas situations, wewill have to consider Japan’s key agenda including not only carbon reduction but also energy
security, greater market efficiency and safety in a balanced manner and discuss its energy transition
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for the long-term future.

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