1.1.1 The Dutch liberalisation policy has been progressing ahead of the European average and the entire electricity market was liberalised by July 2004. This was driven by European legislation on the liberalisation, integration of the European electricity market and accelerated by the views in the Dutch market on the desired allocation of responsibilities between the market and the government. Currently, a significant part of the electricity supply and generation industry is privatised and has been acquired by foreign players.
1.2.1 The Third Energy Package has been transposed into Dutch law through the amendment of several laws and regulations, including amendments to the Electricity Act 1998 made on 20 July 2012 (E-Act) in relation to, inter alia, the unbundling of the transmission networks. Since the E-Act already contained far-reaching unbundling requirements, only a few amendments were needed to comply with the requirements set out in the Third Energy Package.
1.3.1 Electricity is generated mainly by five large-scale companies. In addition, there is a relatively large number of small-scale decentralised generators in the Netherlands. Compared to other European countries, the proportion of installed decentralised capacity in the Netherlands is high. Much of this capacity is attributable to cogeneration plants in industry and horticulture, and also to waste processing plants and sustainable energy (solar, wind and biomass). Most electricity is generated by Essent (owned by RWE), Nuon (owned by Vattenfall), Eneco, E.ON, Delta and Electabel.
1.3.2 The electricity distribution and transmission networks are publicly managed and owned. The Netherlands has one electricity transmission system operator (TSO), TenneT, which is owned by the state. TenneT applied for certification under the ownership unbundling model. In a draft decision, the Dutch energy regulator, the Authority for Consumers and Markets (Autoriteit Consument en Markt (ACM)), has indicated that TenneT meets the unbundling criteria of the Third Energy Package and as a result TenneT was certified by decision of 18 December 2013.
1.3.3 At present, there are eight distribution network managers. The E-Act prohibits privatisation of (transmission and distribution) network managers by stipulating that a (transmission or distribution) electricity network, or the shares in a manager of a (transmission or distribution) electricity network, can only (directly or indirectly) be held by the government or local authorities.
1.3.4 Until 1999, Dutch energy supply companies were owned – directly or indirectly – by municipalities and provincial governments. Since the liberalisation, a number of new supply companies have joined the market including Doug Energy and E.ON. Currently, 38 companies hold licences to supply electricity to small scale customers. However, the four largest energy companies – Nuon (acquired by Vattenfall), Essent (acquired by RWE), Eneco and DELTA – still have the largest share of the retail market.
1.4.1 The Netherlands has opted for full ownership unbundling for transmission under the Third Energy Package. As TenneT already managed and owned most of the transmission networks, the unbundling requirements under the European legislation did not require a major restructuring of the Dutch electricity market.
1.4.2 Although between the early 1990s and 2000s local governments wished to sell their shares in energy companies, political parties felt that energy networks should remain publicly owned. It was felt that network managers should be fully independent from the commercial activities of the energy companies and subject to strong public control to avoid, primarily, the network managers being exposed to risks associated with the energy companies’ commercial activities. This has led to a prohibition on privatisation of transmission and distribution networks and to ownership unbundling of the Dutch electricity distribution networks, as announced by the Dutch minister of economic affairs (MEA) in 2004. This ownership unbundling aimed to allow generation, supply and trading companies to be privatised while ensuring that the networks remained publicly controlled. It also aimed to remove incentives for discrimination in relation to network access and network cross-subsidies of commercial activities, creating a level playing-field in the market. It was perceived that ownership unbundling would create more transparency and enable the energy regulator to act more effectively and efficiently.
1.4.3 The ownership unbundling of both transmission and distribution networks should have been fully implemented on 1 January 2011. It was implemented in the E-Act through:
- the “group-ban” (groepsverbod) that prohibits network managers being part of the same group as the commercial gas and electricity companies; and
- the “ban on additional activities” (verbod op nevenactiveiten) that prohibits groups, which includes network companies, from engaging in additional activities that may conflict with the interest of the management of the networks concerned.
1.4.4 In 2007, three energy companies (DELTA, Eneco and Essent) initiated legal proceedings against the state in relation to the ownership unbundling legislation. In November 2010, the Dutch Court of Appeal ruled that the unbundling legislation was in violation of the principle of free movement of capital as set out in article 63 of the Treaty on the Functioning of the European Union and consequently non-binding. The state instituted cassation proceedings (i.e. verification of the interpretation of the law) before the Dutch Supreme Court, which has sought clarification from the European Court of Justice (ECJ).
1.4.5 On 16 April 2013, Advocate General Jääskinen of the European Court of Justice gave his opinion on the matter. He took the position that the group-ban and the ban on additional activities are legitimate restrictions of the free movement of capital. The choice to structurally unbundle the management of energy distribution networks on the one hand, and the trade, supply and generation of electricity on the other, has not gone beyond what is required to achieve the goal of energy market transparency and the prevention of competitive distortion and is therefore not in violation of European law. On 22 October 2013, the ECJ ruled that although the Dutch unbundling legislation constitutes a restriction of the free movement of capital, the objectives on which this legislation is based, i.e. transparency on the energy market and prevention of distortion of competition by preventing cross subsidies, constitute overriding reasons in the public interest that justify such restriction. However, the unbundling legislation must also be appropriate to achieve these overriding objectives in the public interest and must not go beyond what is necessary to attain those objectives. The ECJ left it up to the Dutch Supreme Court to determine whether the Dutch privatisation and ownership unbundling legislation is justified, appropriate and necessary in respect of their underlying objectives. In anticipation of a final ruling of the Dutch Supreme Court, unbundling of the remaining vertically integrated energy companies (DELTA and Eneco) has been put on hold.
Structure of generation sector
2.1.1 Natural gas and coal are major sources of large-scale electricity generation. There is also a large number of small-scale decentralised electricity generators, mainly in gas-fired waste processing and renewables (solar, wind and biomass). See section 1.3 for a summary of the key players in the generation sector.
2.1.2 In 2011, the Netherlands produced a total of 113b kWh of electricity (4% less than in 2010), of which 63% was generated by natural gas, 22% by coal, 11% by renewables, 3% by nuclear and 1% by oil. In 2011, renewable electricity production increased by 10%. This increase is almost entirely attributable to wind energy. The current government, which came into power in November 2012, has stated a target of 16% of power to be generated from renewable energy by 2020.
Structure of transmission sector
2.2.1 All transmission networks (i.e. electricity networks with a voltage level of 110kV or more) are owned and managed by the TSO, TenneT, which is wholly owned by the state. The state is currently considering partial privatisation of TenneT to attract additional financing for the necessary infrastructure investments. Given that this is currently legally prohibited, such privatisation would require an amendment to the E-Act. It is expected that any privatisation of TenneT would only be a minority interest.
2.2.2 TenneT’s main tasks are to maintain and manage the transmission networks, monitor electricity supply, resolve large-scale disruptions in electricity transmission and maintain the balance between supply and demand. In addition, TenneT is required to develop the electricity market and promote the establishment of an integrated Central Western European market.
2.2.3 TenneT provides connection, transmission and system services. Tariffs and conditions for these services are regulated by the ACM.
2.2.4 In order for TenneT to maintain/restore the energy balance, parties connected to the electricity grid (with the exception of small consumers) and licence holders are required by law to submit daily programmes to TenneT, specifying their input and output in 15 minute increments (including any imports and exports), and to act in accordance with these programmes. The obligation to submit these programmes is referred to as ‘programme responsibility’. Connected parties can outsource their programme responsibility to a competent party recognised by TenneT. The difference between the programmes and the actual electricity consumption is the imbalance. Parties pay an imbalance tariff to TenneT in respect of such imbalances, based on the marginal prices of upward and downward regulation bids selected by TenneT in the balancing energy market, plus an incentive component that is set on a weekly basis.
2.2.5 All parties connected to the grid in the Netherlands have equal rights, regardless of their connection date. This means that new electricity generation is connected to the transmission network without any restrictions. Since April 2011, TenneT has applied congestion management (in relation to a build-up of electricity due to overloading) on the Maasvlakte. Recently, problems have also occurred in Zeeland and West Brabant and it is expected that, in the near future, congestion may arise in the Northern Netherlands, especially around Eemshaven. In both the Maasvlakte and Northern Netherlands, permanent solutions are being developed through expansion of the grid (Randstad 380kV South Ring (early 2013) and North West 380kV (late 2016) respectively). In the West, congestion management has previously been applied, however, the congestion was resolved in 2010 by expansion of the high-voltage grid.
2.2.6 Pursuant to EU Directive 2009/28, the E-Act has been amended to require TenneT to give priority to electricity from renewable sources in the event of congestion on the electricity grid. These provisions have not yet entered into force, since discussions have arisen over the allocation of congestion management costs. Initially, such costs were intended for the producers of conventional power in congested areas. However, the European Commission has indicated that a distinction between conventional and renewable producers is not allowed for the allocation of costs. Consequently, a decision must be made to either socialise the costs or charge all producers.
2.2.7 TenneT is the first European cross border TSO. In addition to the Dutch transmission networks, it operates a transmission network in Germany, covering an area of 140,000km², plus three cross-border interconnection points on the Dutch/German border and two cross-border interconnection points with Belgium.
2.2.8 In 2008, a joint venture between TenneT and the Norwegian transmission manager, Statnett, installed the “Nor-Ned cable”, a high voltage interconnector between the Netherlands and Norway. Together with the UK’s National Grid, TenneT is also involved in the BritNed cable, the high voltage interconnection between the Netherlands and United Kingdom that came into operation in 2011.
2.2.9 In total, the Netherlands has seven cross border interconnections, with plans for further expansion. TenneT has signed a cooperation agreement with the Danish TSO (Energinet.dk) for the development of an undersea high voltage interconnection between the Netherlands and Denmark (the COBRAcable) to connect with offshore wind parks in the North Sea. A map of the networks is illustrated at Figure 1 below.
Structure of distribution sector
2.3.1 Pursuant to the E-Act, distribution networks have voltages of less than 110kV. The distribution networks are owned by the local authorities but these distribution network owners must appoint an independent network manager to operate their network, with the appointment approved by the MEA. Eight of the 27 regional network operators have been appointed in this way: Cogas Infra en Beheer B.V., Liander N.V., DELTA Netwerkbedrijf B.V., Enexis B.V., Endinet B.V., RENDO Netbeheer B.V., Stedin Netbeheer B.V. and Westland Infra Netbeheer B.V. This ensures the operational and financial independence of the network operators.
2.3.2 Tariffs and conditions with respect to connection and distribution services are regulated. Since 1 January 2009, distribution tariffs for electricity connections with a capacity of 3 x 80A or less have been based on a fixed capacity based tariff. This capacity-based tariff is set by the regulator and can differ between the various distribution network managers. In addition to this tariff, distribution network managers charge connection and metering costs (the metering tariff has been regulated since 1 January 2008).
2.3.3 Since 1 August 2013, the “suppliers’ model” has entered into force. This aims to improve the market for small-scale energy users and create a more level playing field for suppliers vis-à-vis network managers by making the supplier the primary point of contact for the customer. Under this model, the customer only receives one invoice for both distribution and supply.
Structure of supply sector
2.4.1 Since July 2004, when the supply market was completely liberalised, a number of new electricity suppliers have entered the market. The four largest incumbent energy companies (Essent, Nuon, Eneco and DELTA) still have a majority stake in the retail market.
2.4.2 The supply of electricity only requires a supply licence where the electricity is supplied to small-scale users (with a connection not exceeding 3 x 80A(kleinverbruikers)). Supply licences are issued by the ACM; there are currently 38 suppliers authorised to supply electricity to small-scale users.
2.4.3 The regulator monitors the small-scale user market, including the supply process, the contents and accuracy of invoices and whether there are any obstructions to switching supplier. Conversely, the market for large-scale electricity users is not monitored.
2.4.4 In principle, there is no price control for electricity supply, but the regulator has the authority to assess the reasonableness of electricity tariffs for small-scale users and can set a maximum tariff to protect them.
2.4.5 As indicated in paragraph 2.3.3, the supplier will soon become the primary point of contact for the customer under the suppliers’ model.
2.4.6 Since 2007, the Netherlands Competition Authority’s (Nederlandse Mededingingsautoriteit’s (NMa)) Office of Energy Regulation, now the Energy Department of the ACM, has published reports about the small customers’ market. These reports are publicly available and contain analysis such as the level of competition, transparency, service provision, pricing and switching percentage.
2.4.7 In its vision of the market dated April 2013, the ACM states that it will aim for further transparency by simplifying tariff structures and improving information provision to customers.
Structure of trading market
2.5.1 The Dutch wholesale market can be subdivided into the following:
- the bilateral market (the trade in bilateral or over-the-counter (OTC) contracts);
- the power exchange (APX-ENDEX); and
- the balancing market or the market for control and reserve power (to restore imbalances and disruptions).
2.5.2 APX-ENDEX is the Dutch electricity exchange. It operates spot and futures markets for electricity and natural gas in the Netherlands. It is also active in the United Kingdom and Belgium, where it merged with Belpex, the Belgian Power Exchange, in 2010. The main shareholders of APX-ENDEX are TenneT Holding B.V. (owner of the Dutch electricity TSO, TenneT), N.V. Nederlandse Gasunie (owner of the Dutch gas TSO), Fluxys Europe B.V. (the Belgian gas TSO) and Elia N.V. (the Belgian electricity TSO).
2.5.3 APX-ENDEX has over 415 members, including energy producers, energy distributors, financial institutions, industrial end-users and brokers.
2.5.4 Based on trade volumes, the spot market is the most important market. It includes a day-ahead auction, a continuous trading facility for intraday markets (offering power products in hourly intervals) and a strips market (offering standardised blocks of hours such as base load, peak load and off-peak load). The futures market includes four weeks, six months, six quarters and five calendar year contracts, as well as OTC clearing services.
Data on traded volumes
2.5.5 Figures 2 and 3 below represent the segmentation of traded volumes of electricity in the wholesale gas and electricity markets pursuant to a report of the NMa. In 2011, electricity was mainly traded on the OTC market. However, while the OTC market increased each year until 2010, the volume of traded electricity decreased in 2011.
Figure 2: Segmentation of traded volumes on the markets in 20111
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Figure 3: Segmentation of traded volumes on the markets 2009 - 20112
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Cooperation with other exchanges
2.5.6 The Dutch market was connected with the Belgian and French markets in 2007, the Luxemburg and German markets in 2010, the Norwegian market and the broader Nordic region (through NorNed) in 2011 and the UK (through the BritNed cable) in 2012. The inter-connection of these markets increased liquidity in the Dutch market and has resulted in the Central Western European power region.
3.1.1 The MEA is responsible for the legislation and enforcement of such in the electricity sector. The MEA publishes a report every four years setting out the energy policy of the Dutch government.
3.1.2 Before 1 April 2013, the NMa was responsible for competition law enforcement in the Netherlands and the NMa’s Office of Energy Regulation(Energiekamer) was the energy regulator. In 2013, the NMa merged with the Independent Post and Telecommunications Authority (Onafhankelijke Post en Telecommunicatie Autoriteit (OPTA)) and the Consumer Authority (Consumentenautoriteit) to form the current regulator, the ACM.
3.1.3 The ACM is a non-departmental public body, headed by a board of directors. It has the power to initiate investigations and take administrative measures, such as imposing fines of up to EUR 450,000 or 10% of the relevant worldwide (group) turnover of the undertaking concerned in the previous calendar year, whichever is higher.
3.1.4 Since 1 April 2013, the ACM’s Energy Department (Directie Energie) has been in charge of the energy regulatory functions. The Energy Department is tasked with:
- establishing tariff structures and conditions for the transmission and distribution of electricity;
- granting licences to suppliers of small-scale users; and
- supervising compliance with the E-Act.
- The Energy Department also monitors any abuses of dominant positions. It has the power to sanction violations of the E-Act, impose administrative fines (bestuurlijke boete) and order periodic penalty payments (dwangsom). The Energy Department does not regulate the wholesale electricity market (or the large-scale user market) but monitors both the small-scale and large-scale electricity markets to identify possible operational problems.
3.1.5 The ACM’s Competition Department (Directie Mededinging) is responsible for the regulation and enforcement of competition in the Netherlands, including merger control, cartel behaviour and abuse of dominant position.
3.1.6 The ACM’s Consumer Department (Directie Consument) became the small-scale user market regulator.
3.2 Key legislation
3.2.1 The regulatory framework for the electricity sector is laid down in the E-Act and relevant secondary legislation. The E-Act entered into force in July 1998 and implemented the First Energy Package. Since then, the E-Act has been amended several times, inter alia, to implement the Second Energy Package in 2004 and the Third Energy Package in 2012.
3.2.2 The E-Act includes legislation on the generation, transport and supply of electricity and sets out the powers and obligations of the ACM.
3.2.3 The E-Act also includes provisions whereby further specific rules can be laid down in secondary legislation, such as governmental decrees and ministerial regulations. Such secondary legislation includes the decree on smart meters (Besluit op afstand uitleesbare meetinrichtingen) and the ministerial regulation on the policy regarding the close off of electricity and gas in respect of small scale users (kleinverbruikers) (Regeling afsluitbeleid voor kleinverbruikers van elektriciteit en gas).
3.2.4 Furthermore, on the basis of article 31 of the E-Act, network managers may send proposals to the ACM on the conditions to be applied in respect of their offtakers, including with regard to the cooperation between network managers. The ACM will consider, and may adopt, rules with respect to such conditions in codes of practice. On the basis of this E-Act provision, the ACM adopted:
- the Tariff Code, setting out rules on network rates;
- various technical codes, such as the Network Code (rules for network operation, transmission and connection), the Measurement Code (rules on the measurement and exchange of data) and the System Code (rules regarding system services); and
- the Information Code, which specifies the responsibilities of market participants on exchanging information.
Dutch Competition Act
3.2.5 Apart from various consumer protection laws monitored by the ACM’s consumer department, undertakings must comply with the Dutch Competition Act (Mededingingswet) (DCA). The DCA is largely inspired by, and based upon, EU competition law and its enforcement is administrative in nature.
3.3 Regulatory framework
3.3.1 No generation licence is needed but a developer may be required to obtain environmental and land related consents. For the supply of electricity to small scale users, i.e. consumers and small businesses (kleinverbruikers), a supply licence from the ACM is required (but not otherwise). The ACM checks that small scale users are supplied in a reliable manner and on reasonable conditions. If a supplier fails to meet the obligations under the E-Act and the supply licence, its licence may be withdrawn.
3.3.2 The E-Act provides for a system of regulated access to the electricity networks. Network managers have an obligation to transport electricity in accordance with the tariffs and conditions as set out by the ACM. This may be different in the event of capacity issues or congestion.
3.3.3 TenneT has a statutory duty regarding the connection of users, transmission of electricity and maintenance of the high voltage grid. It must also secure the safety, efficiency and reliability of the grid. The ACM determines the method of calculation of the tariffs in respect of the statutory duties of the TSO for a period of three to five years in a Method Decision (Methodebesluit). This includes an efficiency discount (the x-factor) that must be applied in every regulation period. With this x-factor, the TSO is forced to work more efficiently. The tariffs are determined annually in a Tariffs Decision(Tarievenbesluit) by the ACM on the basis of a proposal by the TSO.
3.3.4 Distribution network managers have statutory duties to connect users, provide transport, maintain the grid and resolve any disturbances. The ACM regulates their tariffs through a Method Decision (applicable to all distribution network managers) and individual Tariffs Decisions. The Method Decision for the distribution network managers differs from the Method Decision for the TSO. For the TSO, if, in a certain year, the actual electricity volumes differ from those used to determine the tariffs, the difference is set off using the next year’s tariffs. This is not the case for the distribution network manager Method Decision.
3.3.5 There is no recent case law in the Netherlands regarding cartel infringements or abuse of dominance in the energy sector. Nevertheless, the Netherlands has seen an increase in private damages claims against (alleged) competition law infringers. For example, in its landmark decision of 16 January 2013, the district court of East-Netherlands (Rechtbank Oost-Nederland) declared ABB liable to TenneT for loss suffered by TenneT as a result of ABB’s participation in the Gas-Insulated Switchgear cartel (EC case no. 38.899).
3.3.6 Regarding merger controls, the Dutch energy landscape changed tremendously in 2009 after two major Dutch energy companies were acquired by foreign companies: Swedish state-owned Vattenfall acquired Nuon Energy after Nuon had split its production, supply and trading activities from its grid operation activities (EC case no. 5496); and German RWE acquired Essent (EC case no. 5476). Previously, in 2007, a merger plan between Nuon and Essent had been withdrawn (NMa case no. 6015). The plan to create a national champion, strong enough to compete at EU level encountered objections from the NMa, who did not approve of the solutions suggested by the energy companies. More recently, the NMa unconditionally approved the acquisition of the energy retail company Oxxio by Eneco (NMa case no. 7134).
3.4 Support schemes
3.4.1 The renewable energy target for the Netherlands (pursuant to EU Directive 2009/28) is 14% by 2020. The Dutch government has set targets of 16% of all energy to be generated from renewable energy by 2020 and 100% by 2050. The share of renewable energy in total production was 4.3% in 2011 and 11% for electricity.
3.4.2 The Dutch government has implemented several support schemes to reach these targets.
3.4.3 In October 2007, the Dutch government introduced the SDE (Stimuleringsregeling duurzame energieproductie), a feed-in subsidy scheme for renewable energy. The SDE offered a support premium based on the difference between the reference price for the relevant renewable technology and the realised market price. It operated for three years from 2008 and, after several improvements, became the SDE+ subsidy scheme in 2011. The SDE+ scheme resembles a contract for difference, since the premium is based on the difference between the reference price for the relevant technology and the actual market price (normally based on average APX spot prices). There are, however, two differences from a contract for difference:
- the premium is capped at a certain floor for the electricity market price (referred to as the basic electricity price); and
- if the market price exceeds the reference price, the upside can be retained by the generator. The maximum subsidy is based on the indicative capacity and the maximum number of full load hours for the relevant technology. Under the SDE+ scheme, the subsidy period is five, twelve or 15 years, depending on the relevant technology.
3.4.4 The Netherlands also has several fiscal incentives which include:
- the Energy Investment Allowance (Energie Investeringsaftrek), which offers an extra deduction of up to 41.5% of the investment cost for energy-efficient business assets, such as buildings, vehicles and advice;
- various tax relief schemes for environmentally friendly investments, such as the Environmental Investment Allowance (Milieu Investeringsaftrek)scheme offering a tax refund and the Free Depreciation of Environmental Investments (Vrije Afschrijving Milieu Investeringen) providing voluntary depreciation; and
- the Green Funds Scheme, providing tax incentives to enable individuals to invest in green projects that benefit the environment, compensating for the lower interest rate.
3.4.5 The Dutch government entered into several Green Deals with citizens, private companies and governmental organisations to stimulate the realisation of energy saving projects and local sustainable energy generation through public-private cooperation. By the end of 2012, the government had entered into a total of 150 Green Deals. These Green Deals are not intended to provide financial support to eligible projects but aim to remove obstacles for the development of initiatives, such as the permitting process.
Smart Meters and Smart Grids
3.4.6 Smart meters are being introduced in the Netherlands on a small scale, based on an amendment of the E-Act and the Act implementing the Energy Efficiency Directive. At the end of 2013, the voluntary pilot of smart meters was evaluated. The results of the evaluation were positive and therefore the large-scale installation of smart meters in Dutch households will start in January 2015.
3.5 Upcoming regulatory changes
3.5.1 In 2011, the Dutch government initiated project STROOM (the Dutch word for stream and electricity) to streamline and modernise the E-Act and the Gas Act. Project STROOM will be implemented through several legislative proposals.
3.5.2 The first legislative proposal addresses a number of different aspects such as quality specification for gas, direct lines and decentralised renewable energy and entered into effect on 1 January 2014. Another legislative proposal regards reduced tariffs for the energy-intensive industry and already entered into effect. The last part of project STROOM aims at the integration of the E-Act and Gas Act and at eliminating bottlenecks with respect to the effective integration of renewable energy, including draft legislation regulating off-shore wind energy. During the summer months of 2014, the draft legislation was consulted on and is then expected to be sent to the Advisory Division of the Council of State. The aim is to submit the bill no later than early 2015 to the Dutch Lower House, in order for the legislation to enter into force by 1 January 2016.
3.5.3 Initially part of the project was to allow for minority privatisation of TenneT. However, in October 2013 the government decided that public interest in the electricity networks is too important and that, therefore, (partial) privatisation of TenneT is not an option.
4. Country Statistics
4.1 Gross electricity generation
4.1.1 Figure 5 below shows the total gross electricity generation (in TWh) by fuel type in the Netherlands for 1995 to 2010.
Figure 5: Total gross electricity generation3
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4.2 Renewable electricity
4.2.1 Figure 6 below contains figures for 2012 on the domestic production of renewable electricity split by source and technology.
Figure 6: Renewable energy production4