Uncovering the True Price of electricity: progress in reducing external environmental costs
The Netherlands has seen significant progress in the energy transition over the past decade. We at Impact Institute did a study showing how renewable energy and efficiency gains are reducing environmental impacts while meeting electricity demands.
The average household electricity consumption in the Netherlands, has decreased from 3,330 kWh in 2010 to 2,640 kWh in 2022 (CBS). Beyond the surface-level reductions in consumption, there has been a more profound change in the environmental costs associated with energy use—what we call “nature’s energy bill” or the true price gap of electricity.
Understanding the true costs of electricity
Using environmental life cycle assessment data and True Price Monetisation factors, we observe a significant decrease in the average household true price gap of electricity between 2010-2022. The calculations considers impacts like air pollution, contribution to climate change and land use – shown in the Figure on the right. The costs for these impacts are often hidden in the prices we pay. Effects are converted into euros representing the remediation costs of the damages.
In 2010, the external environmental costs from electricity for an average household amounted €1,189 annually. By 2022, this figure had more than halved, dropping to €577 per household—a reduction of over 50%.
Drivers of change
Two key factors have driven this change in the energy transition. First, and perhaps the most obvious is the growth in the share of renewables in electricity generation (as shown in the Figure below). The share of fossil fuels has reduced from 86% to 55% from 2010 to 2022. This reduces the environmental footprint of each kilowatt-hour of electricity we use.
At the same time, policies such as stricter product labels for energy efficiency and eco-design requirements have played a crucial role. For instance, the EU’s energy label system, which rates appliances from A+++ to G, has encouraged more sustainable production, resulting in lower energy consumption and less strain on the environment.
The path forward
This progress in the Netherlands energy transition shows that collective action—through innovation, regulation, and more sustainable consumption—can lead to a more sustainable future. However, the journey towards a fully sustainable energy system has challenges. Recent geopolitical events, such as the conflict between Russia and Ukraine, have significantly impacted global energy markets, leading to volatility in energy prices.
In this context, the backbone of CSRD- the European Sustainability Reporting Standards (ESRS) E1 on climate change provides a critical framework to further drive the energy transition. ESRS E1 specifically addresses the energy mix, mandating that companies disclose the share of energy consumption from renewable versus non-renewable sources.
By providing a clear picture of their energy mix, companies can better understand and mitigate their environmental impacts, contributing to the reduction of the true price gap of electricity on a larger scale
How we guide the Energy Transition
We at Impact Institute guide organisations in the energy transition. We have a longstanding track record in supporting organisations in the energy sector, energy-intensive sectors, and financial sector. We help decision-makers to include impact in their solutions and strategies, by creating transition plans and impact strategies for energy. Read more about our work in this area here.
We also support compliance with CSRD ESRS E1 requirements which specifically addresses the energy mix, mandating that companies disclose the share of energy consumption from renewable versus non-renewable sources. See our CSRD Solutions for more information.
Our integrated software, data, advisory services, and education solutions simplify the energy transition process, helping companies meet their sustainability reporting obligations with ease.
