Mitigating foreign fossil fuel shocks: The role of renewable energy and industrial electrification in The Netherlands

Abstract

Recent disruptions in foreign fossil fuel supply have significantly increased the price of imported gas across Europe. From a long-term policy perspective, it is essential to explore strategies to reduce an economy’s exposure to such shocks. Focusing on The Netherlands, we use a computable general equilibrium model with a detailed energy matrix to quantify the potential impact of foreign gas supply disruptions at different stages of the energy transition. Our results indicate that expanding renewable energy capacity and electrifying industries reduce the economic impact of foreign gas supply shocks. Furthermore, encouraging investments that decrease industrial energy consumption can both mitigate the short-term effects of fossil fuel supply disruptions and accelerate the economy’s shift away from energy dependence.