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On 28 June 2019, the National Climate Agreement (Nationaal Klimaatakkoord) was concluded. The main purpose of this agreement is to reduce greenhouse gas emissions in the Netherlands by 49% compared to 1990 levels. Green (or clean) hydrogen (groene waterstof) is expected to be able to play an important role in the energy transition and decarbonisation of the Dutch economy. The Dutch Government has indicated that in the mid (2030) to long (2050) term, hydrogen can and must be able to carry out a number of critical functions within the energy and raw materials management system.
The principal areas of focus will be the use of hydrogen:
At present, the Dutch Government views blue hydrogen as a transitional replacement for grey hydrogen in industry and in the expansion of infrastructure in the hydrogen production capacity. This is due to the fact that blue hydrogen can currently be used on a larger scale. Furthermore, green hydrogen can be further developed to be produced on a larger scale during this transitional period. The Renewable Energy Directive (RED II) proposal of the European Commission includes a 50% renewable hydrogen obligation for the year 2030. The Dutch Government is analysing the consequences of this stringent obligation in light of making the Dutch industry more sustainable by means of the use of blue hydrogen.
In its Government Strategy on Hydrogen (Kabinetvisie waterstof), the Dutch Government envisages that hydrogen will be an indispensable part of the sustainability strategy for industrial clusters, ports and the transport sector generally. Within all industrial clusters in the Netherlands, market parties are preparing for a growing role played by hydrogen, including through feasibility studies, the development of business cases and proposed investments. The Government Strategy on Hydrogen serves as a first step to transform the policy agenda into a robust and integrated approach towards hydrogen for the benefit of all interested parties in the Netherlands.
Hence, under the National Climate Agreement and the Government Strategy on Hydrogen a substantial hydrogen programme for the Netherlands will be worked at. The work plan for this National Hydrogen Programme (Nationaal Waterstof Programma) was published on 7 July 2021. This work plan prioritises and includes a time path for actions to be taken in the period 2022-2025 and also provides a first look towards the period up to 2030. Three (3) key focus tracks are identified: (i) upscaling offshore production of green hydrogen for the benefit of the Dutch harbour areas, industrial clusters and heavy transport; (ii) development of decentralised hydrogen opportunities; and (iii) conditions indispensable to realise the current hydrogen ambitions. It is envisaged that this work plan will be transformed into a hydrogen route map by early 2022.
The route map will focus in further detail on inter alia (i) the ambitions towards creating a (green) hydrogen economy in the Netherlands, (ii) import strategies and the interrelationship with hydrogen production in the Netherlands, (iii) system integration matters, including the connection between offshore wind (and other renewable energy production) and hydrogen and (iv) supply and demand interdependencies.
Hydrogen is expected to play a key role as an energy carrier for renewable energy. The ambition of the Dutch Government is to have 500 MW of installed electrolysis capacity by 2025. This number should increase towards an installed electrolysis capacity of 3 to 4 GW by 2030. The latter is to be achieved by upscaling instruments specifically targeted at electrolysis onshore and later offshore.
The National Climate Agreement contemplates that some 15,000 Fuel Cell Electric Vehicles (FCEV) are expected by 2025, potentially growing to 300,000 vehicles by 2030. Also, the aim is to have 50 hydrogen filling stations in operation by 2025. The Government envisions a major future role for hydrogen as an energy carrier in mobility, especially in heavy transport, such as lorries, public transport buses and as a potential replacement for diesel trains. In connection with the latter, the Groningen province was awarded a subsidy of EUR 5.8 million by the Blending Facility as part of the Connecting Europe Facility (CEF) in the summer of 2021. The CEF promotes the use of cleaner fuels in rail and road transport and in respect of inland shipping.
A significant number of demonstration projects and feasibility studies have been announced in the Netherlands in the past year including:
A substantial hydrogen programme has been initiated under the National Climate Agreement. This programme has been worked out in further detail in the Government Strategy on Hydrogen and the National Hydrogen Programme.
In accordance with the National Climate Agreement, funding ranging from EUR 60m to EUR 100m is made available from the climate budget to realise the roadmaps as set forth in the National Climate Agreement. Whilst new technologies, such as green hydrogen, require substantial innovative techniques, the focus will be on funding pilots and demonstration projects. Furthermore, additional funds to the amount of approximately EUR 40 million euros per year will be made available from the climate budget for pilots and demo facilities regarding green hydrogen.
In the Dutch State budget for 2022 several measures were announced with regard to the future role of hydrogen in our energy system. A total of EUR 750 million will be made available to cover any risks regarding less transport capacity demand than foreseen (vollooprisico) as well as funding to bridge the gap until transport capacity is fully utilised on a cost-effective basis (aanlooprisico).
Furthermore, EUR 35 million of co-financing is available from Important Projects of Common European Interest (IPCEI) for a specific hydrogen project as well as another EUR 35 million for the development of a hydrogen storage project. It is noted that these amounts have been budgeted for the period 2022 – 2026.
A total of 25 projects regarding the hydrogen chain in the Netherlands have been initially listed for IPCEI funding. The relevant Dutch projects include hydrogen production as well as transport, storage and use of hydrogen. A short list of thirteen (13) projects have been pre-notified to the European Commission. At present, the European Commission will assess the notified projects and it is expected that a new Dutch Government will determine which projects receive support in 2022.
The Netherlands has a renewable energy subsidy regime known as the SDE++ (the Stimulation of Sustainable Energy Transition scheme). In 2022 an amount of EUR 5 billion is budgeted for SDE++ subsidies. This subsidy instrument contains several features that allows it to perform effectively according to international standards. These features include technology neutrality, mutual competition and multi-year security for investors. The SDE++ has replaced the former SDE+ regime by broadening the old regime to ensure that, in addition to renewable energy, other CO2 reduction technologies are also eligible for subsidies. The Dutch Government made the decision to include electrolysis in the SDE++ scheme. In 2022, a total of 2530 full load hours will be eligible for subsidy.
One of the key characteristics of the first large-scale projects currently being considered will often be a substantial operating cost gap. In fact, these types of projects fall in the transition phase between existing support for pilots and demos (the Energy Innovation Demonstration Scheme, DEI+) on the one hand, and the SDE++ scheme on the other hand. This is particularly true for green hydrogen. Blue hydrogen projects, on the other hand, may be able to receive sufficient support for carbon capture and storage (CCS) through the SDE++ scheme.
Therefore, it is contemplated that green hydrogen can benefit from a new hydrogen upscaling instrument currently being developed. This instrument aims to further stimulate green hydrogen production in the Netherlands by bridging the gap between cost price and market price, the so-called unprofitable component. For the first phase of scaling up green hydrogen by means of electrolysis a budget of EUR 250 million is available. In 2022, it is expected that green hydrogen production projects by means of electrolysis in the range of 0.5 and 50 MW may tender for a subsidy award. The incentive aims to induce a significant cost reduction to allow electrolysis to be competitive compared to other CO2 reduction alternatives. Moreover, the Dutch Government favours a production subsidy over any demand focused subsidies whilst in the short terms this will increase domestic electrolysis capacity to a certain scale.
The new upscaling instrument is currently being discussed between the Netherlands and the European Commission but is expected to become available mid-2022. The instrument is targeted to provide support to approximately 100 MW of electrolysis projects.
The most important incentive schemes that are currently (expected to be) available to hydrogen related projects in 2022 and beyond are:
Finally, the Ministers of Economic Affairs and Climate and of Infrastructure and Water Policy recently announced to resolve the demand and supply conundrum of green hydrogen by opening up the annual renewable energy obligation Energy for Transport (jaarverplichting Energie voor Vervoer) in 2023 and 2024 by using renewable hydrogen for the production of fuels (the so-called refinery route (raffinage route)). The use of renewable energy in transport will increase annually due to the system of the annual renewable energy obligation. Effectively, using the annual renewable energy obligation will create a sales market for green hydrogen. It is expected that projects with a total size of approximately 400 MW will be realized by this measure by 2025. This is a great step towards the target of having 500 MW of installed electrolysis capacity at that time.
The Dutch government will continue to monitor whether the current incentivisation schemes are able to provide sufficient opportunities for the development of green hydrogen.
A legislative proposal is pending in Dutch Parliament introducing a minimum carbon price for the production of electricity (Wet minimum minimum CO2-prijs elektriciteitsopwekking). The background to this legislative proposal is that citizens and businesses should be able to rely on a stable and reliable supply of a growing percentage of sustainably generated electricity. Experts have indicated that a minimum price increasing incrementally by a margin below the price trajectory of the EU-ETS is essential to safeguarding security of supply, but that this concurrently provides a significant sustainability incentive due to the security it offers the market. The minimum carbon price proposed under the legislative proposal relates to companies subject to the EU ETS. The bill captures both the carbon emissions of the generation of electricity by power plants as well as the emissions caused by other EU-ETS companies (mostly industry). The minimum carbon price proposed under the bill exists of a combination of the carbon price under the EU ETS and a national tax.
The National Climate Agreement calls on relevant parties to create statutory and regulatory flexibility for experiments to allow national and regional network operators to gain experience in the transport and distribution of hydrogen. In that case, the network operators will begin collaborating with market participants to launch hydrogen pilot projects, with the purpose of jointly exploring a workable supply chain.
Similarly, with regard to transport, storage and conversion, the Government Strategy on Hydrogen has a focus on developing potential temporary roles to help kickstart the hydrogen market and on more structural roles once this market matures. The principal approach in this regard will be to ensure security of supply, to keep the social costs of the hydrogen supply chain as low as possible and to give the market room to manoeuvre. The future hydrogen market could include both public and private networks. Currently, the prevailing view is that the national hydrogen infrastructure should be public whilst commercial hydrogen transport initiatives must be subject to European regulation.
The new Dutch Government to be installed in January 2022 will have to make a final decision on the market regulation of hydrogen in the Netherlands. However, recently in December 2021, the Ministry of Economic Affairs and Climate provided further insight into the desired market regulation of hydrogen. Similar to (natural) gas and electricity, market regulation of hydrogen will also be driven by European developments. In this context, the Netherlands will await the European Commission’s proposals on the internal European hydrogen market.
For the Netherlands, the Dutch Government considers it necessary to create an integrated national infrastructure from a technical, operational and functional point of view. Therefore, a logical next step is that Gasunie will be mandated by law to develop, own, manage and exploit national (high pressure) hydrogen infrastructure in the Netherlands. In anticipation of such formal appointment, by imposing a service of general economic interest (dienst van algemeen economisch belang), Gasunie can receive funds and be obliged to adhere to certain conditions in the course of developing and managing hydrogen infrastructure. It is expected that further details on the conditions applicable to Gasunie will be published in 2022.
The ambitions on the roll out of electrolyser production capacity and hydrogen import and export corridors require an “open access” infrastructure and large-scale caverns storage capacity. The current view in the Netherlands is that hydrogen production by means of electrolysis is a commercial activity to be conducted by private parties (and not by hydrogen grid operators.).
Currently, hydrogen gasses are not regarded as a “(natural) gas” in the context of the Dutch Gas Act (Gaswet). As a result, transport and distribution of hydrogen is not possible within the regulated domain of the grid operators. The National Climate Agreement envisages a further investigation into broadening the legal scope of the Dutch Gas Act to allow experiments that give grid operators a possibility to gain experience in the field of transport and distribution of hydrogen gasses. The Minister of Economic Affairs and Climate decided not to ratify the Draft Ministerial Decree experiments Dutch Electricity Act and Gas Act (Ontwerpbesluit experimenten Elektriciteitswet 1998 and Gaswet). Another possibility being explored is to impose specific temporary tasks to (regional) grid operators by Ministerial Decree (Algemene Maatregel van Bestuur). However, it seems that this will also require a further amendment to the Dutch Gas Act which is not foreseen in the short term. Especially within the built environment, demonstration projects for hydrogen transport require involvement of (regional) grid operators. The aforementioned legislative proposal is likely being prepared as part of the Dutch Energy Act (Energiewet) which includes a complete overhaul and integration of the current Electricity Act and Gas Act in light of European developments and the ongoing energy transition.
In summary, further thoughts on market regulation and required changes to the legal framework have developed recently. Though, as the National Hydrogen Programme shows, it is recommended that the Ministry of Economic Affairs and Climate prepares a legislative agenda encompassing rules and an overall time frame on the appointment of a hydrogen grid operator, hydrogen quality, safety, security of supply and pricing. In the near future, the development of a policy framework on hydrogen storage requires attention as well.
According to the Dutch Government, a reliable system of Guarantees of Origin (GoOs) and certification is required to facilitate a market for green hydrogen. In addition, agreements will have to be reached regarding definitions. The development of a GoO system is required under RED II, which also provides a framework for such development. Co-ordination with other European countries will be sought in the development of the GoO system and the aim will be to implement European rules and measurement methodology as much as possible.
Vertogas, at present already responsible for the GoOs for green gas, also takes part in the CertifHy project. The purpose of this project is to develop an international standard for hydrogen certification.
The Dutch certification system should serve different policy goals that stimulate the market for green hydrogen. The GoO system is set out in the legislative proposal of the Act containing rules on guarantees of origin for energy from renewable sources (Wet houdende regels omtrent garanties van oorsprong voor energie uit hernieuwbare bronnen). On adoption of this legislative proposal, further details will be included in the Regulation of the Guarantees of Origin and Certificates of Origin (Regeling garanties van oorsprong en certificaten van oorsprong). It is expected that the legislative proposal will be adopted in the first quarter of 2022. The legislative proposal does not introduce rules on GoOs or certificates of origin for hydrogen from non-renewable sources. This will need to take place by further legislative amendments once further details are known on the European Commission’s plans for hydrogen certification (including with regard to hydrogen and gasses from non-renewable sources). Furthermore, the Netherlands is of the view that regulations should make clear that green hydrogen imported from third countries in the Netherlands and other EU Member States shall be characterized as such and can be certified.
Safety is an essential prerequisite for the further development of (green) hydrogen. Though hydrogen has been used in the (heavy) industry under international standards for some time, new applications of hydrogen will lead to situations for which further research and monitoring will need to be carried out in order to better understand the scope and effective control of risks. This will preferably be carried out on a European or international level and be implemented based on international and European guidelines and standards.
Initial research has been undertaken to develop general principles to deal with the safety risks of the energy transition, including green hydrogen and other sustainable hydrogen carriers. Sustainable hydrogen carriers are easier to transport and store than hydrogen gas. In addition to hydrogen, the safety study conducted as part of the National Hydrogen Programme mainly focused on ammonia (NH3) and two forms of so-called liquid organic hydrogen carriers (LOHCs) as hydrogen carriers. Generally, liquid organic hydrogen carriers (LOHCs) appear to be relatively environmentally safe, as opposed to ammonia which is considered a risk from an environmental safety point of view. This is mainly because ammonia is very toxic. Currently, the market sees hydrogen gasses and ammonia as the best alternatives, which the Dutch Government will take into account in further developing a safety policy framework for hydrogen (and other sustainable hydrogen carriers).
With respect to transport, in the short-term, transport of hydrogen (carriers) is only possible by road, rail or water. Especially the current focus on hydrogen gasses means that further review must be undertaken as to whether, and if so under what conditions, domestic transport of hydrogen gasses and (foremost) ammonia as a carrier can be regulated in view of the transport associated risks, particularly the risk of ignition.
It is acknowledged that transport by pipeline is preferred whilst it appears that environmental safety standards can be met, provided a number of technical measures are implemented. The expectation is that the risks of transportation of hydrogen by pipeline will not exceed those of natural gas. The so-called hydrogen backbone, which relates to the transport of hydrogen through former natural gas pipelines which will become available as from mid-2027, will mitigate the risks associated with the transport of hydrogen gas. New pipelines are likely to become part of a common pipeline corridor (buisleidingencorridor). Currently, the Delta Corridor between Rotterdam and Germany is being studied and it is expected that such study will also provide insight into the need for new (hydrogen) routes and corridors.
In particular, the ports of Rotterdam, Amsterdam and Zeeland envisage playing a key role in the trade of (green) hydrogen. Their ambition is to act as a Western European hydrogen hub. Green hydrogen demand is expected to increase exponentially as of 2025 whilst the Netherlands cannot produce all required green hydrogen itself. Therefore, import and export (policy) of hydrogen will be a recurring discussion item on the agenda of the various bilateral and multilateral fora where the Netherlands is present. Currently, the Dutch government is exploring the creation of corridors for the import and export of hydrogen. In 2021, the Dutch Government has signed letter of intent with Chili, Portugal, Namibia and Uruguay for the import of hydrogen whilst discussions with Canada are ongoing.
All industrial clusters have indicated that they consider the development of hydrogen infrastructure to be a key prerequisite for further sustainability improvements. The connection to future hydrogen infrastructure and the spatial integration of electrolysis projects deserves particular focus. Collaboration with the various Dutch regions will form part of the National Hydrogen Programme.
Decision-making on matters must take place carefully, in an integrated manner and within the control of the (central) government in collaboration with the relevant regional and local governments. Therefore, the Multi-Year Program Infrastructure, Energy and Climate (Meerjarenprogramma Infrastructuur, Energie en Klimaat (MIEK)) will be used as an instrument for this. The MIEK is a program of energy and raw materials infrastructure projects of national importance that contribute to the climate transition. The aim is to accelerate project decision-making and achieve system integration for the construction of relevant infrastructure and removing bottlenecks. Several hydrogen infrastructure projects are part of the MIEK, such as the (i) construction of an open access hydrogen backbone through the port of Rotterdam (HyTransPort.RTM-pripeline); (ii) onshore landing of at least 2 GW of offshore wind from offshore wind farms in the North Sea before 2030 for the benefit of the production of (onshore) green hydrogen and (iii) development of hydrogen infrastructure connecting the five (5) industrial clusters and providing access to storage facilities and border connections.
In this context, the Ministry of Economic Affairs and Climate Policy, together with TenneT and Gasunie, conducted a study called HyWay 27 on the conditions under which part of the existing gas grid can be used to transport hydrogen. It is estimated that a hydrogen backbone in the Netherlands, to be developed on the basis of the existing natural gas infrastructure, requires an investment of at least EUR 1.5 billion. Currently, transport capacity demand is uncertain, Therefore, a risk exists that during a certain period the transport capacity will not be fully utilised (vollooprisico). The Dutch Government can either take over such risk or compensate for such a risk by providing incentives such as subsidies.
The HyWay 27 report was published in June 2021. Further to the HyWay 27 report, the Dutch Government intends to use part of the existing Dutch gas grid for the transport and distribution of hydrogen. A plan for the phased roll out of a nationwide hydrogen distribution network will be prepared. This plan will need to provide guidance to users on where and when the infrastructure will be developed and will take into account the transport capacity demand.
It is foreseen that the first parts of the national backbone will become available in 2025. In the short term there is a need for transport capacity for industry in particular. In light thereof, several industry clusters (in the IJmond and Rijnmond region) are working together with local industrial players on regional hydrogen backbones. Around 2025, a start will be made on connecting the regional pipelines with each other, as well as with foreign countries and with hydrogen storage facilities, so that they become part of the national and the future European hydrogen backbone.
Furthermore, together with ten (10) other gas infrastructure companies from nine (9) European member states, Gasunie has drawn up plans for a European hydrogen network.
In the Netherlands, the establishment of such a hydrogen exchange (called HyXchange) is currently being investigated by Gasunie and the port authorities of Rotterdam, Amsterdam, Groningen and North Sea Port.
Further analysis on the establishment of a hydrogen exchange revealed that a number of prerequisites need to be met to create a market for transparent and efficient pricing of hydrogen (products). First, hydrogen must be certified (see above). Secondly, an index that provides insight into prices is needed as well as a spot market. Finally, trading instruments and/or products must be developed in order to balance the physical hydrogen (grid) infrastructure and storage of hydrogen.
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