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The Dutch government publishes an ambitious strategy and policy agenda on the development of the clean hydrogen market

The Dutch government publishes an ambitious strategy and policy agend

The Dutch government publishes an ambitious strategy and policy agenda on the development of the clean hydrogen market

08.04.2020 NL law

The Minister of Economic Affairs and Climate Policy (“Minister”) presented the ‘Government strategy on hydrogen’ (Kabinetsvisie Waterstof, also available in English) by means of a letter addressed to the Dutch House of Representatives (Tweede Kamer) on 30 March 2020. With the presentation of its hydrogen strategy and policy agenda, the Dutch government has underlined its ambitions to use ‘the unique position of the Netherlands’ to develop a strong position for the Netherlands in the hydrogen market.

In this strategy document, the Dutch government elaborates on the necessity to develop a clean hydrogen economy, on the role of hydrogen in the energy transition and on its policy agenda in respect of the hydrogen market.

The presentation of the Dutch government’s hydrogen strategy and policy agenda is in line with the ambitions concerning the development of a clean hydrogen economy in the Netherlands as laid down in the Dutch national climate agreement in June 2019 (“Climate Agreement”, available in Dutch and English). The presentation was preceded by a January 2020 research report on ‘A programmatic approach for Hydrogen innovations in the Netherlands for the 2020-2030 period’ (“Programmatic Approach” by TKI Nieuw Gas, available in Dutch and English).

Role of clean hydrogen and biogas in the future energy system

The government strategy refers to various energy scenarios, and notes that a completely sustainable energy supply in 2050 requires at least thirty percent (and up to fifty percent) of final energy consumption to be gaseous energy carriers. Biogas and hydrogen are gaseous energy carriers which can be produced CO2-free, but the government notes that there will not be sufficient biogas available, which makes hydrogen indispensable for meeting the expected demand for CO2-free gas.

In this context, it should be noted that on Monday 30 March 2020, the Minister also sent letters to the House of Representatives concerning the role of gas in the current and future energy system and the ‘Roadmap Green Gas’, concerning the government’s efforts to stimulate the development of CO2-free gases as an alternative to natural gas.

Hydrogen comes in different ‘colours’, of which ‘grey’, ‘blue’ and ‘green’ are most commonly used. The ‘colour’ of hydrogen is an informal label to identify the production process used. The definitions used vary. The following definitions are common. Grey hydrogen refers to the production of hydrogen using steam methane reforming (“SMR”), which uses natural gas and causes CO2 emissions. If the CO2 is captured and stored or used elsewhere, the hydrogen is called ‘blue hydrogen’. ‘Green hydrogen’ usually refers to the production of hydrogen (i) from renewable electricity by electrolysis, but can also refer to the production of hydrogen (ii) from biogas using SMR, or (iii) from biomass through gasification. Clean hydrogen includes both blue and green hydrogen. The Netherlands is, after Germany, the largest producer of ‘grey hydrogen’ in Europe.

International outlook, regional and industrial opportunities

The government states that the Netherlands is in a unique position to develop large-scale hydrogen infrastructure. Specifically for the ports - and especially the port of Rotterdam - the strategy document notes that it is strategically important to retain the current hub function in international energy flows. The Dutch government states that hydrogen may become a globally traded commodity, but that international development of the hydrogen market is required in order to realise its potential.

The policy agenda therefore provides an active international strategy to advance this development globally but has a principal focus on Europe. The European strategy entails active involvement of the Dutch government in various manners at the level of (i) the European Commission, (ii) the Pentalateral Energy Forum (Benelux, Germany, France, Austria and Switzerland), (iii) North Sea countries, and (iv) bilateral cooperation with neighbouring countries.

Within the Netherlands, the Dutch government sets out opportunities for the production and consumption of hydrogen with regard to (i) the ports and industry clusters, (ii) mobility, (iii) the built environment, (iv) the electricity sector and (v) agriculture. Regional ‘hydrogen clusters’ are developing within the Netherlands, for example in the north of the Netherlands and the ports. Parties in the port of Rotterdam area, the port of Amsterdam (collaboration with the North Sea Canal region and parties such as Tata Steel) and clusters in Zeeland/Flanders and in the Northern Netherlands have indicated that they will soon begin preparing for a greater role for hydrogen in the short term. Towards 2030, there is a desire from the industry to connect clusters in order to be able to scale up further. In consultation with the industrial clusters, the government will provide guidance with regard to the precise locations of electrolysers through the Main Energy Infrastructure Programme (Programma Energiehoofdinfrastructuur).

Explicitly referring to the Porthos and H-Vision projects in the port of Rotterdam, where blue hydrogen will be produced on a large scale to reduce emissions before 2030, the government emphasises that development of blue hydrogen infrastructure is a high priority in order to achieve emission reductions in industry and pave the road for large-scale deployment of green hydrogen. For this reason, the government has allowed carbon capture and storage (CCS) technology to compete for SDE++ subsidies from 2020 onwards.

Policy agenda

In order to facilitate the necessary innovation, pilot and demonstration projects to be developed with the aim of reducing costs and to support the transition towards production and consumption of hydrogen at a large scale, the policy agenda features four key elements: (i) legislation and regulation, (ii) cost reduction and scaling up green hydrogen, (iii) sustainability of final consumption, and (iv) supporting policy.

The policy agenda sets out how different types of projects will be supported including by means of research subsidies, a newly introduced temporary aid for the production of green hydrogen to allow for scaling-up of production, and the SDE++ subsidy. In the second half of 2020 the Dutch government will hold an open Important Projects of Common European Interest (IPCEI) call, to identify new large-scale Dutch projects on the distribution and production of green hydrogen which make a substantial contribution to the scaling-up of green hydrogen at a European level. These companies may qualify for more support than within the regular frameworks.

Furthermore, a system of guarantees of origin will be developed for low-carbon hydrogen within the framework provided by the Renewable Energy Directive (“RED II”). The government will also review how the implementation of RED II can contribute to the use of clean hydrogen. The policy agenda further features discussion of the possibility to couple the development of offshore wind with large-scale green hydrogen production, potentially by means of integrated tenders.

The strategy document mentions opportunities to create a demand for hydrogen in various sectors. An obligation to blend green hydrogen into the natural gas network is being considered to ensure offtake, starting with two percent physical blending, which could be increased incrementally to ten or twenty percent. The Netherlands also pursues a European blending obligation for the aviation sector and, should this not be feasible, is considering to introduce a national blending obligation from 2023. Until 2030, the expectation is that most developments will take place on a regional and local scale, in part through the regional energy strategies which all thirty energy regions have to submit before 1 June 2020 (subject to delays as a result of COVID-19).

Network industry

The government expects the hydrogen market to develop towards a network industry, which could include both public and private networks. The government states that hydrogen may be transported and distributed by making use of the existing natural gas pipeline network. By law, gas and electricity distribution system operators (“DSOs”) and transmission system operators (“TSOs”) (netbeheerders) are currently not allowed to act on the hydrogen market. This is set to change as a governmental decree is planned for 2020 to (temporarily) allow TSOs and DSOs to gain experience with the transport and distribution of hydrogen.

Companies in the same corporate group as a TSO or DSO (netwerkbedrijf) are currently allowed to act on the hydrogen market, albeit to a limited extent. The Dutch energy regulator (Authority for Consumers and Markets, “ACM”) has published a consultation on a draft guidance note (Leidraad netwerkbedrijven en alternatieve energiedragers). This note shows that the ACM is of the opinion that companies in a corporate group of which a TSO or DSO forms part are allowed to be involved with the transport of hydrogen and the construction (aanleg) and management (beheer) of hydrogen production and transport facilities. Read more on this topic in another Stibbe blog on the ACM consultation.

National hydrogen plan

The Dutch government aims for cooperation and development of the hydrogen economy on international, national, regional and local levels. As laid down in the Climate Agreement, a national hydrogen plan will be drawn up to guide development, initially covering the period until 2030. The Minister concludes the letter by stating that the period until 2021 will be used as a preparatory phase in which current projects are used as the starting point to gain experience, which will be relied upon to shape the future hydrogen agenda. The national hydrogen plan will be drafted and executed in cooperation with stakeholders, using the Programmatic Approach.

Team

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