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1. CURRENT STATE OF HYDROGEN PROJECTS IN THE NETHERLANDS
The Dutch government has set out its national strategy on hydrogen and corresponding policy agenda in its letter dated March 2020.
Kabinetsvisie Waterstof 30.03.2020 MEZ DGKE/ 20087869
The importance of hydrogen for achieving a decarbonised energy system is clearly set out. The National Climate Agreement, entered into between government, industry and other stakeholders in 2019,
Klimaatakkoord 28 June 2019
also sets out ambitious targets for hydrogen, with key concepts being upscaling, cost reduction and innovation.
The Dutch energy system is changing, and the role of natural gas is decreasing as a result of the energy transition. Electricity currently provides for 20% of energy consumption but is estimated to cover approximately 50% by 2050, with gaseous energy carriers providing at least 30% of final energy consumption. In order to achieve this, scaling-up of the production of both green gas and hydrogen is essential. The Dutch government also sees hydrogen as an opportunity for the Dutch economy; firstly, because it may influence companies in deciding to invest in the Netherlands, and secondly, because hydrogen may lead to exciting opportunities for Dutch companies and Dutch knowledge institutions.
The Netherlands has some unique selling points with regard to hydrogen: it has empty gas fields in the North Sea that can be used for CO2 storage, substantial offshore wind installations that can – in the long term – produce green hydrogen, and also an extensive natural gas infrastructure, which can, with little adjustment, be used for the transportation of hydrogen. Additionally, on the retail side, the Netherlands has large industries, such as Shell refinery, Yara and Tata Steel.
A large number of projects, pilot-projects and initiatives are in the process of being constructed and developed. A few examples are listed below:
the first hydrogen pipeline, which became operational in 2018. This is a retrofit of a former natural gas pipeline, linking the hydrogen industry;
the Hystock plant, a 1MW plant which converts solar energy into hydrogen via electrolysis. This became operational in 2019 in Zuidwending and serves as a showcase of the entire chain;
in the north of the country, Groningen has been recognised by Brussels as the 'Hydrogen Valley', i.e. a geographical area hosting an entire hydrogen value chain – from production to distribution and from storage to local end-use, with applications in industry, mobility and the built environment. This is the first region to receive a European subsidy as recognition as a Hydrogen Valley;
the mobility market is being developed in the northern part of the country with hydrogen refuelling stations and several hydrogen busses already in operation;
It is recognised that the development of the electricity and hydrogen grids should be coordinated. With this in mind, the Dutch gas infrastructure company, Gasunie, has teamed up with TenneT (the Dutch transmission system operator) to produce a joint study on an integrated infrastructure in The Netherlands and Germany. This will be an important project as it will help determine where will be the most appropriate locations for electrolysers across the country.
Gasunie & TenneT: Infrastructure Outlook 2050, a joint study on integrated energy infrastructure in The Netherlands and Germany (2019); Gasunie & TenneT, Phase II Pathways to 2050. A joint follow-up study (2020)
Additionally, in July 2020, 11 gas infrastructure companies (including Dutch Gasunie) proposed creating a hydrogen “backbone” from Sweden to southern Spain and Italy. In the first phase of the project hydrogen clusters across Europe are to be connected.
European Hydrogen Backbone Report July 2020
The assumption is that 75% of existing natural gas pipelines will be utilised and new pipelines will only be required for the remaining 25% of the project. Based on this assumption the investments are estimated to be EUR 27-64 billion by 2040.
Hydrogen is most prominent in the Netherlands in the following areas:
The National Climate Agreement sets out a target of 50 refuelling stations, 15,000 fuel cell vehicles and 3,000 heavy duty vehicles by 2025 and a further 300,000 fuel cell vehicles by 2030. Subsidy schemes are currently being developed.
Hydrogen has also been a popular choice in the context of decarbonising public road transport, particularly buses.
Ports and Industry Clusters
The Porthos project,
of which there is greater detail below, is led by a consortium of state-owned companies with the aim of reducing emissions by 2030 by focusing on the capture of CO2 within the port of Rotterdam, to ultimately produce blue hydrogen on a large-scale. Porthos is the first CO2 storage project in The Netherlands. Similar projects are being investigated by the Port of Amsterdam (with Gasunie and also Tata Steel) and in the Province of Zeeland.
There is also opportunity for hydrogen to play a role in industry in the Netherlands, specifically in the development of hydrogen infrastructure and clusters to support industry. An Infrastructure Task Force has been formed and a report is expected towards the end of 2020.
Buildings and Heating
Since the discovery of the Groningen gas field – the largest gas field in Europe – the Netherlands has been nearly completely dependent on natural gas for the heating of homes and commercial buildings. In March 2018, the Dutch government decided to strive for a complete end to the use of natural gas in the built environment by 2050. Furthermore, the government has decided to close-down the Groningen field by 2030 at the latest, as a result of earthquakes caused by gas exploration. Moving away from natural gas is therefore key for the Netherlands overall net zero goals. Blue hydrogen is viewed as a temporary necessity in order to scale up grey and green hydrogen.
A number of pilot heating projects using green hydrogen have been undertaken, for instance in Rozenburg, where a pilot is being conducted by grid operator Stedin to heat homes by means of 100% hydrogen. Since there is not yet an infrastructure for the transportation of hydrogen in the Netherlands, the hydrogen is produced locally through electrolysis. The hydrogen is then transported to residential homes through an existing gas pipeline. For this purpose, the gas pipeline has been tested in stages, whereby for the initial test nitrogen was used. After the first tests were successfully carried out, the next stage of testing was done with 100% hydrogen, which also turned out to be successful. At present, 40 residential homes are being heated by hydrogen.
Another project is a cooperation between i.a. Stedin, Eneco, Gasunie, Deltawind and the Province of South Holland whereby the possibilities for developing a hydrogen city are being assessed. The aim of the project is to have the entire village of Stad aan 't Haringvliet (in which there are 600 residential homes) switch to hydrogen by 2025. The hydrogen will be produced by electrolysis using electricity generated by wind turbines. At present, the project is in the investigation stage, whereby every party to the project has its own task. For example, Stedin is investigating whether the existing gas grid is suitable for the transportation of hydrogen and Deltawind is exploring the possibility of using existing wind turbines to produce hydrogen.
Another project is being developed in Hoogeveen, in the Province of Drenthe, where the first residential area that will be fully connected to hydrogen is being built. The project consists of two phases:during the first phase (2020-2021) 16 residential homes are being built with a shared hydrogen facility. The hydrogen is produced by means of electrolysis using electricity generated by solar panels that are installed on the roofs of all 16 homes. In the second phase (2021-2022), 80 residential homes will be built, which will also have solar panels, however, these 80 homes will be supplied with hydrogen from the nearby Hystock hydrogen plant. The hydrogen will be transported from the plant to the homes by means of a newly installed gas pipeline. The aim is to demonstrate that gas pipelines are suitable for the transportation of hydrogen. Further detail on the Hystock Project is provided below.
The use of low carbon hydrogen in gas plants will help in achieving CO2 reduction in the electricity sector in the long run. More detail of this, specifically the Magnum Project, is provided later in this chapter.
There are opportunities in the agricultural sector for the use and production of hydrogen, particularly with regard to zero-carbon hydrogen offering possibilities to decarbonise heavy machinery.
2. MARKET PROSPECTS FOR HYDROGEN
The hydrogen market in the Netherlands is at early stages with significant prospects for growth over the coming years. There has been no significant M&A or financing activity in the sector as yet.
3. CHALLENGES FACING HYDROGEN PROJECTS
Reducing cost and securing demand
The biggest challenge facing hydrogen in the Netherlands is to create and implement a clean hydrogen supply chain. Demand, storage, supply and infrastructure all need to be developed. The upscaling of hydrogen and the creation of demand are key requirements for reducing overall costs. The Netherlands aims to become a hydrogen hub due to its favourable location, large ports, extensive gas and electricity grids and its storage capacity and sufficient demand in its industrial clusters.
4. REGULATION OF HYDROGEN
Use of the existing gas grid
The Dutch government has recognized that a solid regulatory framework is key to the development of the hydrogen economy. In its State Vision for the Development of Markets for the Energy Transition, dated 22 June 2020,
Brief MEZ 22 juni 2020 Rijksvisie marktontwikkeling voor de energietransitie.
the Minister of Economic Affairs and Climate Policy stated that one of the main policy issues will be the transition of the natural gas infrastructure; from natural to green gas and low carbon hydrogen. The policy agenda will include studies looking into the role of the national gas infrastructure company Gasunie in the hydrogen chain.
Temporary tasks for network operators
The government will look at temporary roles for Gasunie with regard to transport, storage and conversion in order to kick-start the hydrogen market. Both private and public hydrogen networks are foreseen. The process to bring forward legislation to enable the transport and distribution of hydrogen by network companies has been initiated. This will be subject to a Ministerial Decree based on the current Gas Act. This Decree is expected to be published by the end of 2020 and should clarify the role of the network companies. The production of green hydrogen from electricity and water will be promoted through an innovation subsidy instrument (“SDE++ regulation”) and temporary support for upscaling. Furthermore, the government recognises the importance of large scale infrastructure projects in order to encourage consumption, though no specific laws have yet been enacted in this regard.
No specific legislation has been adopted for hydrogen which means that the existing laws on regulation of gas, and those applying to the energy, transport and heating sectors, apply in the context of hydrogen projects.
The Dutch gas market is regulated by the Dutch Authority for Consumers and Markets (Authoriteit Consument & Markt ("ACM")). Anyone engaging in gas supply, gas shipping or gas transportation, or participating in the operation of gas interconnectors or providing smart metering in respect of gas must have a licence to do so under the Gas Act. The licences include measures relating to the safe operation of the gas network and provisions relating to price controls.
Injection into the gas grid
One option to increase demand for green hydrogen is through blending hydrogen into the gas grid. Pursuant to the current Gas Quality Decree, a level of 0.5% hydrogen is permitted in the regional networks and a level of 0.2% in the national networks. The Gas Act will have to be amended in order to allow for a higher percentage of hydrogen blending. Physical blending of up to 2% is already achievable with minor adjustments and the government expects that this can be increased to approximately 10-20%. In its letter dated 2 November 2019, the Minister of Economic Affairs and Climate Policy has announced that more detailed studies are required, as it may be possible that the gas grid could handle 100% hydrogen.
In addition, heating boilers have been developed for use with 100% hydrogen. As a result, the Ministry of Economic Affairs and Climate Policy has announced that it is investigating, with Gasunie, an obligation for the blending of hydrogen into the existing gas networks. A date is yet to be specified.
Health and Safety
The Netherlands has initiated a 4-year Hydrogen Safety Innovation Programme that will be implemented as a public-private partnership, which aims to identify safety issues and will propose policies to address those issues.
5. REGULATORY BODIES
There is no specific regulatory body that is responsible for the regulation of hydrogen projects. Instead, a number of regulators would have responsibilities depending on the activity in question.
Local Authorities, Municipalities and Provinces
Regulate the use of land
Undertakes Environmental Impact Assessments
State Supervision of the Mines (SodM)
Related to the storage of hydrogen
Rijksdienst Wegverkeer ("RDW")
Approves hydrogen transport vehicles
Minister of Economic Affairs
Regulates new pipelines and decommissioning
Autoriteit Consument & Markt ("ACM")
Regulates the gas network
6. UPCOMING DEVELOPMENTS
There have been several hydrogen projects initiated and developed or recently announced, of which the following are worth mentioning:
Porthos: this project is led by a consortium of state-owned companies: Gasunie, EBN and the Port of Rotterdam. Porthos aims to reduce emissions by 2030, in line with Dutch climate targets, by focusing on the capture of CO2 within the port of Rotterdam from existing hydrogen production to produce large-scale blue hydrogen. The CO2 captured is being stored in an empty gas field in the North Sea. During 2020 the parties have been occupied by the technical elaboration of the transport and storage infrastructure, obtaining all necessary permits and entering into agreements with companies for the supply of CO2. Following this, the consortium will commence the construction of the infrastructure. The project is expected to be operational by 2024.
Hystock Project: This project, initiated by Gasunie, researches the production of hydrogen generated with solar energy through electrolysis. Through Hystock, Gasunie is trying to stimulate the market for pure green hydrogen. Where a lot of other European initiatives focus on blending hydrogen, Hystock focuses on hydrogen fully produced by means of renewable energy. The green hydrogen plant, which has been operational since July 2019, converts 1 MW of solar energy generated by 5,000 solar panels into green hydrogen. This equates to 400 kilograms of hydrogen per day.
Magnum Project: The Nuon Magnum power plant is a 1.32 GW gas-fired combined-cycle power plant located in Eemshaven. Operational since 2014, the three-unit plant is owned and operated by Vattenfall. The facility is capable of generating enough power to serve the needs of approximately two million Dutch households. An innovative hydrogen conversion project is currently underway at the power station to convert one of its units to run on pure hydrogen by 2023. Upon completion, Nuon Magnum will be the world’s first such facility to generate 100% carbon-free power using hydrogen as fuel.
Hydrogen Storage: in 2011 Gasunie discovered the possibility to store hydrogen in salt caverns. At present, its subsidiary Energystock has been storing hydrogen in six salt caverns in Zuidwending, in the province of Groningen. Nouryon (formerly AkzoNobel) and Cory Energy are now also researching possibilities to make use of the salt caverns in Zuidwending. Storage in the salt caverns is intended to address the problem whereby production of solar and wind power is unable to meet demand due to the fluctuating weather conditions. By converting the power into hydrogen and storing it in the salt caverns, supply and demand can be balanced. In addition, it will help in balancing the Dutch electricity grid and prevent blackouts caused by an overload.
North Sea Wind Power Hub: Dutch TSO TenneT proposed in 2016 to make CO2 reduction targets feasible and affordable by building a large European electricity system in the North Sea, based on a 'hub-and-spoke' principle. Offshore wind parks will be connected to a hub in the North Sea, from which the electricity generated is partially converted into hydrogen and connected to shore via pipelines. In July 2019, this concept was further developed by the North Sea Wind Power Hub-consortium (consisting of TenneT, Gasunie, Havenbedrijf Rotterdam and Energinet). After in-depth investigation, the consortium concluded that instead of having one large island, eight to ten smaller energy hubs (of 10 – 15GW each) would be more optimal for realising the 'hub-and-spoke' principle. The consortium envisages having the first energy hub operational by 2030.
Element 1: in 2018 Gasunie Deutschland announced its cooperation with Dutch TSO TenneT and gas transmission company Thyssengas on the build of a 100 MW power-to-gas pilot using offshore wind energy. The project is called 'Element 1' since hydrogen is the first element in the chemical system. The installation is built near the North of Germany where power generated by offshore wind turbines converges before being allocated. Whenever supply exceeds demand, the excess power can be converted into hydrogen and may be temporarily stored. The installation is expected to become operational by 2022.
Djewels: a consortium of Gasunie, Nouryon (formerly AkzoNobel) and BioMCN are planning on building the biggest, European green hydrogen plant (20-60 MW) in Groningen. The construction of the plant is part of the Hystock-project (discussed below) and has received financial support from the European Union (€11 million) as well as the Netherlands Enterprise Agency (€6 million). In 2020, parties are finalising the technical details and economic models of the project. Construction is to commence towards the end of 2020. By 2022 the plant is expected to be operational.
PosHYdon: this is a joint project between Gasunie, TNO and Nextstep (a Dutch association focused on decommissioning and reuse). The project will use Neptune's Q13 oil platform, based in the Dutch North Sea for an haoffshore green hydrogen plant. The pilot aims to integrate three energy systems in the North Sea: offshore wind, offshore gas and offshore hydrogen, by producing hydrogen from seawater on the Q13 platform. The aim of the pilot project is to gain experience of integrating working energy systems at sea and in the production of hydrogen in an offshore environment.
Hydrogen refuelling stations and buses: in 2016 the Dutch government agreed with the public transportation sector that, as of 2030, all buses should be emission free. Several provinces, such as Groningen, Drenthe and South Holland now have hydrogen-fuelled buses in commercial operation within their public transport system. By 2021, at least 50 buses will be operational. As a consequence, the Netherlands is also expanding its amount of hydrogen refuelling stations. At present, there are eight hydrogen refuelling stations in the Netherlands, but this amount is to be increased to a total of 20 by the end of 2021.