Hydrogen law, regulations & strategy in the Netherlands

General info

The Netherlands is on the forefront of the development of international hydrogen infrastructure, with the city of Rotterdam being Europe’s largest container seaport, the proximity of the Netherlands to the North Sea offshore wind farms, an international natural gas pipeline network, and depleted natural gas fields and national salt caverns that can be used for hydrogen storage.

The Dutch government has set out its national strategy on hydrogen and corresponding policy agenda in its letter dated March 2020. 1 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 the government, industry and other stakeholders in 2019, 2 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 per cent of energy consumption, but is estimated that it will cover approximately 50 per cent by 2050, with gaseous energy carriers providing at least 30 per cent of final energy consumption. In order to achieve this, scaling-up 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 regards 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, large industrial players are located in the Netherlands, such as Shell’s 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 Yara-Dow H2 pipeline, which became operational in 2018 and is the first hydrogen pipeline in the Netherlands. 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. This has 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 buses already in operation;
• Gasunie is developing a terminal for the import of green ammonia, including storage and loading facilities and a connection to the so-called (Dutch) Hydrogen Backbone (see figure 1) (the “Backbone”);
• Gasunie is also investigating with Vopak the construction of a terminal for the import of hydrogen. 

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 the most appropriate locations for electrolysers across the country will be. 3 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) Also, until 2030, Gasunie will invest seven billion euros (€7,000,000,000) towards the energy transition goal. This largely entails the repurposing of existing natural gas pipelines for hydrogen. With this, the Netherlands is the first European country to be developing nation-wide hydrogen infrastructure. The development of this hydrogen chain is planned in a 10 year-long roadmap with four phases:

• 2021-2022 - preparing the market: stimulating electrolysis and hydrogen applications in industrial clusters;
• 2023-2025 - developing regional infrastructure: starting phased roll-out of the Backbone;
• 2026-2028 - facilitating growth and market creation: connecting industrial clusters with each other, storage facilities and abroad;
• 2029-2030 - global market readiness: continued growth of offshore wind for hydrogen, realisation of import and transit.

Hydrogen Backbone

The Dutch Government has tasked Gasunie with creating a ring-shaped national hydrogen pipeline to supply industrial clusters. This is the Backbone and the aim is that it will make hydrogen cheaper to transport and will act as a platform to connect hydrogen producers with off takers. The 2021 Budget Day has underpinned an amount of six billion eight hundred million euros (€6,800,000,000) as a support package for climate change. An amount of seven hundred and fifty million euros (€750,000,000) thereof is labelled for the Dutch hydrogen ambition. For 85 per cent of the Backbone, the existing methane gas grid will be retrofitted to allow for the transport of hydrogen, whilst 15 per cent will be new pipelines. Gasunie has been tasked with retrofitting and build the network that will connect the five large industrial clusters in the Netherlands with hydrogen production sites, ports and storage facilities. Ultimately the Backbone is expected to also include cross-border connections. Total costs are estimated at one billion five hundred million euros (€1,500,000,000) and the project is scheduled for completion in 2027.

Additionally, the Backbone will be part of a future European Hydrogen Backbone. 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. 4 European Hydrogen Backbone Report July 2020 The assumption is that 75 per cent of existing natural gas pipelines will be utilised and new pipelines will only be required for the remaining 25 per cent of the project. Based on this assumption, the investments are estimated to be twenty seven-sixty four billion euros (€27,000,000,000-64,000,000,000) by 2040.

HyStock Hydrogen storage

As demand and supply will not be balanced whilst building a hydrogen market, large scale underground storage facilities are needed too. In early 2021, Gasunie successfully completed injection tests of hydrogen into a depleted salt cavern at Zuidwending. The first cavern is expected to be operational in 2026, with the aim being to have four hydrogen storage caverns at Zuidwending by 2030.

Hydrogen is most prominent in the Netherlands in the following areas:

Transport

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. 5 See: www.porthosco2.nl (please see 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 and transport of CO₂ from industry in the Port of Rotterdam, to ultimately produce blue hydrogen on a large-scale. Porthos is the first CO₂ storage project in the Netherlands.

There is also the opportunity for hydrogen to play a role in industry in the Netherlands, specifically in the development of hydrogen infrastructure and clusters to support industry.

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 using 100 per cent 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 carried out with 100 per cent 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 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, 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.

Electricity sector

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.

Agriculture

There are opportunities in the agricultural sector for the use and production of hydrogen, particularly with regards to zero-carbon hydrogen offering possibilities to decarbonise heavy machinery.

The development of the hydrogen market in the Netherlands is in its early stages, with significant prospects for growth over the coming years. There has been no significant M&A or financing activity in the sector yet.

Reducing cost and securing demand

The biggest challenge facing hydrogen projects in the Netherlands is to create and implement a low-carbon 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, its storage capacity, and sufficient demand in its industrial clusters.

Legislative framework

Use of the existing gas grid

The Dutch government has recognised 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. 6 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 considered some temporary roles for Gasunie regarding transport, storage and conversion in order to kick-start the hydrogen market. Both private and public hydrogen networks are foreseen.

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.

Legislation

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.

The ACM published a guideline on 14 September 2021 aiming to provide clarity regarding the role of network companies in the market for alternative energy carriers.

This guideline clarifies what options the current legal framework offers network companies active in this market. It refers, in particular, to Articles 10d of the Gas Act and 17c of the Electricity Act. According to the ACM explanation, network companies can use the possibilities offered by the law to help shape the energy transition, and market parties know where they can and cannot expect competition from network companies or where they can seek cooperation with network companies. In this way, the market for alternative energy carriers can develop as well as possible, which also benefits the energy transition.

It should be emphasized that the Dutch legislator is currently working on a new bill, the Energy Act. This law is intended to replace the current Electricity Act and Gas Act. This may mean that the rules regarding alternative energy carriers, including hydrogen, that network companies must adhere to and that the ACM explains in their guideline, will change in the (near) future.

Within the current legal framework, network companies can perform the following actions or activities with regards to alternative energy carriers:

1. network companies may install and manage transmission pipelines and associated resources for alternative energy carriers and provide the transport of energy carriers over that infrastructure
2. network companies may build and maintain production installations for alternative energy carriers for third parties, but they may not manage or own them;
3. production, trade and supply of alternative energy carriers by network companies is not permitted, with the exception of:
   1. situations in which these activities are inextricably linked to the infrastructure; or
   2. the activities are carried out through minority participations and joint ventures where there is no decisive control of the network company. Network companies can thus help develop or shape markets for alternative energy carriers in a more far-reaching way via minority participations and joint ventures, in collaboration with other parties (a form of public-private partnership).

Injection into the gas grid

Although with minor adjustments to the pipeline it is technically possible to blend hydrogen with natural gas in an existing gas network, Gasunie has decided to modify the pipeline so it can deliver 100 per cent hydrogen rather than a blend. Gasunie is focusing on the development of a pure hydrogen backbone for several reasons, the main being that it is not very efficient to blend pure hydrogen with natural gas and separate it at the end to enable the use of hydrogen as a resource. The secondary reason is that the Netherlands has the opportunity to develop a separate hydrogen backbone relatively easily by using existing natural gas pipelines. In addition, residential and commercial heating boilers have already been developed for use with 100 per cent hydrogen.

Health and Safety

The Netherlands has initiated a four year Hydrogen Safety Innovation Programme that will be implemented as a public-private partnership. This aims to identify safety issues and will propose policies to address those issues.

5.1    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.

There have been several hydrogen projects initiated and developed or recently announced, of which the following are notable:

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. In November 2020, Porthos and four companies (Air Liquide, Air Products, ExxonMobil and Shell) signed a new agreement to keep working together towards the realisation of definite transport and storage contracts and for the preparations for the capture, transport and storage of CO₂. In the next stage, both Porthos and its private sector partners will be completing various technical studies and permit procedures.

The final investment decision for Porthos has been planned for 2022, after which the realisation can proceed. 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 one 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 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 powerplant will generate electricity by using hydrogen. 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, the Magnum power plant will be the world’s first such facility to generate 100 per cent carbon-free electricity using hydrogen as fuel.

Hydrogen Storage

In 2011, Gasunie discovered the possibility of storing 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

In 2016, Dutch TSO TenneT proposed 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 Periodic Table. The installation is built near the North of Germany where the 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 above) and has received financial support from the European Union (eleven million euros (€11,000,000)) as well as the Netherlands Enterprise Agency (six million euros (€6,000,000).

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 offshore 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 nine operational hydrogen refuelling stations in the Netherlands, and twelve more are currently in development.

Hydrogen Delta Network NL

In September 2021, Gasunie and North Sea Port signed an agreement for the development of a regional hydrogen transport network in Zeeland. This “Hydrogen Delta Network NL” builds on the current position of the region for hydrogen and is expected to take shape in the coming years. This is to be followed by the connection of this regional infrastructure to the national Dutch and Belgian hydrogen infrastructures.