Hydrogen law, regulations & strategy in the Netherlands

Dutch industry already produces and uses hydrogen on a large scale, particularly as a fuel. However, this primarily involves hydrogen derived from natural gas (i.e. fossil-based 'grey' hydrogen), which releases approximately 13 megatons of CO2 annually. The Netherlands is the second-largest hydrogen producer in Europe, with an annual output of about 16.7 billion cubic metres (180 petajoules). In the coming years, EU and Dutch incentives aim to replace grey hydrogen with cleaner alternatives, such as:

• Low-carbon ('blue') hydrogen: also produced from natural gas, but with the CO2 captured and stored underground;
• Renewable ('green') hydrogen: produced via water electrolysis using sustainable energy sources, such as wind and solar power.

The production of green hydrogen is expected to scale up rapidly in the coming years. The Dutch government aims to achieve this transition, among other methods, through connecting hydrogen production facilities with offshore wind farms. Binding European targets for the use of renewable hydrogen in industry and mobility will require an estimated 4-8 gigawatts (GW) of electrolysis capacity by 2030, domestically or abroad (as imported hydrogen also counts towards meeting these targets). The national target is 4 GW of electrolysis capacity by 2030, with an aspiration to reach 8 GW by 2032. This is a challenging goal given the slow pace of offshore wind energy deployment and the energy demand for direct electrification.

The development of new large green hydrogen production installations is still in an early phase. At present, one hydrogen production project in the Netherlands – Shell's Holland Hydrogen 1 – has reached a final investment decision (FID). Comparable planned projects 1 are still at the feasibility study or concept phase of development. 2

The Netherlands is working towards the development of a publicly accessible hydrogen transport grid. The Dutch government aims to connect all Dutch industrial clusters via a public transport network in three phases by 2030. In the first phase (2025-2026), a small-scale transport network should be developed in which short-distance hydrogen is transported within industrial clusters, including an interconnection with Germany and Belgium. In the second phase (2027-2028), the aim is to connect industrial clusters that are further dispersed. In the third phase (2029-2030), the national transport grid is planned to be completed, and volumes can be increased by reusing more natural gas pipelines or by increasing pressure on the grid.

Production, import and consumption usually go hand-in-hand, as is the case with hydrogen. The industry is slowly changing from fossil fuel-based machinery to cleaner alternatives that run on electricity (so-called electrification) and hydrogen. Electrification is a big competitor to hydrogen, and we note that compared to electricity, hydrogen consumption projects are less developed on a large-scale basis. However, given the goals set in the RED-III Directive, which impose binding targets for clean hydrogen use in the industry and transport sector, we expect the demand for hydrogen consumption to grow rapidly in the coming years.

The Dutch government is advancing regulations for the hydrogen market, with key decisions pending from the new cabinet formed in July 2024. To support market development, the government is introducing production subsidies for electrolysis projects, offshore wind energy (OWE) subsidies and financing two offshore hydrogen production demonstration projects. A joint tender with Germany is also being organised to support hydrogen imports. Additionally, the government is consulting on its plans to introduce an annual obligation for industrial hydrogen users, with the final design to be decided post-consultation.

On the regulatory side, recent parliamentary discussions have focused on the role of network companies in managing hydrogen terminals. If private market initiatives prove insufficient, the state may intervene. Gasunie, the national hydrogen network operator, will be responsible for developing an offshore hydrogen network and will be authorised under the forthcoming Energy Act to establish and manage hydrogen storage and terminals. Meanwhile, the Dutch regulator, ACM, is preparing guidelines on third-party access to hydrogen terminals, ensuring fair market participation. These measures reflect a coordinated effort to establish a strong hydrogen market in the Netherlands. In the meantime, the policy framework relating to safety for hydrogen pilots is set out in the so-called Hydrogen Safety Guidelines, which are to provide guidance in situations where regulations are currently lacking.

In the following paragraphs, we look at key developments in more detail.

Hydrogen demonstration projects at sea

To capitalise on the potential for offshore wind energy in the North Sea, water electrolysis will be an essential technology in the future energy system of the Netherlands, since the limited capacity of the Dutch electricity grid means that any cost-effective integration of the future offshore wind capacity will not be feasible. To enable safe and cost-efficient large-scale production of hydrogen at sea, timely demonstration is essential. 

The PosHYdon pilot

In May 2024, the test phase of the world's first offshore green hydrogen pilot, the PosHYdon pilot, started. This pilot project is located circa 13 kilometres off the coast of Scheveningen, the Netherlands, on the Q13a-A platform of Neptune Energy. To make hydrogen, seawater is first converted on the platform into demineralised water, whereafter electricity generated by a wind farm is used to produce green hydrogen which will be brought ashore, mixed with natural gas, via existing gas pipelines. The test phase of the PosHYdon pilot is due to be completed by the end of 2024. The results of this pilot will be an important knowledge base for two hydrogen demonstration projects at sea planned by the Dutch Ministry of Economic Affairs. 

Demo 1: hydrogen production at existing wind farm

The first demonstration project (Demo 1) will involve the development of an electrolysis installation of circa 30-50 MW at an existing offshore wind farm in the Hollandse Kust wind energy area. The hydrogen will be transported to land via an existing gas pipeline and fed into the national hydrogen grid. This Demo aims to gain insight into the costs, the business case and the regulation for hydrogen at sea, to stimulate the demand for hydrogen in the industry and support the development of the Dutch hydrogen grid. For Demo 1, 380 million euros of subsidy is available from the Dutch Climate Fund. The government aims to select a consortium of parties that may construct and operate this Demo in the first half of 2025 and it should be operational by 2030. 

In preparation for this Demo, the Dutch Ministry of Economic Affairs organised a market consultation on this Demo in December 2023. The input received from the respondents will be taken into account in the choices on project design. After the summer, a spatial procedure shall be initiated in which the route for landfall and connection to the onshore hydrogen network will be investigated and the Minister will determine how to further shape and fund Demo 1, including on what basis a consortium will be selected. 

Demo 2: hydrogen production at new wind farm

The second demonstration project (Demo 2) will create a hybrid wind farm (production of hydrogen and electricity). It will involve the development of a new offshore wind farm (circa 700 MW) in the wind energy area north of the Wadden Islands specifically aimed at hydrogen production at sea. Circa 500 MW of the capacity of this wind farm is expected to be used for hydrogen production by the wind farm. The hydrogen generated will be transported to land via a pipeline that will form part of the future offshore hydrogen grid. In order to learn about system coupling between offshore wind farms, the electricity generated by the remaining 200 MW will be transported via a line to another offshore wind farm in the Doordewind wind energy area and subsequently to land. This will offer the possibility to create a blueprint for future offshore energy hubs and will provide insight into the technical and operational aspects of a hybrid wind farm, the optimisation of the electrolyser and the hydrogen pipeline, and the integration of offshore hydrogen into the energy system. For Demo 2, 1.4 billion euros of subsidy is reserved in the Climate Fund. The tender for the licence and the subsidy for the offshore wind farm and the electrolyser is planned to open in 2027. Demo 2 should be operational by 2033. 

Repurposing of existing offshore gas pipelines

In a letter to Parliament on the development of an energy infrastructure plan for the North Sea for the period 2030-2050, 3  the former Minister of Energy and Climate confirmed on 6 June 2024 that Gasunie subsidiary Hynetwork Services (HNS) will be tasked with developing and managing the future national offshore hydrogen grid. For the national onshore hydrogen grid, this was already decided mid-2022, allowing Gasunie/HNS to start the development of the national onshore hydrogen grid as a service of general economic interest (SGEI) in 2023.  HNS will be formally designated as operator of the onshore and offshore transport grid by 2031 (in line with requirements of the EU Hydrogen and Gas Decarbonisation package).

Repurposing the existing gas grid

According to the HyWay27 study of June 2021 4  that was conducted at the request of the Ministry of Economic Affairs, the existing onshore natural gas transmission grid can to a large extent be repurposed for the onshore hydrogen grid, with only minimal modifications. It is expected that about 85% of the future onshore hydrogen grid will consist of converted existing gas pipelines.

The HyWay27 study does not address the future offshore hydrogen grid. With around 3,000 km of gas pipelines in the Dutch part of the North Sea, repurposing of these gas pipelines could offer significant advantages. It is therefore important to know whether these pipelines can be converted into the future hydrogen network at sea, provided it does not negatively affect existing and future gas production. Earlier studies showed that two of the three large offshore gas transport pipelines, the NGT pipeline and the NOGAT pipeline, can be converted into hydrogen pipelines. The former Minister of Energy and Climate has requested Gasunie/HNS to further explore the technical and commercial possibilities.

Although repurposing can have significant advantages, repurposing of gas pipelines at sea may be legally challenging.  From a legal perspective, the re-purposing of existing onshore gas pipelines is generally expected to be a relatively smooth process, given the fact that these gas pipelines are already owned by Gasunie. This is, however, different for gas pipelines located in the sea. The majority of gas pipelines in the North Sea are privately owned by oil and gas companies 5 , which is possible because the obligation to designate a (public) grid operator pursuant to the 2009 Gas Directive (as implemented in the Dutch Gas Act), does not apply to offshore gas grids. Unlike natural gas, the EU Decarbonised Gas Package does, however, not provide a separate upstream category for hydrogen networks. Under the EU Decarbonised Gas Package, the unbundling regime for (on- and offshore) hydrogen transmission grids closely resembles the unbundling regime for onshore natural gas transmission grids, which offers two unbundling models: full ownership unbundling and an Independent System Operator (ISO).  This means that different unbundling and access rules will apply to offshore natural gas grids and offshore hydrogen grids, which can lead to complex situations. In case the Dutch government opts for full ownership unbundling for offshore hydrogen grids, ownership of the re-purposed hydrogen grid may have to be transferred by the current private owners to HNS in its capacity as the hydrogen grid operator. While opting for the ISO also has benefits, it could also lead to problems between the owner and the operator regarding investments, and the grid operator would likely have less knowledge about the pipelines, which could hinder effective operation. Moreover, the existing law is unclear as to when a natural gas network will no longer qualify as a gas network, and becomes a hydrogen network, and thereby subject to the regulation applicable to hydrogen networks.

In his letter to Parliament of 6 June 2024, the former Minister of Energy and Climate has indicated his preference for full ownership unbundling for the future hydrogen transmission network. It is expected that in Q4 2024 the government will take a decision on which operation model (ISO, or full-unbundling) will be selected for the offshore hydrogen transport grid, as well as determine how ownership or transfer of the existing infrastructure will take place.   

Hydrogen regulations and subsidy schemes

As the Netherlands has no specific regulation on hydrogen, legislation is currently being shaped at national level, whereby the provisions of EU hydrogen legislation have a major impact on the Dutch hydrogen market. Some notable developments are the following.

Safety regulations

Safety is a top priority in the legal framework for hydrogen in the Netherlands. In the absence of legislation, the policy framework relating to safety for hydrogen pilots is set out in the so-called Hydrogen Safety Guidelines. The guidelines deal with risks and uncertainties surrounding hydrogen and are intended to provide guidance in situations where regulations are lacking. The guidelines set out, inter alia, envisaged safety levels, safety guarantees, responsibilities of competent authorities and the role of grid operators. There are currently three guidelines, namely a general guideline regarding safe handling of hydrogen, a guideline for hydrogen pilots in buildings and a guideline regarding safe handling of hydrogen carriers and hydrogen import.

New Dutch Energy Act

On 4 June 2024, the Dutch House of Commons adopted the long-awaited bill for the new Energy Act (Energiewet). The new Energy Act will be the legal basis for the energy transition and will combine and replace the current Electricity Act 1998 and the Gas Act. Although the bill includes several references to hydrogen, it does not yet contain a specific chapter on hydrogen. The intention is to add that chapter later as part of the national implementation of the ‘EU Decarbonisation Package’ (as a revision of the EU Gas Directive and Regulation). We do note that the bill already includes the possibility of subsidiaries for grid operators to construct and operate hydrogen terminals, storage facilities and other infrastructure for the import, export, and conversion of hydrogen gas. Usually, such activities would only be allowed by market parties (instead of government-owned grid operators). However, if market parties do not provide these services in a timely manner, grid operators will be allowed to provide them, ensuring that the implementation of the hydrogen market as a whole will succeed.

The bill is currently being discussed in parliament and, if passed, is expected to come into force in 2025.

Incentive schemes

In the Netherlands, several incentive schemes have been introduced to support the production of renewable hydrogen. In August 2024, the Subsidy scheme for large-scale hydrogen production using an electrolyser (OWE) was published. The scheme is for companies that build and use hydrogen power generation facilities of at least 0.5 megawatts in size to make fully renewable hydrogen. The Dutch government has made available a budget of almost EUR 1 billion, which is to support the construction of at least 200 MW of capacity. The scheme consists of two parts: (i) a contribution to the costs of the electrolyser installation (up to 80%), which is paid out during the realisation phase; and (ii) a contribution to the operating costs paid out during the operating phase of the plant, which is spread over a minimum of 5 and a maximum of 10 years after the realisation of the electrolyser installation. Applicants for the subsidy will have to demonstrate compliance with EU criteria for the production of renewable fuels of non-organic origin (RFNBOs), as set out in the Renewable Energy Directive (EU) 2023/2413 (RED III). The application process for the OWE scheme is envisaged to be completed by the end of 2024.