Renewable energy in the Netherlands

1. Introduction

Since 2017, the Netherlands has taken many steps towards realising the objectives as set out in the 2015 Paris Climate Change Conference. In October 2017, the Dutch government presented an ambitious energy policy which aimed to achieve a 49% reduction in greenhouse gas emissions by 2030 (compared to 1990) and a 95-100% reduction by 2050. In June 2019, a Dutch Climate Agreement was presented which set out in detail how the Netherlands plans to achieve its CO² emission reduction objectives. In addition, in July 2023, the Dutch House of Commons passed the Temporary Climate Fund Act. Upon approval by Parliament, this act will allocate EUR 34,12 billion towards the development of a greenhouse gas-neutral energy supply by 2050 and for encouraging energy efficiency techniques and the use of renewable energy in industry and the built environment. 

The recent conflict in Ukraine has highlighted the EU's and the Netherlands' reliance on Russian gas. This has prompted a collective effort to achieve energy independence from Russia, reduce overall gas consumption, and transition from carbon-emitting equipment to electric alternatives. This will cause an (additional) increase in demand for sustainable energy, while there was already an increased demand for sustainable energy due to the major steps taken in the Netherlands over the past years with respect to the phasing out of fossil fuels, and will require significant upgrades and improvements of the Dutch electricity grid. Currently, the Dutch electricity grid is congested in large areas, which could form barriers in the realisation of the energy transition. To address these issues, in December 2022, the government together with grid operators, market players and the energy market regulator (ACM) presented the National Grid Congestion Action Programme. This plan sets out an approach on how to tackle capacity problems on the electricity grid. In addition a special national coordinator on this matter has been appointed by the Minister for Climate and Energy Policy. The National Grid Congestion Action Programme consists of three action points and aims to (i) speed up the upgrades of the electricity grid, by means of shortening the required (legal) procedures, (ii) implement new legislation to enable smarter use of the electricity grid, and (iii) encourage grid users to use energy more flexible.  

2. Prioritisation for sustainable producers 

2.1 Pursuant to the Dutch Electricity Act 1998 a request for transmission capacity can only be refused where no transport capacity is reasonably available. The allocation by the grid operators of available transmission capacity takes place on the basis of the order in which they receive applications for transmission capacity (the first-come-first-serve principle, ("FCFS principle"), which is an implementation of the non-discrimination principle that has its origins in EU law. 

2.2 In areas with scarcely available transport capacity the application of the FCFS principle may however result in certain important societal goals not being achieved.  To allow grid operators to deviate from the FCFS principle, the Dutch regulatory authority, Autoriteit Consument en Markt ("ACM"), recently published an amendment proposal to the Electricity Grid Code pursuant to which it introduces a prioritisation assessment framework that allows parties with a public interest or a positive contribution to grid congestion to be given priority when handling and allocating requests for transmission capacity. 

2.3 The prioritisation assessment framework allows grid operators to give priority in an objective, transparent, and non-discriminatory manner to transport capacity requests submitted by parties with a major public interest. The possibility to deviate from the FCFS principle is primarily intended for application in congestion areas, however, the amendment proposal will also allow for application in areas with transmission scarcity that has not been formally recognised as a grid congestion area. 

2.4 The ACM proposal includes the following priority categories: 

  1. congestion relieve: parties entering into an agreement with the grid operator, whereby the allocation of transport capacity to that party will release additional transport capacity (for others); 
  2. security: emergency assistance; fire brigade, ambulance, police and defence, prisons, and water safety; 
  3. basic needs: healthcare, housing needs, water management, waste management, education, and public transport; 
  4. sustainability: (a) priority for producers of renewable electricity over producers of non-sustainable electricity, and (b) priority for electricity off takers that implement large-scale and above-legal sustainability improvements, insofar as they have made concrete agreements with the government to this end.  

2.5 Applications in category (i) have the highest priority and will therefore be processed first, then category (ii), and so on. With the exception of category (iv) sub (a), within the categories, no distinction shall be made between applications and transmission capacity shall be allocated  on the basis of the FCFS principle. In relation to category (iv) sub (a), renewable electricity producers that make use of cable-pooling are given priority over producers that do not use cable-pooling.

2.6 It is not yet absolutely certain that this proposed amendment, to include prioritisation for allocating transport capacity for certain parties, will be implemented. However, given the political attention, public appeal, and the fact that the ACM and grid operators are welcoming prioritisation options, the likelihood of implementation is considerable. After implementation, producers of renewable electricity will be prioritized in respect of applications for transport capacity over some parties, although potentially disadvantaged compared to others. Producers should take this into account when arranging sufficient transport capacity for their production facilities.  

3. Battery energy storage

3.1 The significant increase in renewables that is required to achieve the Dutch climate goals is expected to provide a strong push for the development of energy storage in the Dutch energy market. This development is however currently held back by high transportation costs. 

3.2 In the absence of a definition for ‘storage’ in the Dutch Electricity Act 1998, electricity storage is generally treated as a combination of consumption (where the battery is charged) and production (where the battery is discharged onto the grid). Although production is exempt from transmission tariffs, the consumption transmission tariff can be significant due to the short-term peak capacity needs of battery storage.  

3.3 There is currently a strong call from the market for reduction of the consumption transport tariff  for electricity storage. The ACM, however sets as a prerequisite for a reduced tariff that the electricity storage does not result in increased congestion on the Dutch grids. Whether this is the case will, according to ACM, depend on the location of the battery and its deployment timing, which will be considered on a case-by-case basis. Moreover, the ACM takes the position that, based on the non-discrimination principle and to maintain a level playing field, reduced tariffs should not be restricted to battery storage, but should be available to all (large) consumers and other providers of flexibility. 

3.4 The ACM is currently working on two initiatives to achieve this: the introduction of alternative transport rights in combination with a lower tariff, and an adjustment of the broader tariff structure for (large) consumers, including differentiation of the transmission tariff based on time and/or location of grid usage. While anticipating the introduction of these measures and recognising the need a short-term solution within the energy transition, the ACM  acknowledges that a change in the tariff structure specifically for battery storage may need to be a first step. To this end, the branch organisation for grid operators, Netbeheer Netherlands, is currently in consultation with the ACM and large grid users, to explore the applicability of different tariffs  for energy storage and conversion to promote more efficient grid usage. 

3.5 This problem is not unique to the Netherlands. Research by ACER shows that storage facilities in most countries pay transmission tariffs. A number of countries apply an exemption or reduced transport tariff for storage. However, based on information provided by the ACM on this subject, it appears none of those countries make network relief a requirement.    

4. Offshore wind: From innovation to standardisation 

4.1 Offshore wind energy is one of the key pillars of climate policy in the Netherlands. To achieve the Dutch climate goals, the Dutch government raised the target for offshore wind capacity from 11 GW to 21 GW by 2030/2031 in 2022. This is however only the beginning. To meet the 2050 net zero goal the aim is have 50 GW of offshore wind capacity in 2040 and approximately 70 GW in 2050.  

4.2 The offshore wind tenders organised by the Dutch government since 2016 are instrumental in the implementation of Dutch climate policy. The tender process is strictly controlled by the Dutch government, setting parameters for  the pace at which the proposed new capacity will be developed, the maximum capacity of the wind parks, planning and zoning and the grid connection and having a strong focus on  cost efficiency and innovation. For example, recent tenders aimed  to encourage market players to propose solution-oriented applications that contribute to the further growth of offshore wind energy for societal goals.  

4.3 Recently, however, there have been calls from the market for a standstill on innovation and a focus on standardisation in order to enable an accelerated rollout. Standardisation is believed to offer many advantages. Not only can standardisation provide faster installation and more scalability. It also provides certainty, promotes the use of circular materials, and enhances the stability of the development process by mitigating risk, streamlining production, and providing supply chain reliability. Additionally, it brings benefits in terms of resource utilisation, cost efficiency and safety.  

4.4 According to the Dutch wind industry's trade association (NWEA), keeping up with constant developments is a huge challenge. By the time suppliers deliver, the order is often already outdated, resulting in wasted time and money that could be used more effectively.   

4.5 In June 2023, NWEA, in consultation with developers, suppliers, wind turbine manufacturers and installation companies, adopted an unofficial standard of a maximum turbine tip height of 1,000 feet and a minimum capacity of 14 MW per turbine. This standard will be in use until the end of 2037. In 2028, the wind industry will evaluate this standard’s suitability and for the period from 2037 onwards. 

4.6 The ultimate goal is a common industry-standard endorsed by the Dutch government and the EU. Discussions about this are currently underway with other countries. The choice of a 1,000-foot limit was made because this aviation-derived limit is internationally recognised, increasing the likelihood of its application across the entire North Sea. 

Portrait ofCecilia Weijden
Cecilia van der Weijden
Partner
Amsterdam
Portrait ofMarcellina Rietvelt
Marcellina Rietvelt
Advocaat
Amsterdam
Portrait ofMarco Boudens
Marco Boudens
Advocaat
Amsterdam
Portrait ofTijl Poen
Tijl Poen
Advocaat
Amsterdam