The Netherlands – The Netherlands, like many nations, is fully committed to reducing its carbon emissions and pursuing cleaner and more sustainable energy sources. One of the key components in its strategy to achieve this is the production of green hydrogen, an energy carrier with zero CO2 emissions.
However, ambitious plans for large-scale green hydrogen factories that play a pivotal role in this strategy are now facing a significant hurdle – the sharply increased costs for using the electricity grid.
The Climate Agreement of the Netherlands outlines the country’s determination to significantly reduce CO2 emissions. A crucial part of this reduction involves transitioning from hydrogen produced from natural gas to green hydrogen generated from water and green electricity. Green hydrogen is considered the energy carrier of the future, with the potential to make industries and transportation more sustainable.
Infrastructure development
While green hydrogen is a promising solution, it’s also a relatively new one that requires extensive infrastructure development. The Netherlands has set ambitious targets for domestic green hydrogen production, with the goal of reaching 3 to 4 GW by 2030, eventually scaling up to 8 GW by 2032. However, these targets are now in jeopardy due to skyrocketing electricity transport costs, according to a coalition of parties dedicated to green hydrogen development. This coalition, which includes major players like Uniper, NLHydrogen, รrsted, HyCC, RWE, Shell, BP, and Engie, warns that these costs are becoming a significant roadblock.
As Alice Krekt, director of NLHydrogen, points out, the revenue model for green hydrogen production in the Netherlands has become overly dependent on high and potentially rising electricity transport costs. The situation has become so dire that companies planning large-scale green hydrogen production might have to halt their construction plans unless a solution is found for this financial burden.
Afkenel Schipstra, hydrogen manager at Uniper Benelux, highlights the staggering increase in grid usage costs. Those connected to the high-voltage grid have seen their costs surge by up to 332% in just two years. This increase in grid usage costs is attributed to the grid operator TenneT’s efforts to expand the electricity grid and manage the growing complexity of supply and demand due to a mix of renewable energy sources, which are weather-dependent and not available 24/7.
Schipstra also points out that TenneT’s fixed costs may continue to rise due to changes in government funding, where investments for connecting offshore wind farms are no longer covered. These additional costs are now included in the network rates, passed on to all parties connected to the grid.
Grid rates
The impact of soaring electricity grid costs is not limited to green hydrogen production. Other sustainable technologies such as industrial e-boilers and heat pumps are also at risk of being impeded by this substantial cost factor.
The hydrogen sector sees a few possible solutions to this challenge. In the short term, there’s a call for the outgoing cabinet to allocate funding within the hydrogen scale-up instrument (OWE) to cover grid costs. Additionally, different rates could be explored, offering a reduced grid rate for applications that make a valuable contribution to the efficient integration of sustainable energy.
Uniper, in particular, identifies two potential solutions to help green hydrogen production thrive in the Netherlands. The first is to ensure that the country remains competitive with its neighboring nations in terms of green hydrogen production costs. This could include offering a partial exemption, similar to Germany, for electrolysers operational by 2026. In the long term, a fair distribution of infrastructure costs for renewable energy, storage, and electrolysers should align with the benefits they bring to the energy system. The European Commission is currently investigating options for cost sharing in this regard.
The Netherlands’ commitment to green hydrogen and sustainable energy sources now faces a critical challenge that will test the resolve to make renewable energy an integral part of the nation’s energy landscape.
