Budget Day brings Dutch hydrogen ambition a small step closer

Budget Day 2021 has brought the Dutch clean hydrogen ambition a small step closer. On Budget Day, the Dutch ruling coalition presented its plans for the coming Parliamentary year. They labelled climate change as one of the key issues that needs to be addressed with priority, and underpinned this message with a EUR 6.8bn support package. Part of that package will be used to fund the hydrogen ambition, which should help to decarbonise the energy system.

The Dutch hydrogen strategy, which was published in 2020, includes the ambition to realise 0.5 GW electrolyser capacity by 2025, and 3 to 4 GW by 2030. These green hydrogen production facilities will be part of future clean hydrogen supply chains and will be connected to a hydrogen infrastructure for the transport of clean hydrogen at a later stage. The strategy also links green hydrogen production and offshore wind tenders to accelerate the development of green hydrogen.

One of the concrete measures included in the Budget is the aim to create a national network for hydrogen, the so-called hydrogen backbone. For the vast majority of this backbone (85%), the existing natural gas grid will be retrofitted to allow for the transport of hydrogen. Only a small part of the infrastructure, about 15%, will exist of new pipelines. The current Transmission System Operator for natural gas, Gasunie, has been asked to retrofit and build the network that will connect five large industrial clusters in the north, south and southwest of the Netherlands with hydrogen production sites, ports and storage facilities. The final infrastructure will also include cross-border connections. Gasunie estimates the total costs of retrofitting and new pipelines at EUR 1.5bn. The government will provide EUR 750m in support.

In the Dutch government’s current Offshore Wind Energy Roadmap, published in 2018, windfarm zones, with a total capacity of 11.5 GW have been pencilled in to be realised by 2030. In the climate plans revealed on Budget Day, the Dutch government acknowledges that more offshore wind capacity is needed in order to meet the national 2030 GHG emission reduction targets. This need becomes even more apparent when the Dutch government’s hydrogen strategy is taken into consideration, which requires 4 to 6 GW additional installed wind capacity by 2030 in order to produce sufficient wind energy for 3 to 4 GW electrolyser capacity. On Budget Day, the government therefore announced the intention to realise 10 GW additional wind at sea capacity by 2030, which should bring the total Dutch offshore wind capacity to 21.5 GW in 2030.

Upscaling green hydrogen production requires subsidies of EUR 6bn to 7bn according to the government’s own estimates. However, in the announced plans on Budget Day, no new dedicated subsidies were earmarked.

Earlier this year, the National Growth Fund allocated EUR 73m to green hydrogen projects and made a reservation for an additional EUR 265m. Another reservation of EUR 252m has been made for specific operational financial support of projects. This adds up to EUR 590m of dedicated financial support for hydrogen. This is a far cry from what the Dutch government believe is needed to get large-scale green hydrogen projects off the ground. Given the ambition of 3 to 4 GW hydrogen production capacity, this comes down to roughly EUR 150m to 200m subsidy per GW. It remains to be seen if this would be sufficient to realise the Dutch hydrogen ambition, as it is quite small compared to other EU countries.

Only seven EU Member States (Germany, France, Italy, Spain, Portugal, Poland and the Netherlands), have published hydrogen ambitions for 2030. As can be expected, the larger countries have larger ambitions. However, not Germany, but France has the most ambitious plans in terms of capacity.

From a financial perspective, the most robust support scheme comes from Germany as can be seen in Figure 3, where the dedicated hydrogen subsidies are displayed. Both in terms of total dedicated subsidies and in terms of dedicated subsidies available per GW of capacity, Germany stands out from the rest. Despite its ambitious announced target, the Dutch government hasn’t underpinned its plans with robust dedicated financial support. On the contrary, the Dutch dedicated subsidies are flimsy compared to those of other EU Member States.

On Budget Day 2021, the Dutch government underpinned the urgency to fight climate change and announced an extensive climate package of EUR 6.7bn. Green hydrogen has been labelled by the government as one of the key solutions to lower GHG emissions. The Dutch hydrogen strategy was launched last year, to give the Netherlands a head start in developing this sector. Despite the ambitious goals, the strategy was not supported by ambitious subsidies, and Budget Day 2021 didn’t bring the anticipated financial measures either. This will only make it more challenging for the Dutch hydrogen industry to be ahead of the game.