New coalition of the Dutch government wants to support the energy transition.
By investing billions into green hydrogen, geothermal and renewable gas.
These energy sectors previously depended on the free market for investments and have been calling for financial support for years. Now they believe the energy transition will gain significant momentum, due to the plans of the new cabinet to subsidize these sectors through the investment of billions of euros.
According to the member of parliament Silvio Erkens (Energy Spokesperson of the VVD party) around €15 billion will be allocated to “high quality renewable energy carries” in the upcoming Climate and Transition Fund (that has a total budget of €35 billion). This investment will be equally divided between the hydrogen, geothermal, and renewable gas sectors.
Erkens mentioned that the money is intended for the “upscaling and cost reduction” purposes within the sector. Erkens proclaimed that for the energy transition to gain momentum, these technologies need to “get off the ground” via these government subsidies.
The future is looking extremely promising as Jacqueline Vaessen (General Manager of NextStep) says “we will be able to realize our current ambitions in stimulating the sector, as the current investment seems to be sufficient in terms of the magnitude.” The task to stimulate and scale up the green hydrogen economy is immense. This is because producing ‘grey hydrogen’ (produced from natural gas for use in the industry) is more cost and price effective than ‘green’ hydrogen.
The price of this 'grey' hydrogen is €1 to €1.50 per kilogram, which is well below the price of clean 'green' hydrogen from electrolysis. The price of green' hydrogen from electrolysis ranges: €3 to €7 per kilogram.
The sector needs to expand the electrolysis capacity, to bring down the cost price. This would make it a much greener alternative to ‘grey’ hydrogen and would lower the overall carbon footprint, as it provides a CO₂-free storage medium for renewable electricity.
Lowering the cost of ‘green hydrogen’ is an "enormous task that will not come about without strong government commitment" Vaessen says. She is therefore positive regarding the coalition's agreement, as she believes that “a substantial share of the budget will be made available for ‘green’ hydrogen.” Vaessen bases her expectations on a letter from the State Secretary for Economic Affairs and Climate: Dilan Yeşilgöz-Zegerius (VVD), who spoke earlier in December about €5 billion needed for the hydrogen sector. This is sentiment is bolstered as MP Erkens expects that hydrogen will be the largest recipient of money from the climate fund.
Geothermal energy: €2 billion needed to properly scale up the sector.
The same positive sentiment is coming from another sector: geothermal energy. "We are delighted with the action points that this coalition agreement offers for the development of geothermal energy in the greenhouse horticultural sector and for the urban environment," says Hans Bolscher, Chairman of Geothermal Energy Netherlands. "Geothermal energy is an indispensable link in the sustainable energy transition of the Netherlands and therefore deserves to be scaled up in the coming cabinet period."
According to Bolscher, "at least" €2bn is needed for a specific financing scheme for large-scale, sustainable heat. The reason being that heat projects are not covered by the SDE++ (sustainability development of energy) subsidy scheme. The sector needs to catch up, and in any case to bridge the period until budget limits are introduced in the SDE++ in two years' time, allowing separate budgets for different technologies. In this way, the Climate Fund can conduct 'overdue maintenance' for the geothermal sector. These technologies are developing with difficulty because the costs are still high. While technologies such as solar energy and carbon capture and storage can curb CO₂ emissions at lower costs, therefore they are given priority within the SDE system.
Energy investments no longer supported via the energy bill.
A significant aspect of setting up the Climate Fund for this investment injection of billions is the new way of financing via the general governmental budget, says Dutch MP Henri Bontenbal (CDA). The subsidy that goes to renewable energy via the SDE has previously been financed by an extra surcharge on every citizen's energy bill for years, the Storage Sustainable Energy (ODE).
"If we are serious about wanting more money for the energy transition, we can't have citizens pay for it all via the energy bill" says Bontenbal. "That's not fair. That is precisely why the Climate Fund came about with funding from the general budget. “