The Netherlands

Effective energy and climate policy requires long-term stability and political commitment that provides certainty for investors, industry and the public. With the 2019 Climate Act, the Netherlands has set ambitious and legally binding targets for emissions reductions to 2030 and 2050, and a clear framework for assessing progress towards those targets through PBL’s annual Climate and Energy Outlook (KEV). KEV 2023 showed that the targets are within reach, but only if all stated policies, including from the 2023 Climate Package, are implemented. However, recently announced fiscal and regulatory policy changes, such as reducing the tax on natural gas and removing the heat pump obligation when replacing a natural gas boiler, risk slowing down the transition. The government should build on previous policy development and implement a well-designed mix of measures to stay on a trajectory towards the climate targets, including cost-effective incentives as well as regulations to provide policy certainty. This should be clarified in the next Climate Plan, scheduled for 2025. Furthermore, the KEV should continue to be used as guidance when assessing the need for additional policy measures. Support in terms of subsidies should be assessed based on market maturity.

The Netherlands has managed a remarkable acceleration in the energy transition in recent years. However, rapid changes also come with challenges in terms of who is paying for this transition and who is reaping the benefits. The extremely high energy prices during the energy crisis of 2022-23 have put the question of affordability high on the agenda. To ensure the necessary buy-in for the energy transition from all parts of society, it is crucial that the transition does not come at the expense of people with lower incomes or small businesses. To date, energy policy development has been focused on delivering fast results, without properly addressing distributional impacts or ensuring equitable access to support. Interventions to increase the energy efficiency of homes and buildings have been focused on homeowners. Subsidies on EVs or heat pumps require upfront capital and are therefore limited to those with higher incomes. The net-metering system for solar PV has similarly transferred money from all electricity consumers to the people who could afford the investment. To protect vulnerable consumers, subsidies and other energy policies should be better targeted and take distributional implications into account.

The government should deliver an overall vision for a people-centred energy transition that sits alongside the National Energy System Plan and the Regional Energy Strategies. In doing so, the government should develop a methodology for assessing distributional implications, as part of policy design, implementation and evaluation, to address unintended consequences. This should be delivered through co‑ordinated engagement with local communities, citizen groups and other stakeholders to develop equitable policy interventions and broad-based public support. Mobilising the public will be key to securing buy-in for new energy infrastructure, which today struggles with local acceptance issues. Consumers also need to be empowered and engaged to deliver the demand-side response needed to balance the electricity system and manage grid congestion. 

The Netherlands has an ambitious plan to decarbonise the energy sector as outlined in the National Energy System Plan. To date, there has been tremendous progress, with the Netherlands becoming a frontrunner in renewables deployment. However, there is a lack of coherence between the long-term plans and the current situation, which exacerbates grid congestion and encourages competition between low-carbon energy sources. There is also a strong focus on the future supply of renewable energy, with less clarity on the demand side. Industrial decarbonisation remains a key challenge here that needs to be addressed to deliver on the climate goals and create more certainty on the demand for clean energy sources. To sustain the pace of the transition, interventions across the energy system need to be aligned and carefully calibrated to manage the complex interplay of supply and demand, delivering clarity for investors and mitigating market externalities. Therefore, the government should build on the National Energy System Plan and develop a coherent energy system strategy, with co-ordination across government and sectors, to link the ambitions set out in the plan to the realities on the ground. A co-ordinating body, which could be within existing ministry structures, should be defined to drive alignment, co-ordinate interventions and support energy system-wide improvements. 

Natural gas remains a large energy carrier in the Netherlands, especially in electricity and heat production. To decarbonise the electricity sector by 2035 in line with stated ambitions, the existing natural gas fleet needs to either switch to biomethane or e‑methane, add carbon capture, be repurposed to be able to use low-emission hydrogen, or close within the next ten years. In the heating sector, natural gas boilers should be replaced with heat pumps and fossil-free district heating.

The government should develop a pathway with a clearly communicated timeline and sequencing to orderly replace natural gas with carbon-neutral options to achieve the climate targets. For electricity generation, the transformation should be guided by a strategy to minimise system costs and ensure security of supply and flexibility in a system with large shares of variable renewable generation. For heating, the government should clarify the role for hybrid heat pump solutions while further incentivising energy efficiency improvements, electrification and the use of low‑emission gases. Furthermore, the government should engage with local authorities and energy communities to assess the role for district heating across the country. The Netherlands should also work towards its target of 2 bcm/yr biomethane production by 2030, which would accelerate the phase-out of natural gas, including in hard-to-abate sectors. A Biomethane Action Plan should be developed in close co‑operation with all stakeholders, including the biomethane industry, farmers, gas transmission and distribution system operators.

The Netherlands publishes transparent and open data on congested areas in the grid in a congestion map. These data are at an impressive level of geographic detail, clearly showing the availability of capacity for new generation and demand connections, and the size of the connection waiting lists. However, the waiting list is affected by users seeking connection at multiple locations. The government and regulator should consider increasing the cost for applications and giving connection priority to mature projects, to improve transparency in the waiting list. Furthermore, there is scope for improving the congestion map to make it more useful for different actors who are looking for grid connections or can provide innovative solutions to the congestion issue. Inspiration can be drawn from other countries that have developed similar capacity maps. The causes and total costs of congestion should be clearly identified, and in congested areas, the congestion map should include a roadmap to resolve the issues with a schedule for planned grid upgrades. As the total costs of congestion are very high, the policy and regulatory framework should incentivise increased flexibility and grid-enhancing technologies to maximise the use of the existing grid, alongside an accelerated buildout of new grids. 

With the rapid growth of renewables, energy storage and flexibility solutions will become more important in the Netherlands. Batteries can provide balancing services to the electricity system, and if located and operated in the right way, can also be an important asset to manage grid congestion. Up to 70 GW of battery systems are on the waiting list for grid connection in the Netherlands, which is an astonishing number, even if figures are partly duplicated. This provides great potential for flexibility and grid congestion services. The connection tariffs should be adjusted to make battery investments more attractive, especially when located and operated in a way that offers congestion management services, such as being close to production or consumption. Furthermore, batteries and other flexibility assets need clear price signals that reflect the local grid conditions, in addition to the overall system. Battery storages can be operated in a way that benefits overall system stability but worsens local grid congestion. To avoid this, the government should assess ways to achieve clear locational and operational price signals that incentivise congestion management services, including new contract forms and local flexibility markets through the GOPACS platform. 

The Netherlands’ high offshore wind ambitions will require effective tendering processes also after the current roadmap to 2032. To maintain a stable investment environment, it needs to be clear under which circumstances the offshore wind farms will operate during their full licence time, including the terms and conditions of the grid connection and the capacity that can be used. Grid expansion needs to keep up the pace of the offshore wind deployment, and timelines should be adjusted accordingly. If installed offshore wind capacity surpasses the absorption capacity of the grid, solutions must be available to guarantee demand beyond the grid to ensure the business case. The tendering regime should be adapted to the reality to avoid failing tendering processes that could compromise the timing of the ambitious roadmap. Current good practices to create smaller tenders and consulting the sector and other stakeholders should be maintained. The long-term targets for offshore wind depend on strong market development for hydrogen and the roadmaps of both must be carefully linked to ensure large-scale electrolysis can capture the production of the offshore wind energy in excess of the grid capacity. The government should assess further combining support for hydrogen with the policy framework for offshore wind. Building on the North Seas Energy Cooperation Action Agenda, the Netherlands and its regional partners should also assess potential synergies in the North Sea between national low-emission hydrogen projects and industrial hubs. 

The Netherlands has set ambitious targets for clean hydrogen development and has many electrolyser projects in the pipeline. However, final investment decisions are not being taken at the rate needed. To reach the target of 3-4 GW of electrolyser capacity by 2030, the Netherlands will need to increase demand certainty for low‑emission hydrogen and ensure an integrated approach to support mechanisms along the entire value chain. Demand certainty is crucial for the conclusion of long‑term offtake agreements, which in turn is key for project developers to reach a FID. The Netherlands should transpose the requirements in REDIII into national law and introduce an obligation for renewable hydrogen in industrial sectors to increase demand certainty. The government is already working on this, which is promising. Furthermore, the government should develop cross-sectoral industrial decarbonisation strategies to provide clarity on the role of low-emission hydrogen in the future. These could build on the existing cluster energy strategies developed in the industry clusters. 

Delivering nuclear energy is a long-term endeavour which requires a stable policy and regulatory environment with long-term financial certainty to provide clear signals to support skills and supply chain development across the sector. In democratic countries, no government can build a new nuclear reactor in a single term. The different stakeholders involved in such huge investments need to see a clear plan for nuclear development in the country based on long-term political agreements that create stability. While the government’s recent targets for nuclear energy production are helpful signalling, there is a need to develop the evidence base for the role of nuclear in a decarbonised energy system.

As the Dutch energy system has a large and growing share of renewable energy, the government should model and assess the role of nuclear power in providing flexibility and the need for secure baseload energy to manage inertia in the energy system. This should be translated into a multi-year roadmap and the government should communicate the results to develop cross-party consensus around the role of nuclear in the Dutch energy system, providing long-term certainty for the sector and investors. 

Nuclear power can be leveraged to deliver flexibility in the energy system in three main ways: 1) ramping reactor power output; 2) coupling the reactor to thermal energy storage; or 3) coupling the reactor to a flexible thermal application such as district heating or a thermal industrial process. Coupling the nuclear reactor to a flexible thermal application is the most valuable and cost-effective because it creates two markets, both electricity and thermal demand that nuclear energy can sell into when prices in one market are low or negative. In this way, flexible nuclear energy can also act as a grid balancing resource instead of inflexible base load.

The government should conduct a feasibility study on the non-electric applications of nuclear energy to understand its potential to provide flexibility, grid stability and enable better integration in a decarbonised energy system to complement the intermittency of renewable energy. The study should include different reactor concepts and address locational options in line with the energy system development. Government investment in a demonstration project of nuclear energy for thermal applications can help prove the concept and derisk investment.