Claudia Beele September 6 2021 Geothermal energy developments in the Netherlands Stek | Energy & Natural Resources - Netherlands Claudia Beele Energy & Natural Resources IntroductionLegislative developments and permittingAvailable grants and SDE++ subsidyAvailable grants and guarantee schemePossible outlookIntroductionAccording to the Dutch industry association for geothermal energy, there are currently over 20 locations in the Netherlands where geothermal energy is being produced. To date, there are no major changes in legislation relevant to geothermal energy to report, but discussions in this respect as well as on the sector's position within the Dutch renewable energy mix as supported by the Dutch subsidy scheme SDE++ continue.Legislative developments and permitting proceduresThe Mining Act (the act)(1) applies to geothermal energy at a depth of 500 metres below the earth's surface or deeper. Under the act, both an exploration permit and a production permit are currently required for geothermal energy projects. In addition, environmental permit(s) will be required on the basis of the Environmental Permitting (General Provisions) Act,(2) depending on:the area where the geothermal project will be realised; andthe actual structure of the geothermal installations.However, significant changes to the applicable permitting procedures have been announced and may already enter into force on 1 January 2022.In recent years the Dutch geothermal industry has mainly called for clearer distinctions in legislation between oil and gas projects on the one hand and geothermal projects on the other. The industry has argued that some provisions of the act are evidently written for oil and gas projects and overcomplicate the legal framework for geothermal energy. In addition, it has often been highlighted that the applicable permitting procedures have not corresponded well in practice with geothermal development and production.The legislative proposal amending the act, including the anticipated new permitting scheme for geothermal energy projects, is currently still pending. It is understood that the aim is for the new legislation to enter into force on 1 January 2022. A consultation has recently been issued by the geothermal energy sector in relation to the Mining Decree(3) that specifies further requirements under the act. It is clear that there are still a number of issues and concerns, and the proposed new legislation needs to be further tailored to the sector's needs. The sector is concerned with the following, among other things:the coordination between different permitting procedures and their effectiveness and efficiency;the envisaged role of Energie Beheer Nederland, a company that invests in the exploration, extraction and storage of gas and oil on behalf of the Dutch state and to which a mandate was granted by the Ministry of Economic Affairs and Climate in March 2019 to participate in geothermal energy projects; andthe (clarity of) the transitional law that has been proposed. Generally speaking, the sector is worried that it will not become easier under the new legislation to obtain (project) financing for geothermal energy projects and therefore to realise new projects, but that instead this will become (even) harder.Available grants and SDE++ subsidyGeothermal energy projects may be eligible for an SDE++ sustainable energy transition grant in the Netherlands. In short, the SDE++ subsidy serves as compensation for the unprofitable surplus (in the case of new technology, this would cover the shortfall between the cost of the technology and the market price of the avoided CO2). The SDE++ subsidy scheme is available not only for geothermal energy projects, but also for other renewable energy sources, including biomass, wind (both offshore and onshore, which are separate categories), water projects and solar energy. Since the broadening of this subsidy scheme, technologies no longer compete on the basis of renewable energy produced but rather on the amounts of CO2 and other greenhouse gases that have been avoided.In addition to its concerns on the proposed amendments to the act, the geothermal energy sector has expressed serious concerns regarding the eligibility of new projects for the SDE++ subsidy due to the change in scope and requirements of the subsidy scheme. The current scheme as set out in the Incentive Decree for Sustainable Energy Production and Climate Transition(4) would create fewer opportunities for renewable heat projects in general and in particular for those concerning geothermal heat.Earlier this summer, the House of Representatives adopted a motion requesting the government to investigate ways in which the likelihood of successfully launching a geothermal energy project under the SDE++ subsidy scheme could be improved, as current initiatives are competing with, for example, carbon capture and storage, a less expensive technique to avoid CO2 emissions. A recently published report produced by independent research firm CE Delft may be helpful in achieving better eligibility. It has concluded that there is more room in terms of budget under the SDE++ subsidy scheme for research on the under-investment of available funds.An announcement of contemplated changes to the act to reflect the sector's specific concerns has not yet been made.Available grants and guarantee schemeIn addition to the SDE++ subsidy, there are other support schemes available for geothermal energy projects in the Netherlands, including several European, national and local subsidy schemes. The Dutch government has, among other things, provided for a guarantee scheme (RNES Aardwarmte), under which investors are protected against the financial risks of potential unsuccessful drilling.(5) The scheme in effect serves as insurance in the event that the heat output of the source is lower than expected. The available budget in 2021 amounts to €66.66 million. The scheme requires a premium payment equal to 7% of the maximum subsidy amount, with separate maximum amounts applying to regular and ultradeep geothermal energy projects. The drilling needs to commence within a year of approval of the request for the grant, and it needs to be completed within a year. The geothermal heat must be supplied within two years of the issue of the grant.Possible outlookGiven the concerns expressed by the sector, the date planned for the proposed amendments to enter into force may be too ambitious. The Climate Act, presented by the government on 28 June 2019, includes the aim to intensify the targeting of geothermal energy as a (renewable) energy source by means of, among other things, reducing legislative bottlenecks and maintaining the available support schemes for this technique. It may be argued that as yet, the government has not succeeded in doing so. In the meantime discussions on the sector's experience and professionalism are ongoing.Earlier this year the Dutch industry association for geothermal energy presented a new (sustainable) industry standard for a well design, which is mandatory for members of the association. This was lauded by the national regulator, the State Supervision of Mines,(6) which noted that the new design could be seen as a positive development and evidence of the increasing professionalism of the sector.Developments will continue to be closely monitored and it is hoped that the sector will be able to continue its positive trajectory as part of the progress in Dutch sustainable energy that is envisaged.For further information on this topic please contact Claudia Beele at Stek by telephone (+31 20 530 52 11) or email ([email protected]). The Stek Advocaten BV website can be accessed at www.stek.com.Endnotes(1) Mijnbouwwet.(2) Wet algemene bepalingen omgevingsrecht.(3) Mijnbouwbesluit.(4) Besluit stimulering duurzame energieproductie en klimaattransitie.(5) Misboringen.(6) Staatstoezicht op de Mijnen.