Regulation of electricity utilities – power generation

Authorisation to construct and operate generation facilities

What authorisations are required to construct and operate generation facilities?

In principle, a permit procedure and a spatial planning procedure should be followed prior to the construction of a generation facility. Various permits and authorisations are required to construct new projects in the Netherlands. Some examples of required permits are:

  • an environmental permit;
  • a water permit;
  • a permit in accordance with the Nature Conservancy Act; and
  • an authorisation based on the Flora and Fauna Act.

 

In some cases it might be necessary for the (local) authorities to issue a new zoning plan or integration plan. The expected production of the generation facility determines whether the municipality, the province or even the Minister of Economic Affairs and Climate is the relevant authority to grant the relevant permissions.

In order to enhance the development of renewable energy production facilities and achieve the renewable targets, the government adopted the National Coordination Regulation. The National Coordination Regulation combines and simplifies the application for permits and licences. The coordination regulation streamlines the various procedures for permit applications to foresee in a parallel application procedure for permits and consents, which shortens the application periods to an absolute minimum. For smaller generation facilities, either the provinces or the municipalities are the responsible authority to grant the required permits and licences.

In addition to the above, permission from landowners or infrastructure operators can be required if someone else is the owner of the intended location of the generation facility. To apply for a grant under the Stimulation of Sustainable Energy Regulation (SDE++) (which is the successor of the SDE+ subsidy scheme), it is necessary to obtain a formal declaration from the land owner, at the latest at the moment of filing of the application. Any arrangements in regard to the land, such as the establishment of a right of superficies or a land lease right to secure the ownership of the generation facility, can be finalised after the application for the SDE++ subsidy.

 

Grid connection policies

What are the policies with respect to connection of generation to the transmission grid?

Following the provisions of the Electricity Act, TSOs and DSOs are legally obliged to provide a grid connection to each producer that applies for one. The Electricity Act prescribes that a connection should be provided based upon objective, transparent and non-discriminatory criteria and tariffs taking into account the costs and benefits of different technics for renewable energy and decentral production. Depending on the actual size of the grid connection certain costs apply. Upon the receipt of an application for a grid connection, the relevant grid operator will provide the customer with a detailed and complete overview of the works to be carried out and the related costs to establish such a connection. The grid connection should be realised within a reasonable time, which for renewable energy and connection up to a maximum of 10MVA lapses 18 weeks after the application for a grid connection is submitted, unless this can reasonably not be expected from the grid operator.

 

If the refusal to connect a customer relates to the production of renewable energy, the grid operator should notify the producer and the regulator of the Electricity Act, the ACM, and provide to the ACM an overview of all relevant measures that the grid operator will undertake to prevent any further refusals to connect for the future. Based on the Electricity Act, the ACM has the authority to investigate refusals to connect a customer to the grid.

Alternatively, a producer may also launch a tender to establish a grid connection if the connection is larger than 10MVA. In such case, the Electricity Act does set certain criteria for third parties to establish the grid connection.

As part of the wider energy transition, the government is currently assessing which measures can be implemented to prevent the situation where subsidised renewable energy projects cannot be connected to the grid due to a lack of grid capacity. New legislation in relation to grid connection and amendments to current legislation in this regard will also be included in the Energy Act. For example, although the right to grid connection will be maintained in the Energy Act, the possibility to temporarily refuse and postpone grid connection in certain extreme situations will also be included in the Energy Act. In the event of physical congestion, grid operators may temporarily refuse and postpone new requests for grid connection. However, grid operators must expand the grid’s capacity in order to ensure that postponed request can eventually be granted.

 

Alternative energy sources

Does government policy or legislation encourage power generation based on alternative energy sources such as renewable energies or combined heat and power?

The production of renewable energy was mainly supported via the SDE+ subsidy scheme. The SDE++ subsidy introduces several new elements to the subsidy scheme and is calculated on the basis of the amount of CO2-emissions reduced with the project rather than the amount of renewable energy that has been produced.

In order to be eligible for SDE++, parties will have to meet several criteria which were already included in the requirements for SDE+. In short, the primary differences between SDE+ and SDE++ are:

  • SDE+ is calculated based on the amount of renewable energy produced, whereas SDE++ is calculated on the amount of reduced tons of CO2-emission;
  • newly introduced (sub)categories of eligible technologies;
  • a limitation of the base subsidy amount for floating solar projects;
  • the annual allocation of the guarantees of origin for renewable energy shall be included in the calculation of the correction amount; and
  • as a mandatory requirement, biomass projects will have to obtain a permit under the Dutch Nature Conservancy Act prior to submitting the SDE++-application.

 

The SDE++ subsidy is a feed-in-tariff for producers of renewable energy to compensate them for the non-profitable portion of the costs to reduce CO2-emissions. Each year one can apply for SDE++ subsidy. The SDE++ grants are divided into four categories, each subject to a maximum amount. Parties that are granted a SDE++ subsidy receive the subsidy for 12 or 15 years (depending on the technique used by the applicant).

The final SDE++ legislation was published on 22 September 2020. The structure of the SDE++ subsidy allows for a wider group of projects to become eligible for a subsidy (e.g. also carbon capture and storage and hydrogen power), but it is important to thoroughly review the requirements of the CO2-emission reduction technologies as set out in the SDE++ legislation in order to verify whether a project is eligible for SDE++ subsidy or not. A confirmation regarding the suitability of the installation for CO2-emission reduction technologies and a metering protocol (which must also be assessed by a metering company) are some of the new documents and information that have to be submitted with the SDE++ application. Should there be no (further) delay, the first SDE++ autumn application round will open on 24 November.

Based on the Electricity Act, a guarantee of origin is issued for every 1MWh of electricity produced by renewable and high-yield combined heat and power sources. Such guarantees are issued by CertiQ, which is the only entity authorised to issue them. The guarantees are tradeable and can be sold by the owners of the production installation.

The value of guarantees of origin was not taken into account when calculating the SDE+ subsidy (correction) amounts, as it is not possible to allocate a market price for guarantees of origin in the Netherlands. However, the annual allocation of the guarantees of origin for renewable energy shall be included in the calculation of the correction amount of the SDE++ subsidy.

 

Climate change

What impact will government policy on climate change have on the types of resources that are used to meet electricity demand and on the cost and amount of power that is consumed?

Traditionally, the Netherlands relied for many years on its natural gas production. On a European level, specific targets have been set for 2020 and 2030 to reduce CO2-emissions, and to halt global warming. The Dutch government, however, is lagging behind achieving its renewable targets. A lot of renewable energy generation facilities are still to be built. The government supports the development of renewable energy projects through subsidy schemes and simplifying the process of requesting the required licences and authorisations for the construction of renewable energy projects. In addition, the SDE++ subsidy scheme functions as a support mechanism for projects that reduce CO2-emissions that currently fall outside the SDE+ subsidy scheme, such as carbon capture and storage projects. The government also proposed to close the five remaining coal plants in the Netherlands by 2030, although it is aiming to enhance this timeline to meet the renewable energy goals.

Storage

Does the regulatory framework support electricity storage including research and development of storage solutions?

The current Dutch regulatory framework does not contain any specific provisions relating to energy storage and therefore does not specifically support the investment in storage solutions. Under Dutch regulations, Dutch consumers may use the net metering scheme. The consumers can offset an energy surplus of their power production, which will be fed into the grid, with the electricity that it consumes from the electricity supplier. The net metering scheme will be replaced in 2023 by a new support mechanism, the feed-in subsidy, which can be defined as compensation for the electricity which has been fed back into the grid. The consumers are exempted from the payment of the sustainable energy surcharge and energy taxes. Owing to the current format of the net metering scheme, consumers are not encouraged to invest in energy storage as the whole surplus can be set off.

Government policy

Does government policy encourage or discourage development of new nuclear power plants? How?

Only 3 per cent of the total energy supply in the Netherlands is being produced by nuclear power. The reactor in Borssele is the only active nuclear power plant at the moment.

The rules regarding the use of nuclear materials in the Netherlands are set out in the Nuclear Energy Act 1963. There have not been any major amendments to the act since the implementation in 1963. In 2006, the government had an initiative to update the provisions of the Nuclear Energy Act. The revision would grant more control over the nuclear business to the Ministry of Economic Affairs and Climate. The licences for nuclear plants would be limited to 40 years and reprocessing agreement would be made subject to a licensing system. To date, the initiative and forthcoming proposal to amend the act, has not resulted in a definitive amendment of the act. In the meantime, the Authority for Nuclear Safety and Radiation Protection has been established, which focusses on the development of regulations, licensing systems and supervision to ensure that the highest standards of nuclear safety and radiation protection are being met.

Regulation of electricity utilities – transmission

Authorisations to construct and operate transmission networks

What authorisations are required to construct and operate transmission networks?

In the Netherlands, one single transmission network operator, TenneT, has been appointed to operate the transmission grid. Based on the provisions of the Electricity Act, it is the responsibility of the TSO to construct, maintain and expand the high-voltage grid of more than 110kV and the cross-border grid. Furthermore, the TSO is obliged to build new grids, secure the transport of electricity in a safe, reliable and efficient manner, expedite the safety of the use of generation facilities and is responsible for the execution of programme responsibility.

The appointment of a grid operator for the transmission system is subject to the consent of the Minister for Economic Affairs and Climate. If the grid operator does not perform its tasks as grid operator to the full satisfaction of the Minister, the Minister is entitled to replace the current grid operator by a different legal entity that shall be able to operate the grid. Under the Electricity Act, several regulatory duties have been granted to the Minister, such as the duty to adopt secondary legislation, such as the Codes, by decree and consent. The ACM shall supervise the appointment of the grid operator and has been designated to define the Tariff Code and subsequent Codes with a technical nature.

Eligibility to obtain transmission services

Who is eligible to obtain transmission services and what requirements must be met to obtain access?

Third-party access to the transmission grid is arranged by the provisions of the Electricity Act. One of the statutory duties of the grid operator under the Electricity Act is to provide a connection to the grid to each producer which applies for one. The Electricity Act prescribes that a connection should be provided based upon objective, transparent and non-discriminatory criteria and tariffs taking into account the costs and benefits of different technics for renewable energy and decentral production. The connection shall be realised in accordance with the secondary legislation and the tariffs and conditions set herein by the ACM. In case of any grid congestions, applications from producers of renewable energy shall have priority compared to other applications.

Government transmission policy

Are there any government measures to encourage or otherwise require the expansion of the transmission grid?

In the past, an application for a connection could be rejected or delayed by the grid operator if the requested connection endangered the technical capacity of the grid. The grid operator was allowed to delay the connection until the necessary amendments to the grid were implemented or the capacity has been created in any other way. The Minister of Economic Affairs described this approach of the TSO as discriminatory towards new producers who would like to enter the grid. As a consequence hereof, the Minister amended the Electricity Act to oblige the grid operator to provide a connection to the grid, if the capacity is not sufficient. When the technical capacity of the grid is endangered, the grid operator shall be obliged to perform congestion management, a method to maintain the stability of the transmission grid in a period during which the power supply exceeds the point that the grid is balanced. The Energy Act also includes new provisions and obligations in this regard.

Rates and terms for transmission services

Who determines the rates and terms for the provision of transmission services and what legal standard does that entity apply?

The rates and terms for the provision of transmission services are set by the ACM. The rates must be non-discriminatory. Each year, the ACM announces the maximum tariffs for next year. Parties must pay a connection fee to the TSO to get connected to the grid. Such connection fee is built out of two components, being an initial connection tariff and a periodic connection tariff. On top of the connection fee, parties must pay a transmission fee that covers the costs of the transmission service. The rates are announced by the ACM in a method decision, in which the formula to calculate the maximum tariffs is explained in further detail. The formula includes an x-factor, which is determined by the ACM in a separate method decision for a regulatory period of three to five years and reflects the discount owing to efficiency.

 

Entities responsible for grid reliability

Which entities are responsible for the reliability of the transmission grid and what are their powers and responsibilities?

TenneT has been appointed as the Dutch TSO and is therefore responsible for managing the high-voltage grid. As designated TSO, TenneT does have some additional obligations based on the Electricity Act, such as the transportation and distribution of electricity in an efficient and safeguard manner. Furthermore, the TSO should ensure that connection points are created and maintained with other (international) grids or consumers and should provide system services; that is, to maintain the balance between the supply and demand of electricity.

Law stated date

Correct on

Give the date on which the information above is accurate.

29 September 2020.