Uncertainty over the growth of industrial demand threatens to undermine the Netherlands’ potential as a key European hydrogen hub, the IEA has said.

The Dutch government should work to reduce the risk for investors by introducing quotas for industrial use of clean hydrogen and cross-sectoral industrial decarbonisation strategies to address the demand issue, which continues to prevent many supply projects from progressing to FID, the agency said.

“While demand for low‑emission hydrogen is potentially large, not only to meet domestic needs but also to export to other markets, investors want more certainty, and FIDs for electrolyser projects are lagging,” the IEA said in its latest review of the Netherlands’ energy policy.

The IEA acknowledged that the Dutch government is working to transpose into its national law the demand quotas set at the EU level under the Renewable Energy Directive. The directive calls for 42% renewable hydrogen in industrial consumption by 2030 and 60% by 2035.

The Oxford Institute for Energy Studies (OIES) has said the ability of EU quotas to force buyers to pay a premium for clean hydrogen will depend on the penalties for non-compliance imposed at the national level. “The effectiveness of these quotas in stimulating demand for clean hydrogen will therefore depend on how member states enforce them,” the OIES said.

The potential deployment of renewable and low-carbon hydrogen in the Netherlands  to replace existing grey hydrogen demand is significant. Dutch industry consumes around 1.5mt/yr, making the country the second-largest user of hydrogen in Europe after Germany and the largest per capita consumer, according to the IEA. Around two-thirds of the hydrogen is consumed in refineries and as feedstock in ammonia production.

Gateway to Europe

The Netherlands has emerged as a pivotal country for Europe’s hydrogen sector, both as a supplier and as a gateway for imports to meet demand in neighbouring markets, especially in Germany. The Port of Rotterdam has attracted investment in multiple import and production projects as it looks to leverage its position as Europe’s largest seaport.

At the same time, the Netherlands’ offshore wind resources hand it a significant advantage in electrolytic hydrogen production. The government has set a target  of 21GW of installed offshore wind capacity by 2032 and continued growth to 70GW by 2050.

However, the next phase of the offshore wind roadmap will need to be better integrated with hydrogen production and with the expansion of interconnection capacity with surrounding countries through hybrid projects and energy hubs, the IEA said.

Green hydrogen projects reaching FID in the Netherlands include Shell’s 200MW Hydrogen 1 projects, which will draw on the Hollandse Kust (noord) offshore windfarm. Other proposed projects aimed at combining offshore wind with hydrogen production include NorthH2, led by a consortium of Dutch utility Eneco, Norway’s Equinor, German utility RWE and Shell. The project aims to start hydrogen production on a gigawatt-scale by around 2030–35, with potential to grow further to 10GW of electrolyser capacity using electricity from new offshore windfarms in the North Sea.

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Author: Stuart Penson