Supply and demand in the hydrogen value chain in north Netherlands coming together slowly but surely

No one’s going to buy a bike if there are no bike shops. And if nobody wants to buy a bike nobody will want to sell them. It’s a classic chicken-and-egg situation: no demand, no supply, but also no supply, no demand.

The green hydrogen market finds itself in a similar chicken-and-egg situation. Energy company RWE plans to build two large green hydrogen plants at Eemshaven and has already received grants to do just that. Still, the company has not yet made an investment decision. Lijs Groenendaal, Director Hydrogen RWE Netherlands, explains, ‘We will only take the next step in moving the project forward once we have certainty about offtake.’

Switching to zero-carbon energy carriers

Why would RWE produce green hydrogen if there are no (or too few) customers? In principle, there are plenty of companies in the northern part of the Netherlands that would be happy to have sustainable hydrogen. Very much so, given that Dutch industry is required to become more sustainable. If plants and factories want to keep their social licence to operate, they need to switch from fossil fuels to zero-carbon energy carriers. And for companies that are unable to electrify their production processes, such as those in the chemical and basic industries, for example, zero-carbon hydrogen is the solution.

So, both supply and demand are present. But then why is it so difficult to get the production, transport, storage, and consumption parts of the value chain rolling? After initial optimism about green hydrogen, sentiment seems to be shifting. Projects are struggling to get off the ground or are being delayed, and expectations are being scaled back. How do various parties in the hydrogen value chain in the north of the Netherlands view the developments? What is the current state of affairs?

Green-power-fed hydrogen plant

RWE, active on the production side of the value chain, plans to build two projects in the north of the Netherlands. The first project is Eemshydrogen, which involves building a 50-megawatt electrolyser in the seaport industrial area in the province of Groningen. The green power that will feed the hydrogen plant will come from RWE’s Westereems wind farm. The second project is twice as large: this is to be a 100-megawatt electrolyser to be built at RWE’s Magnum power station at the port in Eemshaven. The Oranjewind offshore wind farm, currently under construction, will supply the power.  

‘We are currently reviewing the design choices,’ says Groenendaal. ‘We are looking at synergy opportunities to reduce costs. But we can’t move forward without offtakers.’

Feed-in tariff a hurdle

Not only RWE, but energy and services group Engie, too, has plans for electrolysers, though its HyNetherlands project has been delayed. ‘We will, however, continue working to get the project off the ground,’ says an Engie spokesperson. ‘We still believe there’s an important role for HyNetherlands to play in making the chemical and industrial sectors in the Netherlands and Germany more sustainable.’

Companies building wind or solar farms to power their electrolysers face not only uncertainty about customers but also another hurdle: the ‘feed-in tariff’. The Netherlands Authority for Consumers and Markets (ACM) intends to introduce this tariff so that power producers also pay for grid connections. Currently, only customers (offtakers) pay for these. However, in response to backlash from the energy sector, introduction of the tariff has been postponed. ‘The issue surrounding the feed-in tariff has a major bearing on investment decisions being held back,’ says Groenendaal. Norwegian-based Equinor is also developing a hydrogen plant in Eemshaven. However, the Norwegian energy company is not building an electrolyser for green hydrogen but rather a plant that converts natural gas into ‘blue hydrogen’. Equinor will capture and store the CO2 released in the process in aquifers. However, the company has yet to make an investment decision.

Letter to Parliament not helpful

The letter sent by Minister Sophie Hermans of Climate Policy and Green Growth to the Dutch House of Representatives on 14 July does not help matters. The letter stated that no additional financial support is currently available for blue hydrogen. This news came as a disappointment to Alexander Jongenburger, Business Development Manager at Equinor. ‘That letter is not helpful when it comes to developing the hydrogen system. Producing blue hydrogen would be a good way to kick-start the hydrogen system, which is unlikely to be possible with green hydrogen alone.’ Jongenburger hopes that when a new Dutch government is installed it will come to a different decision.

So, there are plans for the supply of hydrogen, but what’s the situation on the demand side? René Hartman, Head of Industry at GETEC Benelux, is busy working on just that. His company supplies electricity, steam and natural gas to companies at the GETEC Park Emmen industrial park. The 30 companies, of which 12 are production plants, still need 100 million cubic metres of natural gas annually, partly to generate electricity and steam in several cogeneration (combined heat and power) plants. ‘The only way to replace high-calorific natural gas is with hydrogen,’ says Hartman.