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Heating the Netherlands: the future’s all-electric. Or is it? Delta-EE’s top 10 facts to demystify the Dutch heating market

dutch-home-gas

The Netherlands has set some of the most ambitious targets in Europe to phase out natural gas in heating (and elsewhere), aiming to be “natural gas free” by 2050. This is no small ask in a country where, today, almost 90% of the >7million homes use natural gas - usually via an individual boiler (or “CV-ketel”) as their main source of heating and hot water.

Since the gas free target was set, heat pump sales have grown rapidly, increasing numbers of new homes are being built without a gas connection, and the government subsidy supporting renewable heating installations – the ISDE – proved so popular, it had to be closed to new applications part-way through 2019[1].

So, it looks like natural gas for heating is on the way out in the Netherlands, and the vision for the future is all-electric, right? Well, based on the research we recently completed for our latest reports under our Heat services, we’re confident saying that it’s a bit more complicated than that. For example, did you know that gas boiler sales in the Netherlands have actually increased in recent years[2]?

Here are Delta-EE’s Top 10 facts about the outlook for the Dutch heating market, that we think anyone involved in the market should be aware of:

Yes, there are big opportunities for electrification of heat - in some market sectors

  • New build construction is increasingly electrifying, due to direct policy intervention. Nearly half (47%) of all new homes in 2019 were built with a heat pump for space heating, and we think this is likely to rise to nearly 80% by 2021.
  • Thousands of existing homes will likely be disconnected from the natural gas network in the next few years, and the government hopes to grow this to 200,000 a year by 2030. 27 municipalities are currently taking part in the “Natural Gas Free Areas Program” to learn and develop best practise, and more will be announced later this year. Some – e.g. Amsterdam – are offering upfront financial support to help homeowners make the switch.
  • There are a growing number of new, service-based propositions emerging, in both new build and retrofit, which can support the move to electrification and removing the critical upfront cost barrier - for example the ‘all-electric living as a service’ model, by the FCTR-E[3].

But electrification is far from the only solution: there are also opportunities in low-carbon gases

  • Too rapid a growth in electric heating – especially heat pumps – will pose a challenge to the industry. Both in terms of supplying enough trained installers (a common theme across the markets we study), and managing growing public concerns over perceived nuisance noise.
  • Electrification of heat is not seen as the only ‘natural gas free’ option by the Dutch Government. It has also set targets for 2030 to grow biomethane usage ten-fold (ultimately enough for 1.3M homes), and for 1.2M dwellings to be connected to heat networks (up from ~400k today).
  • The Netherlands is one of the fore-runner countries exploring hydrogen for residential heating. We see a large number of demonstration projects planned or already running in the Netherlands, and a boiler industry which is very active in developing and certifying a range of 100% or blended hydrogen heating products.
  • Hybrid heat pumps could well prove an attractive “transition option” among pragmatic homeowners. The Netherlands today is already one of Europe’s most buoyant markets for hybrids, with a wide range of products available and ever more being released. Under the right conditions, we think they could take up to 20% of the retrofit heating market by 2030.

And the future is not set in stone – some key policy developments in the next 1-2 years will be critical in determining the future direction of the Dutch heating market.

  • Local ‘Heat Transition Visions’ will set the future direction in each area. Led by the municipalities, and due to be released at the end of 2021, these plans are expected to set the future direction of travel per neighbourhood, in terms of what heating options and network connections might be available in the future (natural gas/green gas/electricity/heat networks), and the timescale for any possible disconnections. Staying close to these will be key for those wanting to put the right products in the market at the right time.
  • Further developments in the Dutch hydrogen strategy. The Netherlands has ambitious plans to become a world leader in the production and use of green hydrogen, making use of its existing position as a key hub country for natural gas in Europe. The 2020s has been earmarked as the decade for learning more about the possible role hydrogen could play in heating, including both pure hydrogen trials, and the possible raising of blended injection limits.
  • Plans to further reform energy taxes. The Dutch government has already made a series of changes to residential energy taxes, which has led to a low price differential between gas and electricity. There are ambitions to take these even further in the coming years, which would make electrically-driven and hybrid heating solutions increasingly attractive.

So in conclusion, yes, there are opportunities for electric heating in the Netherlands – and big ones – both right now, and in the coming years. But there will almost certainly be space for other technologies, and other fuels, too. And for all the possible solutions, there is a big need to develop the right offerings, to help Dutch business and households successfully make the energy transition.

To learn more about the Dutch heating market, and to discuss the potential opportunities for your products and services, get in touch.

 

[1] It’s since been reopened, with new budget, for 2020

[2] Our Gas Heating Service’s report ‘EU Gas Boiler Market 2019’ has more details

[3] You can hear more about the FCTR-E in our Talking New Energy Podcast, Season 2: https://www.delta-ee.com/podcast/series-2-archive.html

 

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