Principles of the legislative proposal
Under this legislative proposal, energy suppliers must comply with an obligation to deliver a specific amount of green gas to the built environment each year. Because it is impossible to physically measure how much green gas has been delivered, it becomes an administrative obligation. To prove that an energy supplier is compliant, both the existing Guarantees of Origin (GvOs: garanties van oorsprong) and new tradeable Green Gas Units (GGEs: groengaseenheden), will be used. The Dutch Emissions Authority (NEa), which is being proposed as the implementation and supervisory body, will determine annually how many GvOs an energy supplier must have in its account in order to be compliant.
Explanatory note on the legislative proposal
The Dutch government is aiming for a significant increase in the use and production of green gas as part of the overarching goal of the European Climate Law to reach 55% CO2 reduction by 2030. Green gas has the same characteristics and quality as natural gas. However, rather than being derived from fossil sources, it is produced from bio-resources such as residual streams from the agricultural sector and food industry. Through fermentation or gasification, biogas is produced from these residual streams to be purified and upgraded to meet MR Gas Quality, after which it is called green gas.
During 2022, the Netherlands produced 0.2 bcm of green gas. However, now the target is to reach 2 bcm in national production by 2030. With this legislative proposal, the Dutch government aims to achieve a strong increase in the production of green gas in the Netherlands, with 1.6 bcm as the target level. Imposing an obligation on energy suppliers is expected to create a sufficiently high market price to trigger the necessary investments in new production capacity. The blending obligation (bijmengverplichting) should make it attractive enough for energy suppliers to consider taking a role in green gas production themselves, for instance by building their own production plants. As a result, this is expected to lead to additional availability of knowledge and capital and more cooperation in the chain. The blending obligation thus aims to provide entrepreneurs with longer-term certainty about the market direction.
The green gas blending obligation is not derived from European regulations but is devised by the Dutch government. However, the EU has formulated several renewable energy targets, including the goal of the REPowerEU to produce 35 bcm of green gas by 2030. The blending obligation will be included in the Dutch Environmental Management Act (Wet milieubeheer), which already includes several renewable energy obligations.
Blending obligation system
The system is based on the existing GvOs which are the evidence that a producer has generated a quantity of gas from renewable energy sources with their production plant. GvOs are traded through the VertiCer register where any market participant can open an account. However, for the green gas blending obligation, GGEs will be used. GGEs are trading units that are similar to the renewable energy units in the renewable energy transport obligation (HBEs: hernieuwbare brandstofeenheden).
Blending obligation stakeholders
These include energy suppliers of gas to final consumers with a small connection to the grid; final consumers of gas with a small connection to the grid; green gas producers; traders in the green gas chain; verifiers; auditors; the Dutch Emissions Authority (NEa); VertiCer and Rijksdienst voor Ondernemend Nederland (RVO).
Comments on the legislation proposal may be made online until consultation closes on 8 September 2023, with results being available online thereafter.
If you have any questions about the consultation or what this legislative proposal may mean for your business, please contact one of our advisers.