Government of Netherlands to financially participate in geothermal development

Date: 01/04/2019

The government will participate financially in projects to extract geothermal heat for the heating of houses and buildings. In the coming years, the cabinet wants to start taking residential areas off the gas and geothermal heat or geothermal energy is one of the important alternatives, writes Minister Wiebes of Economic Affairs and Climate in a letter to the Lower House.

Energiebeheer Nederland (EBN), a natural gas exploration, production, transportation and sale company owned by the Dutch Government, engaged also in oil extraction projects in the Netherlands, will therefore enter geothermal energy on behalf of the government.

With geothermal energy, deep water is drilled into hot water that is used to heat greenhouses, houses or buildings. The cooled water is then pumped back into the soil via another pipeline. That way the bottom is not disturbed.

Limited risk
The risk of earthquake or other accidents is limited, but if geothermal technology is carried out incorrectly, there are indeed risks of earthquakes, gas leaks and groundwater contamination. The State Supervision of Mines (SSM) has stopped projects in Groningen and Limburg last year to prevent accidents.

Due to the expected increase in the number of geothermal projects for district heating, the rules will be tightened. The geological knowledge of EBN’s soil must prevent the risk of accidents.

The financial participation of EBN must ensure that geothermal heat projects are also a stable investment for other parties. It is expected that in the future twenty percent of the heating in houses and buildings will come from geothermal energy.

The role of EBN in the development of geothermal heat projects comes at the request of the Second Chamber in response to a motion by D66 party leader Rob Jetten. Until next year, that role is still voluntary for project developers. From next year, government participation will be regulated by law through an amendment to the Mining Act.

Industry Comment by Stichting Platform Geothermie

In a reaction, the Netherlands Platform for Geothermie (SPG) states it is carefully optimistic on the “clarity about the risk-bearing participation of 20 to 40 percent by EBN in new geothermal projects. The Mining Act may have been amended for this in 2020, and therefore EBN participation is still on demand from the geothermal energy company in the coming period.”

It though also highlights that there are two important conditions requiring further interpretation.

Financial support
According to SPG, additional financial support for geothermal projects remains necessary to make projects profitable. After all, EBN also wants a (competitive) return, so that the financial feasibility of projects does not improve in the first instance through participation. An appropriate SDE+ subsidy for projects in the built environment and with low sales therefore remains a top priority for feasibility. For example, the expansion of the SDE+, for example to stimulate projects such as CO2 storage and energy saving, should not be at the expense of the budgets for geothermal development.

Market for sustainable heat
The demand for sustainable heat and the associated development of heat networks is too slow to achieve the set climate targets. Connecting a sufficient number of homes to a heat network is a lengthy process. In many municipalities, this process with the associated dialogue with the residents still has to be started. SPG therefore calls on the government not only to help develop sustainable heat supply, but also to strongly stimulate demand development.

SPG sees this as an initial reaction to the announcement, but will provide further substantive response after consultation with its partners. (SPG statement)