The cabinet is again confronted with a major financial setback in the energy transition. A plan for a large, public heat network in South Holland is almost twice more expensive than previously estimated.
Warmtelinq, as the project is called, does not go according to the latest calculations 600 million euros Cost only at least 1.1 billion euros. Three sources that are aware of the cost increase confirm. The project may also be (extra) delay. All sources want to remain anonymous because of the sensitivity of the subject.
Around 2027 the first of a total of 120,000 houses in The Hague, Schiedam, Leiden and Delft must be heated via the heat network with ‘residual heat’ of industrial companies from the port of Rotterdam, among others. Hot water must be transported from the port with pipelines to the residential areas. Gardeners in the region also have to obtain their heat.
It is by far the largest heat project in the Netherlands. The cabinet sees it as an important way to get households and companies in the province ‘off the gas’. Staatsbedrijf Gasunie is building the net and started it in 2022.
Open secret
Who will pay the extra costs is unclear. The Ministry of Climate and Green Growth and a spokesperson for Gasunie who is about the project say they cannot go into the amounts. The project spokesperson does say: “It is now public that we have to deal with at Warmtelinq with cost overruns and delays. We are struggling with that. With the setback, we are not out of the line with other developments in construction, infrastructure and cables and pipes in the Netherlands. We are not the only one who is wrong.”
Gasunie is in principle held out of the wind In this kind of setbacks, based on agreements that it has made with the cabinet in the past. A source of The Hague says that the cabinet is therefore investigating whether it can bear the extra costs themselves, or that customers are also presented with part of the bill through higher rates.
In the first instance, these are energy suppliers Eneco and Vattenfall, which have reserved transport capacity at Gasunie. They could (partly) pass on any higher rates in the long term to their customers. That is sensitive, because the cabinet wants this form of heat not to become more expensive than gas generated.
More setbacks
The heat project is again a large energy transition project in which the government is confronted with substantial rising costs. Recently there was also one setback During the national hydrogen transport network being under construction, where the government also controls. That network will not cost 1.5 billion euros but at least 3.8 billion euros, Minister Sophie Hermans (Climate and Green Growth, VVD) wrote to the House of Representatives at the end of February.
In the same letter Hermans already wrote that there was a disappointment at Warmtelinq, partly due to inflation. But then she didn’t say how big it was. A source states that it is such a large cost increase that it cannot only be the result of inflation. “Underestimation of the complexity of the project and wrong choices in implementation and tendering” would also play a role.
In recent years, the cabinet has often taken a leading role in large energy projects, partly because companies themselves find the large investments involved with it too risky. For example, the government itself will be responsible for the costs of the construction of new nuclear power stations.
But the risks of such a steering role are also becoming increasingly visible. A source of The Hague says: “There have been a lot of setbacks in the past year. That costs billions. The bucket is not yet completely full, but there may be a point that this is the case and politicians decide that the government cannot always assist.”
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Bickering
Six years ago, the government was in control of WarmtelinQ at themselvesdue to, among other things, concerns whether the rates would remain affordable if commercial parties would exploit the nets. The heat network was initially an initiative of Eneco, which collaborated with local authorities.
Because the construction threatened to get stuck because of the rates, among other things, the rates, then Minister Eric Wiebes (Economic Affairs, VVD) decided that Gasunie would take over the project. The Court of Audit showed itself there at the time criticallypartly because it was insufficiently clear what contribution was made to ‘public interests, such as […] affordability ”.
At the same time, the government wants the government to play a leading role in more heat projects. It works on a law (Collective Heat Act) that must arrange that all new heat companies (also at distribution level, the fine -meshed piece in residential areas themselves) always come into the hands of municipalities. This is partly because the cabinet wants such ‘vital’ infrastructure to be in public hands. Next week, a House of Representatives will talk about the law.
However, energy companies act against this, because they would not have any control over the risks, such as the cost increases that now affect the WarmtelinQ project. A source says that the disappointment also shows that the government cannot be cheaper at all, as is often stated by proponents of the public ownership.
Warmtelinq was already delayed earlier. The intention was initially that the project started to deliver the first heat in 2023, later that became 2025. It is also a controversial project. Opponents say that by taking residual heat from polluting industry, that industry does not get an incentive to make it more sustainable. Often it concerns companies that use a lot of fossil fuels.