Large energy companies immediately announced an investment stop and the municipalities subsequently described Eneco and Vattenfall as unreliable. The question of how we are going to ensure that half a million houses are connected to a heat network in the coming years is itself causing the necessary temperature rise. On Friday, Minister Rob Jetten (Energy, D66) presented his new heat law. Five questions about – in the words of Jetten – “my toughest file”.
1 Why are heat networks important?
The Netherlands will have to get rid of gas in the coming decades, and the heat networks play an important role in this. Now about half a million homes have a connection, through which they receive hot water (for heating and from the tap) from a central heat source. That heat source can be residual heat from companies, but also biomass or geothermal heat. By 2030, another half a million connections must be added. Twenty years later, when, according to the schedule, no one uses natural gas anymore, probably a third of all houses will be connected to a heat network.
2 Why is Jetten now coming up with a new law?
The importance of the heat networks is increasing and the minister wants to use the new Collective Heat Supply Act to ensure that everyone can obtain an affordable and sustainable alternative to natural gas. It is crucial that Jetten sidetracks the commercial energy companies, which now own 90 percent of the existing heat networks. Municipalities will be given the central role instead of the Eneco’s and Vattenfalls: only they (or other public institutions) may become the owner.
This means, says Jetten, that people with a heat network connection will have to deal with “a reliable public party”. This is all the more important because the owner of a heat network is always a monopolist, because you simply build one infrastructure (pipe network plus heat source). And if your district switches to a heat network, you are usually obliged to participate (for decades).
In addition, municipalities must already take the lead in making the neighborhoods more sustainable. Then it is only logical that they also become the owners of the nets, says Jetten.
Also read: Who provides heat in the district? Property dispute delays new heat networks
3 Are the energy companies not giving up because of this plan?
Until now, commercial companies have played a central role in the operation of heat networks. Eneco, Vattenfall and Ennatural – the three largest parties – no longer want to invest if they do not have control over the operation. Heat networks are long-term projects that sometimes require tens of millions in investments.
The companies say they welcome more public control and also want to share ownership, but they still want to be able to manage the risks on their investments. And according to them, that is not possible as a minority shareholder, especially because many municipalities lack the knowledge. That’s why they are now temporarily stopping all investments.
4 What do the municipalities think of the new law?
They assume that residents’ resistance will decrease if they know that a municipality, or a communal heating company, will become the owner instead of a private company. As with electricity and gas networks, heat networks should also be in public hands, according to the umbrella association VNG. In this way, the municipalities can “better at the wheel” to safeguard public interests – such as the costs of heat. They do, of course, rely on additional contributions from the government.
5 Does Jetten run the risk of delays in the transition?
Yes. Because certainly in the early years, municipalities have to arrange money, knowledge and manpower to be able to handle this role. According to a PwC study, this certainly leads to delays. Jetten also recognizes this. It is true that energy companies and municipalities explicitly keep the door open to continue working together.
In order to prevent delays, there will be “a growing-in period” of seven years. During that time, companies may still own a heat network if there are no alternatives. In practice, this concerns projects that are already being prepared, because the realization takes many years.
Furthermore, Jetten emphasizes, the companies will not just lose their current heat networks when the new law comes into effect on 1 July 2024. During a transition period, ‘the existing heat companies will be given sufficient time and space’ to recoup their investment in the current networks. That could be in ten years for one network, in another thirty.
A version of this article also appeared in the newspaper of October 22, 2022