More experiments in the electricity and gas markets
On 15 May 2018, a draft version of a general order in council of the Dutch Decree on Experiments Electricity Act 1998 and the Gas Act (Besluit experimenten Elektriciteitswet 1998 en Gaswet, 'The General Order') was published. The General Order repeals the Dutch Decree on Experiments Decentralised Sustainable Electricity Generation (Besluit experimenten decentrale duurzame elektriciteitsopwekking). At the same time, the General Order issues regulations in order to enable more players in the field to experiment and broaden the scope of possibilities to experiment and derogate from the Electricity Act 1998 and the Gas Act. The General Order has been published for consultation until 15 June 2018.
The Dutch Progress on Energy Transition Act
In April 2018, the Dutch Progress on Energy Transition Act (Wet Voortgang energietransitie, 'VET') was adopted. The VET includes amendments to the Electricity Act 1998 and Gas Act. Among other things, these amendments provide the Dutch Minister of Economic Affairs and Climate with the authority to grant exemptions in order to execute experiments that derogate from the Electricity Act 1998 and the Gas Act. As a consequence of these amendments, the scope to experiment and therefore derogate from the Electricity Act 1998 and the Gas Act has been broadened. The General Order provides for further regulations to facilitate this broadening and regulations on the granting of exemptions and the execution of experiments. By doing so, the government aims to identify whether derogation from the aforementioned laws facilitates the energy transition or whether structural legislative amendments are required. This is in response to several motions put forward in the Dutch House of Representatives.
The current Decree on Experiments Decentralised Sustainable Electricity Generation is more limited in scope than the proposed General Order. For example, derogation from the Electricity Act 1998 is allowed, whereas derogation from the Gas Act is not. Moreover, exemptions are granted only to cooperative ventures and cooperative associations, and to experiments that contribute to decentralised power generation and cogeneration. The VET, together with the General Order, expands the possibility for exemptions, e.g. to all players in the energy sector, including grid operators. By doing so, experiences with various issues within the energy transition can be developed.
Proposed possibilities and impossibilities
The General Order allows experiments relating to the installation and management of grids by parties other than the regional grid operator. One of the consequences is that cooperative ventures and cooperative associations may assume the role of grid managers. It is also proposed to experiment on a larger scale (5,000 connections for cooperative ventures and cooperative associations operating in grid management, 10,000 connections for other players active in other energy and gas market categories).
Additionally, the draft explanatory document mentions the possibility to experiment with a new kind of role in the market: the role of aggregator (aggregator). In general terms, the aggregator relieves customers or producers from active participation in the energy or gas market by trading their consumption, production or flexible capacity in a smart manner. The aggregator can therefore act as an intermediary between customers, grid managers and traders.
Another possibility is to experiment with supply tariffs (customer consent is necessary) and grid management tariffs (covering the costs of the experiment and involving experiment participants only). A separate administration will be necessary for both kinds of tariff experiments. The Dutch Authority for Consumers and Markets (Autoriteit Consument en Markt) will assess whether the tariff experiments are objective, transparent, non-discriminatory, cost covering, and experiment related.
Exemptions will be granted only if the proposed activity is a genuine experiment and the exemption cannot be obtained on other lawful grounds. The maximum duration for an exemption depends on the experiment, with a maximum of up to ten years. Exceptions to this rule are possible if sufficiently substantiated and justified. The General Order also allows for further regulation of the number of exemptions (divided over multiple categories of market parties). After the conclusion of an experiment, a performance report together with a view on the continuation (in another way than as an experiment) will be submitted to the House of Representatives. The General Order will be evaluated by the parties concerned after four years.
Exemptions will not be granted to experiments relating to the division of grid management and supply, trade and production, other than through cooperative ventures and cooperative associations. The division between supply and transport remains important. Producers are not allowed to influence the task of a grid manager. In addition, the draft explanatory document explains that an exemption will not be granted for the purpose of LNG storage, interconnections or the offshore network.
Regulations that facilitate experiments enable the government to gain experience in regulating new developments, the practical implications of which are uncertain. In the past, the Council of State (Raad van State, 'RvS') has expressed critical views on these experiment regulations. The RvS has addressed the fact that these kind of regulations are increasingly being used to avoid amending the law. As a consequence, the general order in council is no longer the exception, but the rule (the Dutch Crisis and Recovery Act, Crisis- en herstelwet, is a good example). According to the RvS, a general rule needs an independent assessment of what is required in the public interest and in order to balance interests properly. Experiments may facilitate these assessments, but should not replace them. These regulations could therefore induce legal uncertainty or legal inequality.
Views on the General Order may be submitted until 15 June 2018. If you need assistance in this process, or a second opinion on a view to be submitted, please feel free to contact us.