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Netherlands Utilities Network Analysis


Fitch Solutions Sector Intelligence  

 

    THIS COMMENTARY IS PUBLISHED BY FITCH SOLUTIONS COUNTRY RISK & INDUSTRY RESEARCH and is NOT a comment on Fitch Ratings' Credit Ratings. Any comments or data are solely derived from Fitch Solutions Country Risk & Industry Research and independent sources. Fitch Ratings analysts do not share data or information with Fitch Solutions Country Risk & Industry Research.

    Netherlands Utilities Network Analysis

    • 06 Jun 2022
    • Netherlands
    • Logistics & Freight Transport

    Key View: The Netherlands boasts a well-managed utilities network offering a reliable supply of electricity, fuel and water, as well as widespread access to fast internet services. Fuel costs are high by regional standards, though the country is expected to invest heavily in green-mobility infrastructure and businesses can obtain subsidies for electric vehicle usage. Electricity costs and water availability risks are low. Moreover, broadband coverage is very strong which will provide a boost to e-commerce and connected infrastructure initiatives. That said, energy costs are rising sharply on the back of global commodity price rises, driven by geopolitical risks and rising demand. Overall, the Netherlands scores 65.1 out of 100 for Utilities Network, ranking 31st out of 201 markets globally. This ranking reflects the high cost of utilities, despite widespread availability and reliability.

    High Cost Of Utilities Weigh
    Developed Markets - Utilities Network

    Note: 100 = Lowest risk; 0 = highest risk. Source: Fitch Solutions Logistics Risk Index

    Latest Utilities Network Analysis

    • Coal-fired power is the first to be removed from the power mix. Our Power team expects a 12.3% contraction in coal-fired generation and a 2.8% decrease in natural gas-fired generation in 2022.
    • The Netherlands has approximately 2GW offshore wind capacity, which is an initial outlay of the country’s plan to fill large swathes of its North Sea waters with wind towers, creating 21GW of offshore wind power by 2030. About half of this is currently tendered. Shell is taking the lead with plans for its 200MW Hydrogen Holland I project, now subject to investment decision later this year. It will supply green hydrogen to Shell’s Energy and Chemicals Park which operates some 30km further east of the port. The Rotterdam Port Authority anticipates to eventually expand to 20GW capacity, making it by far the largest electrolysis production site in Europe. New locations within the port will be made available, with a ramp up of tendering anticipated after 2026.
    • The green hydrogen sector is attracting investor interest. Royal Dutch Shell has awarded a contract for the construction of a 200MW green hydrogen plant in the Port of Rotterdam which will receive electricity from the 759MW Hollandse Kust offshore wind farm. Construction work is expected to start in Q222, with production expected to start in 2024.
    • Crude prices have risen steeply over the course 2021 and going into 2022. At the time of writing in late May 2022, Brent was trading at just under USD100/bbl, a sharp increase from the USD43.2/bbl averaged in 2020.
    Utilities Costs And Availability

    The utilities sector is well developed and able to cater to the demands of industry and households. Fuel, water and electricity are widely available and the internet services are world-class. The Dutch telecoms market is gradually migrating to upgraded platforms and operators repurposing their spectrum and physical assets for LTE and 5G. This makes the country an attractive location for manufacturing and services sectors. The Netherlands scores a high 84.2 out of 100 for Availability of Utilities, ranking sixth out of 201 markets globally.

    Although utilities are widely available, they are costly. Energy costs will remain elevated in the near term, as the country seeks to spearhead its long-term renewable energy goals. Overall, the Netherlands scores 46.0 out of 100 for Cost of Utilities, ranking 113th out of 201 markets globally.

    Electricity

    Thermal power in the Netherlands is dominated by gas-fired capacity and thermal power dominates the domestic power mix in the Netherlands. This will create challenges over the next decade as the country has committed to fully phasing out coal-fired capacity and over the long term is looking to divest fossil fuels entirely. Following the closure of more than 1.5GW of gas-fired capacity between 2016 and 2018, gas generation increased again over 2019 and 2020 to compensate for the removal of coal-fired capacity.

    Electricity Risks
    Source

    Energy mix (2021 estimates for generation): natural gas (69.6), coal (5.3%), oil (1.2%), non-hydropower renewables (23.7%).

    • Thermal power makes up almost 71% of total electricity generated in the Netherlands, reflecting the scale of investment which will be needed in new renewables capacity if the country is to successfully divest of fossil fuels. Coal-fired power is the first to be removed from the power mix. In 2022, we expect a 12.3% contraction in coal-fired generation, alongside a 2.8% decrease in natural-gas fired generation.
    Availability

    100% of the population has access to electricity.

    • The country boasts strong reliability of electricity supplies and is an attractive location for energy-intensive industries.
    Reliability
    • Risk of shortages are limited.
    Cost
    USD0.18/KWh.
    • Electricity costs are on par with the developed markets and global averages.
    Planned Projects
    • Overview: Increasing renewable capacity, modernising the power grid and decarbonising the power sector will be of primary focus over the coming years, backed by government support and robust EU funding. The country is phasing out thermal power, with coal-fired capacity due to be removed by 2030 (followed by carbon neutrality by 2050), leaving natural gas at the primary thermal power source over the next decade. With no new natural gas-fired power projects in the pipeline, we expect that growth will be focused on renewables, led primarily by wind, including large-scale offshore developments, and solar power.
    • Hydrogen: The green hydrogen sector is also attracting investor interest. Royal Dutch Shell has awarded a contract to for the construction of a 200MW green hydrogen plant in the Port of Rotterdam which will receive electricity from the 759MWHollandse Kust offshore wind farm. Construction work is expected to start in Q222, with production expected to start in 2024.
    Source: International Energy Agency, national sources, Fitch Solutions
    Costs On Par With Developed Markets Average
    Developed Markets - Cost Of Electricity, USD per KWh
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