Dutch and British responses to the gas crisis

28 Apr 2022

By Matthew Lockwood and Anna Devenish 

Going Dutch? is a research project looking at Dutch and British attempts to move domestic heating away from dependence on natural gas. It was planned in 2020, but even as we started the project, the wider context began to change radically. Over the course of 2021, as the world economy started to recover from the pandemic, a number of factors in various markets started to push gas prices up. With Russia’s invasion of Ukraine, European countries have started to look seriously at whether they could stop using Russian gas.

While it is not the main focus of our research, a question worth asking is therefore what the responses of the different countries to the crises have been, if they diverge, and where they do, why.

Addressing the gas price crisis

In the UK, the government is offering two measures to help households deal with an increase in energy bills of 54% in April 2022. All domestic electricity consumers will get £200 off their energy bills, although this is not a grant but rather a loan that has to be repaid over the next five years.  Consumers with homes worth under a particular council tax band will also get a £150 council tax rebate. There is a further £144 million of discretionary support for vulnerable and low-income households. The whole package is estimated to cost £9.1 billion

The Dutch government has adopted several measures to offset the impact of skyrocketing energy prices and inflation that could reach 5.2% this year. First, a one-time energy subsidy of € 800 for households eligible for social benefits. Second, a cut in the VAT rate on natural gas, electricity, and district heating from 21% to 9% from 1 July 2022 through 31 December 2022. Finally, allocating an additional € 150 million through the just-launched National Insulation Programme, which was previously planned for 2026, to assist low-income residents in implementing energy-saving measures. The government puts the total cost at €2.8 billion.

How do these two approaches compare? Converting Euros to Sterling at the purchasing power parity rate and allowing for differences in population, the Dutch package is equivalent to £157 per person, while UK support is £135 per person, although much of this is actually a loan. The Dutch package is therefore more generous and more targeted at poorer households, perhaps reflecting historical differences in redistribution and welfare systems in the two countries.

Getting off Russian gas

The war in Ukraine has accelerated Western countries’ efforts to wean themselves off Russian gas. In 2021, Russian gas made up about 45% of the European Union’s imports of gas and about 40% of its gas consumption. However, both the UK and the Netherlands use less Russian gas than the European average.

Russian gas accounts for 15% of Dutch gas consumption. On 14 March 2022, the Cabinet issued a letter to Parliament outlining the state of affairs and proposing a strategy for reducing reliance on Russian gas. The measures for the coming winter include:

  • Taking steps to ensure that gas storage facilities are fully filled by 1 October 2022, with government intending to intervene with some risk-reduction measures and gas storage mandates. It is unknown what gas sources will be used to fill the facilities.
  • Considering options for increasing capacity for liquefied natural gas (LNG) import facilities in Rotterdam and Eemshaven. In addition, on 4 March 2022, Gasunie signed a Memorandum of Understanding with Germany to build a joint LNG-import terminal in Brunsbüttel.
  • Prioritising reduction of energy demand. On 2 March, the Cabinet launched the National Insulation Programme and a national campaign to educate homes and businesses on energy-saving techniques. As a result of this €4 billion effort, 2.5 million homes should be insulated by 2030.
  • Updating the National Gas Crisis Plan and the National Electricity Crisis Plan, which establish a plan of action if the supply of electricity or gas in the Netherlands is severely disrupted.

The Cabinet also proposed longer-term measures: accelerating the development of green gas, hydrogen, renewable energy, electrification, and the adoption of hybrid heat pumps. In addition, there has been a discussion of nuclear energy expansion, with the possibility of continuing operation of the Borssele power station and building two new nuclear power stations.

Importantly, the goal of stopping domestic gas production in Groningen remains unchanged, but the date has become unclear (2023 or 2024).

The UK is far less dependent on Russian gas, at less than 4% of demand. The UK response took the form of a new British Energy Security Strategy, published on 7 April 2022. The main points of the strategy were:

  • A huge acceleration of new nuclear power, with an ambition of up to 24GW by 2050, equivalent to building one reactor a year
  • An increase in the target for offshore wind from 40GW by 2030 to 50GW
  • A licensing round for new North Sea oil and gas projects planned to launch in Autumn, with a new taskforce providing bespoke support to new developments. It is unclear how much additional gas, by when, this will produce.
  • A Heat Pump Investment Accelerator Competition in 2022 worth up to £30 million to make British heat pumps
  • Consultation on a limited expansion of new onshore wind
  • An ambition, but no target, to increase solar capacity by a factor of 5 by 2035, particularly on domestic and commercial rooftops.

There is also a doubling of ambition of low carbon hydrogen production capacity by 2030, with at least half coming from green hydrogen. It is worth noting that there are no plans relating to gas storage, as the UK now has no large-scale commercial or strategic storage facilities. Conversely, the UK already has considerable LNG import capacity.

Comparing these responses, while there are some similarities, a few contrasts also stand out. First, the UK is attempting to increase domestic gas production, while the Netherlands has held to its plan to phase out production in the Groningen field. The Netherlands appears to be seeking greater gas supply security through storage and new LNG import capacity. Second, while the UK government was much criticised for not being able to agree on measures to reduce demand through energy efficiency, such measures are part of the Dutch response. Third, the UK strategy gives a central place to the expansion of new nuclear power, whereas this plays a much smaller role for the Dutch.

Why do we see these differences? There are of course a range of factors, including contrasts in the degree of dependence on Russian gas, the fact that domestic gas production in the Netherlands is onshore, and the different relationship of the two countries to the EU. However, one important issue might be the contrasting nature of politics in the two countries.

The contrasting nature of politics

The UK typically sees majority government, and the strategic response to the Russian gas crisis has effectively been negotiated within the party. The current leader of the governing Conservative Party has faced a crisis of credibility in the last few months, which also means that he has given weight to things that party members and core supporters like, such as nuclear and expanded North Sea production, while dropping major expansion of onshore wind in the face of resistance within the party. At the same time, his current political weakness has meant that he has not been able to force the Treasury to support an expansion of energy efficiency.

By contrast, the relatively new Dutch government is a coalition, as is normal for the Netherlands. While led by the centre-right VVD, the coalition involves a number of other parties, including the social liberal D66 party. The Dutch strategic response on Russian gas has therefore been the outcome of a cross-party negotiation, with consideration of a wider range of priorities amongst different groups. While the result is still the outcome of a political process, it is perhaps less skewed than that seen in the UK.

Overall, both the UK and the Netherlands are drawing on the same set of policy responses to the crisis. Both are offering consumers financial support on the gas price surge (although both to much less of an extent than in France with its state-owned dominant supplier). Both are looking at measures to increase gas supply in the short to medium term, and more renewables and nuclear to support future electrification. However, within this broad field of measures there are also differences in emphasis that may be related to institutional and political differences.

This article originally appeared on the Going Dutch website.

About the authors:

Dr Matthew Lockwood is a Senior Lecturer in Energy Policy at SPRU, and Co-Director of the Sussex Energy Group.

Dr. Anna Devenish is a Research Fellow in the Governance of Heat Transitions at SPRU, and a member of the Sussex Energy Group.