Netherlands Implements RED III Targets for Green Hydrogen

To meet the ambitious hydrogen targets of the EU Renewable Energy Directive III (RED III), the Netherlands is introducing a bill that includes an annual obligation for all operators of industrial plants with yearly hydrogen consumption that exceeds a certain threshold to ensure that a percentage of their annual consumption is met by renewable fuels of non-biological origin (RFNBO, and this obligation the Annual Obligation).

This bill is expected to come into effect on January 1, 2026, however, that poses challenges for some hydrogen users since compliance requires the physical delivery of hydrogen. Some users will not be connected to the Dutch hydrogen grid until 2027 at the earliest, which means they will be unable to fulfill this obligation. The bill also includes a temporary exemption for these users, which is described in detail below. 

Requirements of the renewable hydrogen booking registry

To ensure adherence to the Annual Obligation, a registry for certificates of renewable hydrogen and hydrogen carriers will be created. Pursuant to the RED III (and delegated EU regulations pursuant to the RED I, II, and III), the following requirements apply to hydrogen and hydrogen carriers to qualify as RFNBOs.

Hydrogen produced by electricity only qualifies as renewable hydrogen if certain criteria are met. Key criteria include:

• source of electricity: the electricity used for RFNBO production must come from renewable sources. Electricity can come directly from a dedicated renewable energy production installation that is not connected to the electricity grid (i.e. by means of a direct line between the hydrogen installations and the electricity producer) or, where the renewable electricity production installation is connected to the grid, it can be demonstrated that the electricity required for the production of hydrogen does not come from the grid;
• additionality principle: the hydrogen is sourced from an electricity production installation that comes into operation (achieves COD) at the same time or no earlier than 36 months as the hydrogen production installation, and
• greenhouse gas reduction: consumption is required to result in a greenhouse gas emission reduction of at least 70% compared to 'grey hydrogen' produced via a steam-methane formation plant

Compliance with these criteria must be verified via a 'mass balance system', which is an essential element of the RED sustainability programme that ensures information about the sustainability of raw materials, intermediate and end products is credible in relation to its origin and type and can be verified along the entire production and supply chain. The mass balance system for RFNBOs is similar to the current guarantees of origin scheme used for certifying renewable electricity. A key difference, however, lies in the verification process: in a book-and-claim system like the guarantees of origin scheme, guarantees of origin can be transferred separately from the physical electricity, allowing for the decoupled trade of the certificate and the physical electricity; in a mass balance system, both production and consumption must be tracked through the physical supply chain. This means that under a mass balance system, it is not possible to 'greenify' non-renewable hydrogen by separately purchasing renewable hydrogen credits.

Temporary relaxation of the booking rules

In October 2024, Gasunie subsidiary HyNetwork Services, the intended hydrogen grid operator, announced that the construction of the Dutch hydrogen grid faced significant delays. According to updated planning, the national hydrogen transport grid will be partially operational between 2027 and 2029, with full connectivity expected by 2032. The fact that the Annual Obligation comes into force before all industrial hydrogen users are connected to the hydrogen network means these hydrogen users may have difficulty gaining access to renewable hydrogen and, as a result – since the booking process of renewable hydrogen credits (i.e. the attribution of credits to end-users for the volumes of hydrogen they consumed) requires physical delivery of renewable hydrogen – they may not be able to fulfill their Annual Obligation.

To resolve this issue, the Dutch government has proposed the inclusion of a temporary exemption in the bill, allowing industries to attribute renewable hydrogen without the otherwise required proof of sustainability. This exemption will be in place until 2029 and will be subject to a review in 2028 to determine if a further extension is necessary.

If the hydrogen cannot be physically delivered through the transport grid, the exemption allows hydrogen users to attribute and claim renewable hydrogen using administratively purchased sustainability information, rather than physical delivery. Under the exemption, producers of renewable hydrogen will intentionally not certify a portion of their production under the RFNBO certification scheme. These non-certified credits, which would otherwise expire, can be administratively sold to hydrogen users without access to a hydrogen transport grid, to enable them to comply with their Annual Obligation. 

The Netherlands Emissions Authority (NEa) and the Netherlands Enterprise Agency (RVO) will oversee the implementation of this exemption. They will ensure that sustainability information is accurately recorded and industries are genuinely using renewable hydrogen. This oversight is crucial to maintaining the system's integrity and preventing fraud.

Conclusion and next steps

The temporary relaxation of the booking rules included in the bill shows a pragmatic solution that ensures Dutch hydrogen users can comply with the Annual Obligation, even if they are not yet connected to the hydrogen grid. This exemption, while temporary, is a critical component of the broader strategy to meet the ambitious targets set by RED III and to drive the Dutch hydrogen market and Dutch industries towards a more sustainable future. 

With the internet consultation phase of the draft act closed, the bill is now ready for submission to the Dutch parliament.

The bill, including explanatory notes, and the reactions from the market consultation can be found here (only available in Dutch): Overheid.nl | Consultatie Wet jaarverplichting hernieuwbare brandstoffen van niet-biologische oorsprong in de industrie

For more information on this draft law and the Netherland’s hydrogen market, contact your CMS client partner or these CMS experts.