The Energy Regulation

and Markets Review

Law Business Research

Editor

David L Schwartz

2

The Energy Regulation and Markets Review

Reproduced with permission from Law Business Research Ltd.

This article was first published in The Energy Regulation and Markets Review, 1st edition (published in June 2012 – editor David L Schwartz).

For further information please emailAdam.Sargent@lbresearch.com

The Energy Regulation

and Markets Review

EditorDavid L Schwartz

Law Business Research Ltd

Contents

4

ThE Law REviEwS

ThE MERgERS anD acquiSiTionS REviEw

ThE RESTRucTuRing REviEw

ThE PRivaTE coMPETiTion EnfoRcEMEnT REviEw

ThE DiSPuTE RESoLuTion REviEw

ThE EMPLoyMEnT Law REviEw

ThE PuBLic coMPETiTion EnfoRcEMEnT REviEw

ThE Banking REguLaTion REviEw

ThE inTERnaTionaL aRBiTRaTion REviEw

ThE MERgER conTRoL REviEw

ThE TEchnoLogy, MEDia anD TELEcoMMunicaTionS REviEw

ThE inwaRD invESTMEnT anD inTERnaTionaL TaxaTion REviEw

ThE coRPoRaTE govERnancE REviEw

ThE coRPoRaTE iMMigRaTion REviEw

ThE inTERnaTionaL invESTigaTionS REviEw

ThE PRojEcTS anD conSTRucTion REviEw

ThE inTERnaTionaL caPiTaL MaRkETS REviEw

ThE REaL ESTaTE Law REviEw

ThE PRivaTE EquiTy REviEw

ThE EnERgy REguLaTion anD MaRkETS REviEw

www.TheLawReviews.co.uk

Contents

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PuBLiShER Gideon Roberton

BuSinESS DEvELoPMEnt MAnAGER Adam Sargent

MARkEtinG MAnAGERS nick Barette, katherine Jablonowska

MARkEtinG ASSiStAnt Robin Andrews

EDitoRiAL ASSiStAnt Lydia Gerges

PRoDuction MAnAGER Adam Myers

PRoDuction EDitoR Joanne Morley

SuBEDitoR Anna Andreoli

EDitoR-in-chiEF callum campbell

MAnAGinG DiREctoR Richard Davey

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acknowLEDgEMEnTS

AFRiDi & AnGELL

AnDERSon MōRi & toMotSunE

BAnWo & iGhoDALo

D’EMPAiRE REynA ABoGADoS

DJinGov, GouGinSki, kyutchukov & vELichkov, AttoRnEyS AnD counSELLoRS At LAW

GoLtSBLAt BLP

GóMEz-Pinzón zuLEtA

GonzÁLEz cALviLLo, Sc

hEnGELER MuELLER

hoGAn LovELLS

kvALE ADvokAtFiRMA DA

L o BAPtiStA SchMiDt vALoiS MiRAnDA FERREiRA AGEL

LALivE

LAthAM & WAtkinS AARPi

LAthAM & WAtkinS LLP

MAkARiM & tAiRA S

MAnnhEiMER SWARtLinG

ii

MintER ELLiSon

PAkSoy AttoRnEyS At LAW

PotAMitiSvEkRiS LAW PARtnERShiP

SchoEnhERR AttoRnEyS At LAW

StEk

StikEMAn ELLiott LLP

tRiLEGAL

WhitE & cASE LLP (South AFRicA)

zuL RAFiQuE & PARtnERS

Acknowledgements

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Editor’s Preface ...................................................................................................ixDavid L Schwartz

Chapter 1 AuStRALiA .............................................................................. 1Mitzi Gilligan, Eliza Bartlett, Carolyn Vigar, Darshini Nanthakumar, Rudi Kruse, Genevieve Watt and Nicholas Liau

Chapter 2 AuStRiA ................................................................................ 23Bernd Rajal and Guenther Grassl

Chapter 3 BRAziL ................................................................................... 34Guilherme Guerra D’Arriaga Schmidt

Chapter 4 BuLGARiA ............................................................................. 45Yassen Spassov

Chapter 5 cAnADA ................................................................................ 62Patrick Duffy, Brad Grant, Erik Richer La Flèche and Glenn Zacher

Chapter 6 coLoMBiA............................................................................ 76Patricia Arrázola-Bustillo and Fabio Ardila

Chapter 7 FRAncE ................................................................................. 86Fabrice Fages and Myria Saarinen

Chapter 8 GERMAny ............................................................................. 97Dirk Uwer

Chapter 9 GREEcE ............................................................................... 108Euripides Ioannou and Dimitra Rachouti

Chapter 10 inDiA ................................................................................... 120Akshay Jaitly, Sitesh Mukherjee, Neeraj Menon and Vibhu Sharma

conTEnTS

Contents

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Chapter 11 inDonESiA ......................................................................... 132Pudji W Purbo

Chapter 12 itALy .................................................................................... 146Simone Monesi

Chapter 13 JAPAn ................................................................................... 159Reiji Takahashi, Atsutoshi Maeda, Shun Hirota and Yuko Suzuki

Chapter 14 MALAySiA ............................................................................ 171Lukman Sheriff Alias

Chapter 15 MExico ............................................................................... 179Gonzalo A Vargas

Chapter 16 nEthERLAnDS ................................................................. 190Jan Erik Janssen and Martha Brinkman

Chapter 17 niGERiA ............................................................................... 199Ken Etim and Ayodele Oni

Chapter 18 noRWAy .............................................................................. 210Per Conradi Andersen and Christian Poulsson

Chapter 19 RuSSiA .................................................................................. 219Evgeny Danilov

Chapter 20 South AFRicA .................................................................. 237Shamilah Grimwood and Zahra Omar

Chapter 21 SPAin .................................................................................... 257Antonio Morales

Chapter 22 SWEDEn .............................................................................. 266Hans Andréasson, Martin Gynnerstedt and Malin Håkansson

Chapter 23 SWitzERLAnD .................................................................. 278Georges P Racine

Chapter 24 tuRkEy ............................................................................... 290Zeynel Tunç

v

Chapter 25 unitED ARAB EMiRAtES ................................................ 302Masood Afridi and Haroon Baryalay

Chapter 26 unitED kinGDoM .......................................................... 319Elisabeth Blunsdon

Chapter 27 unitED StAtES ................................................................ 334Michael J Gergen, Natasha Gianvecchio and David L Schwartz

Chapter 28 vEnEzuELA........................................................................ 344Arnoldo Troconis

Appendix 1 ABout thE AuthoRS .................................................... 357

Appendix 2 contRiButinG LAW FiRMS’ contAct DEtAiLS ..... 374

Contents

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Editor’s PrEfacE

Safe and reliable delivery of electricity and natural gas has been the hallmark of energy policy and regulation in the industrialised world for the past 75 years. More recently, regulators, policymakers and the industry began to focus their attention on ways to improve economic efficiency, increase productivity and reduce costs through a seemingly endless series of reforms.

In some countries, utilities were encouraged to enhance transmission and interconnection facilities with neighbouring systems in order to pool energy resources. More recently, utilities have been encouraged to participate in regional organisations to buy and sell power, and to administer transmission, dispatch and scheduling of a variety of energy products. Certain countries have encouraged utility efficiency through a variety of performance-based incentives.

Policymakers have tried to reduce the barriers to entry by requiring non-discriminatory treatment among transmission users, and prohibiting affiliate abuse. Utilities were encouraged to unbundle certain utility services; in some cases, regulators required the divestiture of generation or transmission facilities. Utilities have even been encouraged to provide retail wheeling services to facilitate competition for delivery service customers.

Many markets have developed competitive bid-based electricity auctions to set energy and capacity prices, which often take into consideration the cost of transmission congestion. These markets tend to be administered by independent or governmental entities that do not have a market position bias. Clearing prices set in these markets are intended to send price signals to maximise short-term efficiency (scheduling, dispatching and selling energy), as well as long-term efficiency (building new or retiring old generation and transmission facilities).

In certain countries, lawmakers and policymakers have encouraged developers to build and finance new renewable resources and to develop more effective means of conserving energy, through a variety of ‘carrots’ and ‘sticks’. These measures have included subsidies such as feed-in tariffs and renewable energy credits, as well as utility

Editor’s Preface

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requirements through renewable portfolio standards. In certain competitive markets, conserving electricity has been converted into a demand-side product (‘negawatts’) with near or equal value to supply-side generation (megawatts). New ‘smartgrid’ technologies have been created to increase the efficiency of transmission, generation, distribution and individual consumers’ energy use.

Now, however, the myriad of efficiency mechanisms faces new and unprecedented challenges. Transmission and distribution systems are ageing and desperately need upgrading. Severe new environmental requirements are leading to mass retirements of baseload coal-generation resources. Fuel prices are volatile, adding long-term uncertainty to energy prices. Spikes in the price of raw materials are making the development of new infrastructure all the more expensive. Cyber-security threats are exposing the vulnerabilities of our energy networks. And the global economy continues to threaten our ability to obtain the necessary credit to build and finance energy infrastructure.

This is the sobering backdrop for this inaugural edition of The Energy Regulation and Markets Review. I would like to thank all of the authors for their thoughtful consideration of these difficult challenges. As can be seen in these chapters, we have much to consider and resolve before we can achieve the kinds of energy security and efficiency that we have been pursuing.

David L SchwartzLatham & Watkins LLPWashington, DCJune 2012

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Chapter 16

NetherlaNds

Jan Erik Janssen and Martha Brinkman 1

I OVERVIEW

The Netherlands has an energy industry with an annual output of between €35 and €40 billion. Specifically, the Netherlands is the largest producer and exporter of gas in the European Union. Although gas reserves are diminishing, the Netherlands is expected to maintain its position as a net exporter until around 2025. A contractual arrangement between the state, Shell and ExxonMobil – often referred to as the ‘gas building’ – determines that NAM (the Dutch national gas company) is the producer of the vast Groningen balancing field and that GasTerra is responsible for the sale of that output. NAM is a 50/50 joint venture between Shell and ExxonMobil and GasTerra a 50/50 joint venture between NAM and the state.

In 2010, 126.6 billion kWh of electricity and 83.9 billion cubic metres of natural gas were produced in the Netherlands. Due to its natural gas reserves, the Netherlands can provide for most of its domestic demand for energy and a large portion of its electricity is produced in gas-fired plants.

The energy markets in the Netherlands have been completely liberalised. Former regional energy monopolies have been broken up and the largest production and supply companies are now part of multinationals such as GDF Suez, RWE and Vattenfall. The bulk of the energy regulation in the Netherlands relates to transmission and distribution networks.

i Legislative framework

The legislative framework for the energy sector in the Netherlands is largely based on the European electricity and gas directives. These directives have been implemented in the Electricity Act 1998 (‘the Electricity Act’) and the Gas Act (together, ‘the Acts’). At

1 Jan Erik Janssen is a partner and Martha Brinkman is a senior associate at Stek.

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the time of writing a bill for the implementation of the European 3rd Energy Package in the Acts is pending before the Senate. Implementing rules relating primarily to tariffs, conditions and processes relating to the networks have been laid down in secondary legislation based on the Acts, such as codes adopted by the Netherlands Competition Authority (‘the NCA’).

The legal framework for exploration and production activities in the Netherlands (including the Dutch part of the continental shelf ) is laid down in the Mining Act and secondary legislation – the Mining Decree and Mining Regulation – based thereon.

In addition a Heat Act is expected to enter into force in the foreseeable future that will give consumers security of supply and will prescribe that the price for the supply of heat to small-scale users will be set on the basis of the principle that they will not pay more than consumers connected to the gas network.

II REGULATION

i The regulators

In the Netherlands there is no separate energy regulator. The regulation of the electricity and gas markets has been entrusted to the Minister of Economic Affairs, Agriculture and Innovation (‘the Minister’) and the NCA. The NCA is divided into a number of departments, including the Office of Energy and Transportation Regulation.

With respect to Dutch energy policy the Minister, by law, must publish an ‘energy report’ at least every four years, giving guidance on decisions to be taken by the Dutch government relating to a reliable, sustainable and efficient energy supply. The Minister is responsible for most of the regulation in the energy sector, including the Acts.

The NCA is responsible for the enforcement of general competition law on the basis of the Netherlands Competition Act.2 In its capacity as energy regulator under the Acts, the NCA adopts the tariff and technical codes governing the transmission and distribution of electricity and gas. It also sets the regulated tariffs for each distribution company. The NCA enjoys considerable powers to sanction infringements or violations of the Acts, including the power to impose administrative fines, a binding order or an order sanctioned by periodic penalty payments. The NCA is also engaged in handling complaints about distribution companies and the monitoring of the obligations of suppliers to so-called small-scale users (consumers and small businesses). From 1 January 2013 the NCA, the Independent Post and Telecommunications Authority and the Consumer Authority will merge per into one authority: the Netherlands Authority for Consumers and Markets.

ii Regulated activities

In the Netherlands, network services performed by distribution companies (network operators) are regulated, whereas other activities have been liberalised.

Pursuant to the Acts, the owner of a transmission or distribution network must appoint an independent network operator to operate its networks. This operator must

2 See the Netherlands chapter of The Public Competition Enforcement Review (Fourth edition).

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perform its tasks on the basis of regulated tariffs and conditions set by the NCA. TenneT has been appointed as the operator of the national high-voltage grid (i.e., all grids with a voltage level of 110kV or more) and GTS (Gas Transport Services) has been appointed as the operator of the national high-pressure gas network. There are fewer than 10 operators of regional distribution networks. TenneT and GTS are currently wholly owned by the Dutch state and the distribution companies are owned by local authorities (provinces and municipalities). Under strict conditions, an exemption to appoint a network operator for closed distribution systems may be obtained from the NCA.

Under the Acts, network operators have exclusive powers to construct, maintain, renew and operate their networks, to provide for connections to their networks and to provide metering services to small-scale users. The latter is the corollary of the obligation to roll out ‘smart’ meters to all small-scale users. Small-scale users are defined in the Acts as users with a connection with a capacity of no more than 3× 80 amperes (Electricity Act) or 40 cubic metres of gas per hour (Gas Act). Closed distribution systems, electricity connections with a capacity of more than 10MVA and gas connections with a capacity of more than 40 cubic metres gas per hour (with the exception of the connecting point to the network) may be constructed by third parties. The exclusive activities of the network operators are strictly regulated. The Acts contain various provisions that ensure the financial and operational independence of the network operators. The Acts also strictly regulate which activities may or may not be performed by affiliate companies of the network operator. Pursuant to the Gas Act, an operator must also be appointed for liquefied natural gas (‘LNG’) and gas storage facilities. These operators enjoy much lighter regulation.

The supply of electricity and gas in the Netherlands has been fully liberalised since 2004. Customers are free to chose their supplier and to negotiate the prices for the supply of electricity and gas. For the supply of electricity and gas to small-scale users a supply licence from the NCA is, however, required. A licensed supplier is obliged to supply small-scale users under reasonable conditions. The NCA monitors the small-scale user supply tariffs and may set a maximum supply tariff when it deems the tariffs too high, although this has never happened. For the physical trading in electricity and gas certain requirements of TenneT and GTS must be met.

The Acts do not impose licence requirements on the production of electricity or gas. The customary permits from local or national governmental authorities under the applicable planning and environmental legislation are required. For large-scale investments a coordination mechanism may apply that shortens the overall length of the procedures. For the exploration and production of oil and gas in the Netherlands (including the Dutch part of the continental shelf ) a licence from the Minister is required pursuant to the Mining Act. Such a licence will only be granted if the Minister deems production economically feasible.

For the trade of electricity or gas no licences from the Minister or the NCA are required. Traders must, however, register with and obtain certain licences from TenneT or GTS.

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iii Ownership and market access restrictions

The Acts stipulate that a network or shares in a network operator can only be held by the state or local authorities (‘the privatisation prohibition’). As previously mentioned, TenneT and GTS are currently wholly owned by the Dutch state. The Minister has, however, announced an amendment to the Acts that would allow for a partial privatisation of TenneT and GTS. The operators of the regional networks must have the economic ownership of the networks operated by them (and, following an amendment to the Acts, ownership of the national networks must be with TenneT and GTS or a group company). In addition, the Acts prescribe that Dutch network operators cannot belong to a group that produces, supplies or trades energy (‘the group prohibition’; see also Section III.i, infra).

Except for this group prohibition, the ownership of production, sale and supply companies is currently not regulated or restricted. The pending implementation of the European 3rd Energy Package will, however, introduce certain ‘level playing field’ provisions in the Acts. These provisions will entail an obligation to report to the Minister any change of control over an electricity plant with a nominal capacity of more than 250MW or over an LNG plant. The Minister may then attach conditions to such change of control if this is deemed necessary for reasons of public safety or security of supply.

Pursuant to the Mining Act, all minerals and gas in or under the Dutch soil (including the Dutch part of the Continental Shelf ) are owned by the Dutch state. Ownership is transferred to the licensee at the moment of production. The Mining Act prescribes state participation of 40 per cent via its 100 per cent state-owned participation vehicle EBN (Energie Beheer Nederland). Licensees must enter into a cooperation agreement with EBN stipulating the rights, obligations and division of costs in accordance with the respective interests of the parties.

iv Transfers of control and assignments

Except for the aforementioned ‘privatisation prohibition’, ‘group prohibition’ and ‘level playing field’ provisions, changes of control over energy companies are not restricted under the Acts. The NCA has the authority to approve or prohibit mergers or other changes of control over businesses in the Netherlands under the merger control rules in the Competition Act (which mirror European merger control rules).

III TRANSMISSION/TRANSPORTATION ANd dISTRIBUTION SERVICES

i Vertical integration and unbundling

The Acts provide for ownership unbundling of network activities. Network operators may not be part of a group, national or foreign, that produces, supplies or trades energy. This ‘group prohibition’ is more restrictive than the unbundling requirements for transmission in the European directives and, moreover, applies to transmission as well as distribution. The group prohibition has been challenged before the courts. The largest previously vertically integrated distribution and supply companies, Essent and Nuon, have not awaited the outcome of this procedure and have sold their production and supply business to RWE and Vattenfall respectively. The Dutch Supreme Court is

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awaiting the outcome of its recent request for a preliminary ruling to the Court of Justice of the European Union on the compatibility of the group prohibition with European law, in particular the principle of the free movement of capital.

The Acts also contain restrictions on network operators that are unbundled from production and supply companies. These restrictions seek to ensure the organisational and financial independence of the network operator and to prevent cross-subsidisation and the dissemination of strategic information. Moreover, the Acts stipulate that the network operators may only perform their statutory tasks, minimise the outsourcing of activities by the network operator and restrict the activities that may be performed by the group to which the network operator belongs to infrastructural activities.

ii Transmission/transportation and distribution access

The Acts provide for a system of regulated third-party access to the transmission and distribution networks. The network operator must, on request, provide third parties with a connection to its network (with an exception for large-scale gas users), and, except in cases of lack of capacity, carry out the transport of electricity or gas against tariffs and conditions set by the NCA. Oil and gas production pipelines are not subject to third-party access provisions and for LNG and gas storage facilities a lighter regime applies.

Amendments to the Acts that will provide for preferential transportation for renewable electricity in case of congestion, are expected to enter into force soon.

iii Rates and tariffs

Pursuant to the Acts, the maximum tariffs for the transmission and distribution of electricity and gas are set by the NCA on the basis of CPI-X pricing. The tariffs are set annually by the NCA for each individual network operator, based on the previous year’s tariffs and taking into account changes in the consumer price index and an efficiency discount (and in the case of the network operators of regional grids, by a factor reflecting the quality of the grid in terms of outages). The efficiency factor is based on benchmarking and is set for a period of between three and five years for electricity network operators, gas network operators as well as the electricity and gas transmission system operators TenneT and GTS. The regulated rates for metering services to small-scale users are set separately. The applicable rates for network users are largely determined by the capacity of their connection.

iv Security and technology restrictions

The Acts currently do not include provisions aimed at protecting homeland security or the safety of critical infrastructure or systems other than a general obligation for network operators to operate their networks in a safe and reliable manner. An amendment to the Acts has been proposed that would give network operators, gas storage companies and LNG companies a more specific obligation to protect their infrastructure against terrorism and cyber crime. The details of this obligation will be laid down in secondary legislation. The Minister will be given the power to give binding instructions in this area.

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IV ENERGY MARKETS

i Development of energy markets

The trade and sale of power in the Netherlands takes place on three markets: the over-the-counter market; the APX-ENDEX physical and futures exchange; and the imbalance market operated by TenneT. Currently, there are seven electricity interconnectors on the Dutch border: one with Norway (NorNed), one with the UK (BritNed), three with Germany and two with Belgium. In addition to the roles of producer, trader or supplier, a participant on the Dutch electricity market can also be a ‘programme responsible party’. In that capacity a party must inform TenneT, who balances the system, on a daily basis of all transactions with other parties which they have planned for the next day. The difference between the programme and the actual amount of electricity that has been consumed or supplied is the imbalance for which an imbalance tariff must be paid to TenneT. Under the Electricity Act, all parties connected to the grid, excluding small-scale users whose programme responsibility is by law assumed by their suppliers, bear their own programme responsibility unless they have assigned this responsibility to a programme responsible party (normally also their supplier).

With respect to gas, GTS offers the title transfer facility (‘TTF’), a virtual trading place where market parties can transfer gas to another party. GTS registers the title transfers of gas via the TTF by means of an electronic message that lists the volumes of gas transferred, the period, and the purchasing and selling parties involved. Delivery for trades on the physical and futures exchange APX-ENDEX also take place on the TTF. The high-pressure gas transmission system is connected to Belgium, Germany and England (BBL). Programme responsible parties (formally knows as ‘shippers’) arrange for the gas to be transported within the national gas transmission system by contracting transport capacity with GTS on the basis of the GTS Transmission Service Conditions. GTS operates the market-based imbalance system.

ii Energy market rules and regulation

There is little red tape involved when it comes to operating on the electricity and gas markets in the Netherlands. For both electricity and gas, suppliers who supply to small-scale users must obtain a licence from the NCA and trading on the APX-ENDEX exchange requires membership thereof. Moreover, programme responsible parties for electricity and gas must meet the relevant requirements of TenneT and GTS respectively and in order to participate on the TTF, a party must apply with GTS for a TTF subscription. Following the entry into force of the Regulation on Energy Market Integrity and Transparency (REMIT), parties who are active on the wholesale markets for electricity and gas are also subject to certain information obligations aimed at preventing insider trading.

iii Contracts for sale of energy

Although the retail markets have been liberalised, a licence is required for the supply of energy to small-scale users. Licensed suppliers are obliged to supply electricity and gas in a reliable manner and on the basis of reasonable terms and conditions. In practice all licensed suppliers in the Netherlands use the same general terms and conditions, which were drafted in cooperation with the Dutch Consumer Union and the NCA.

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In addition, a model contract for the supply of electricity and gas to small-scale users will be introduced as of 1 July 2012, which all licensed suppliers will be required to offer in addition to any other type of contract. As of 1 April 2013 the provisions in the Acts dealing with the ‘supplier model’ for small-scale users will enter into force. Under this model the licensed supplier will be the primary point of contact for small-scale users, invoicing for both distribution and supply (the network operator will invoice the supplier).

Other than for small-scale users, the Acts do not regulate the sale of electricity or gas. Depending on the type of contract, the Markets in Financial Instruments Directive (MiFID) as implemented in the Dutch Act on Financial Supervision (‘the Wft’) may be relevant. Certain types of contracts that qualify as derivatives may qualify as ‘financial instruments’ under the Wft. If a party executes or receives and passes on orders for such financial instruments on a regular basis, it could be construed as an ‘investment firm’ that performs ‘investment services’ as meant in the Wft, for which activity a licence from the Dutch Financial Markets Authority is required unless one of the Wft exemptions applies.

iv Market developments

With respect to electricity, the Netherlands has moved from an electricity importing country to an electricity exporter. There are plans to take a total of over 14GW of new production into operation before 2018, an increase of approximately 50 per cent compared to the current Dutch production capacity. In the development of the north-west European electricity market, the attractiveness of the Netherlands as a location is increasingly emerging as a prominent factor in producers’ investment plans. Plans for a second nuclear power plant in the Netherlands have, however, been put on hold and are unlikely to be revived anytime soon.

With respect to gas, the Dutch policy has been to build on the Netherlands’ gas position to become a gas hub (‘gas roundabout’) for north-west Europe, inter alia by facilitating onshore gas storage and improving cross-border transport capacity. In addition, in 2011 the first LNG terminal in the Netherlands (Gate) came into operation. Most gas users in the Netherlands, including all households, use low calorific gas. This can be gas from the Groningen field or converted high calorific gas from the small fields. The declining production from the small fields means that increasing quantities of foreign gas are needed for the supply of low calorific gas. This will mean that the composition of low calorific gas will change. The Minister has reached an agreement with GTS that allows the composition of low calorific gas to remain unchanged for at least the next 10 years to that end-users do not have to replace installations. In addition, there are approximately 60 large-scale users that are connected to a separate network of GTS for high calorific gas. They do have to take measures to adapt to the changing gas composition for high calorific gas.

V RENEWABLE ENERGY ANd CONSERVATION

i Development of renewable energy

Current government policy is based on collaboration and harmonisation of renewable energy incentives at a European level. For the short term the Dutch government is

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committed to working towards achieving the European target of a 14 per cent share of renewable energy by 2020. For the long term, the government’s approach is geared towards the promotion of innovation in order to make renewable energy production competitive. The government intends to achieve these aims by various means.

One is the so-called SDE+ scheme, whereby subsidies are granted to sustainable energy projects. The SDE+ will be financed by a surcharge on the energy bills of consumers and companies. The relevant legislation for the surcharge, which will be imposed as of 2013, is currently being drafted. The main options for achieving the renewable energy target are onshore and offshore wind energy. Discussions are taking place regarding a more coordinated planning approach to realise the ambition for 6,000MW onshore wind-powered generation capacity and various projects for offshore wind energy. Discussions are also taking place on mandatory co-firing of biomass in coal-fired plants as well as on obligation on suppliers to supply a minimum percentage of renewable energy. Finally, a recent amendment provides for a possibility to deviate from the Acts for sustainable local initiatives.

ii Energy efficiency and conservation

The 2006 European Energy Efficiency Directive has been implemented in the Netherlands in the form of the Energy Efficiency Act as well as in the Acts. This implementation covers a large number of aspects relating to energy efficiency, such as energy-saving requirements for appliances and the rollout of smart energy meters. In addition, an action plan for energy savings has been introduced to increase awareness for the potential of energy savings in buildings.

The current government has also introduced the ‘Green Deal’ between the government and society as a whole. The Green Deal aims to resolve any difficulties with regard to energy saving and the generation of local sustainable energy and to show that ‘green’ and ‘growth’ can go hand in hand without large-scale subsidies.

When it comes to reducing carbon emissions there are two main projects. The first is the European Energy Trading System in which the energy sector and major industrial companies are the main participants. The emission rights are partly auctioned by the government and partly allocated on the basis of European benchmarks. The second project is carbon capture and storage (‘CCS’). A joint venture (Road) between E.On and GDF SUEZ is currently developing a large-scale CCS demonstration project, whereby CO2 of a new coal-fired power plant is stored underneath the North Sea.

iii Technological developments

The Netherlands has specific strengths in the area of sustainable energy technology, albeit that the solar sector has suffered recently. To further strengthen the innovative capacity and competitiveness of the Dutch energy sector, energy has been designated by the government as an economic ‘top sector’ that should benefit from a modern form of industrial policy, including a joint innovation agenda for business, research institutes and government and active energy diplomacy. The government has also set aside funds for the promotion of trial projects for the development of smart grids. To enhance infrastructure investments, a new procedure has been introduced in the Acts that offers

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network operators more certainty in advance on whether and how certain investments can be recouped in the tariffs.

VI THE YEAR IN REVIEW

The year 2011/2012 has been a transition year. The government that presided over the Netherlands in this period has recently fallen and new elections are due in September. The current caretaker government has emphasised that the transition to a cleaner supply of energy must be beneficial to the Dutch economy.

The Minister has recently initiated a large-scale legislative review in order to streamline and modernise the Acts. Part thereof will also be allowing for a partial privatisation of TenneT and GTS. The ownership unbundling saga in the Dutch energy sector, which has already demanded so much management time, is set to continue with the recent request of the Dutch Supreme Court for a preliminary ruling to the Court of Justice of the European Union on the compatibility of the group prohibition with European law.

VII CONCLUSIONS ANd OUTLOOK

Energy policy in the Netherlands has not always been very consistent, either in time (in particular with respect to renewables) or in comparison with European policy (in particular with respect to ownership unbundling). By 2025 it is expected that the Netherlands will have become a net importer of gas. It remains to be seen to what extent the next government is able to accelerate its ambitions with respect to making the Netherlands a gas hub and achieving a low carbon-emission economy by 2050.

In the near future there will be wholesale revisions to the Acts, the entry into force of the Heat Act, including secondary regulations, and – most likely – partial privatisations of TenneT and GTS.

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Appendix 1

About the Authors

JAn Erik JAnssEn

StekJan Erik Janssen is a competition and regulatory expert. He represents companies in administrative and civil litigation and in front of competition authorities, regulators and policy makers. He has been consistently recommended as one of the leading energy and competition lawyers in the Netherlands. Mr Janssen is a founding editor of the Netherlands Journal for Energy Law. In 2008 his peers voted him the best energy lawyer in the Netherlands.

MArthA BrinkMAn

StekMartha Brinkman is a senior competition and regulatory attorney. She litigates and advises on European and Dutch competition law issues, public procurement law and sector-specific regulation. Ms Brinkman is co-author of the section on energy regulatory developments in the Netherlands Journal for Energy Law. The Legal 500, 2012 edition, recommends her as a leading energy lawyer.

stEk

Herengracht 5511017 BW AmsterdamNetherlandsTel: +31 20 530 52 00Fax: +31 20 530 52 99janerik.janssen@steklaw.commartha.brinkman@steklaw.com www.steklaw.com