The pragmatic reality behind the energy transition
The ambition to become more sustainable is alive and well among Dutch industry, but practice proves stubborn. Where the energy transition was, a few years ago, primarily a boardroom discussion about distant future goals, companies today are running up against physical and economic limits. The transition is not stalling due to a lack of willpower, but due to a combination of grid congestion, an imbalance between supply and demand, and the hard reality of returns on investment.
Over the next two to five years, the challenges will only increase. We are moving from a phase of voluntary incentivization to a phase of regulation. The “carrot” is making way for the “stick” in the form of stricter laws and regulations, such as mandatory quotas for the consumption of green hydrogen in industry. Companies want to move forward, but are hitting limits.
The barriers in practice
In the day-to-day reality of sustainability projects, we see that companies are running into three structural walls: cost, availability, and infrastructure.
The foundation of our current energy system is being destabilized by the shift toward supply-driven energy generation. Where we used to simply turn a gas plant up a notch when demand increased, we are now dependent on when the sun shines or the wind blows. This creates a structural imbalance that plays out not only on a daily level, but also across seasons.
The shift to supply-driven generation increases variation and peak loads on the electricity grid. Combined with limited grid capacity, this leads to the current problem of grid congestion. Companies that want to electrify in order to move away from natural gas simply cannot get a heavier connection anymore. The power grid is full.
In addition, the investment costs for technologies such as large battery systems or electrolyzers are currently very high. Although the will is there, an investment must remain economically justifiable. The availability of green hydrogen in the Netherlands is also still negligibly small at this point. Delivery by trailer is inefficient, and the much-needed national infrastructure (the “backbone”) is still under development.
The search for workable solutions
When electrification stalls and the grid has no capacity, the question naturally arises: what can still be done? Within this complex field of forces, various solution directions are being explored, such as energy storage, local energy hubs, and other alternative energy carriers. Decentralized solutions, such as local energy hubs, help companies balance generation, storage, and consumption on a smaller scale. This allows clusters of companies to collectively bypass grid congestion and become more independent from the national grid.
Alongside these system-oriented solutions, specific energy carriers are also being examined. Hydrogen is one of the options receiving a great deal of attention, not as a holy grail, but as a possible building block within a broader energy system.
When does hydrogen offer added value?
- Seasonal storage: to preserve surpluses of sustainable energy from the summer for the energy demand in winter.
- Hard-to-electrify processes: for industrial production processes where electricity does not (yet) offer a technical alternative for the required heat.
- Heavy transport: for applications where batteries are too heavy or have too limited a range.
Why hydrogen Is not a universal solution
Although hydrogen will undoubtedly play an important role in the future energy system, its application requires a realistic perspective. Producing green hydrogen is an energy-intensive and relatively inefficient process. When you look at the entire chain, from generating electricity with a wind turbine to its final use in a truck or production process, only about 20% of the original energy typically remains. By comparison, direct electrification is far more efficient because there are virtually no conversion losses.
In the coming years, innovation will therefore need to focus less on hydrogen as the “holy grail” and more on increasing efficiency and lowering costs. Think of batteries that are less dependent on scarce metals, such as salt batteries, or electrolyzers with higher efficiency. Ultimately, it is not the party with the greatest ambitions that wins, but the party that can translate innovation into a profitable and feasible business case, one that is not only technically and financially viable, but also solid enough to convince subsidy providers and investors.
The importance of thorough preliminary research
Companies often start too late in understanding their specific business case. Subsidy applications are sometimes rushed the moment a scheme opens, without the technical and financial feasibility having been fully investigated.
A successful transition starts with thorough preliminary research. This maps out exactly how much capacity you need and which sustainability pathways (electric, hydrogen, or a hybrid form) are truly profitable. Such a study not only helps in making the right internal decisions, but is also crucial for convincing subsidy providers and financiers of the quality of the project.
Starting the permitting process early is also essential; for hydrogen projects, this is often an underestimated source of delay.
Subsidies are a catalyst, not a cure-all. A broad range of subsidy schemes are available for innovation and investment in the energy transition as well as, specific schemes for hydrogen production and applications. Subsidies can offset a significant portion of the additional costs, but do not automatically make a project financially viable. A realistic business case and clear financing of the company’s own contribution remain prerequisite conditions.
A broad range of subsidy schemes is available for innovation and investment in the energy transition, such as TSE-industrie, WBSO, MIT, and specific schemes for hydrogen production and applications. Subsidies can offset a significant portion of the additional costs, but do not automatically make a project financially viable. A realistic business case and clear financing of the company’s own contribution remain prerequisite conditions.
Conclusion
For industry, the energy transition is not a linear process, but a search for the right balance between innovation and realism. Hydrogen is an indispensable piece of the puzzle, but not a universal solution to every energy problem.
The companies taking the lead now are those that are not waiting for the perfect infrastructure, but are already investing today in knowledge and thorough preliminary studies. By modeling scenarios and keeping the business case central, you avoid investing in a technology that tomorrow proves to be outdated or simply too expensive.
Ignite Group understands these dilemmas. We are not just the party that writes the subsidy application; we think alongside you as a substantive sparring partner. We know the regulations, but above all we know the practical problems you face as an entrepreneur. Together we look at what truly works for your specific situation, so that sustainability does not remain a theoretical goal, but becomes an achievable reality.
Would you like to know more or do you have questions about this topic? Contact us.
