Dutch collective heat act enabling accelerated construction of heat networks?
Written By
Partner
Netherlands
Specialising in EU and Dutch energy regulation, I advise both national and international clients in navigating the energy transition and decarbonisation requirements.
Senior Associate
Netherlands
As a Senior Associate in our Competition and Regulatory Groups in Amsterdam and The Hague, I specialise in competition, public procurement and energy regulatory matters, with a focus on the tech & comms and energy & utilities sectors.
Associate
Netherlands
As an associate in our Regulatory and Competition & EU Law team in The Hague, I advise on a wide range of regulatory matters and EU law, with an emphasis on sustainability, including ESG, Energy, and Environmental Law.
Just before summer recess this year, the Dutch Parliament (Tweede Kamer) finally adopted the collective heat act (Wet collectieve warmte) (Act). Upon adoption of the Act by the Senate (Eerste Kamer), which is expected later this year, connections to existing and new heat networks is expected to grow significantly from 15.000 now to 80.000 to 100.000 per annum in the future, with the ambition to more than double connections to renewable heat networks to a total of 1,5 million by 2030. This will require considerable investments in both heat networks and (eventually by 2050 only) renewable heat sources. To phase out the use of natural gas for heating, the act includes ever stricter carbon emission target related heating.
One of the most contentious points for discussion during the legislative process so far has been the ownership of heat companies. Whereas under the current legislation full private ownership of such companies is allowed, the new legislation prescribes that public ownership (provinces, municipalities or other publicly owned entities) is required for the majority of the shares. This does provide private investors with the opportunity to become a (large) minority shareholder and the Act explicitly caters for specific minority shareholder’s interest protection via, for example, the articles of association of the heat company.
Another topic that has been subject to substantial discussion is tariff regulation for the supply of heat to households. Whereas currently tariffs are regulated using a gas reference price, this will be phased out under the Act to enable tariffs to be determined based on actual costs of construction and operation of the heat network. This will be done gradually in various phases and is expected to be finalised around 2030, although the explanatory memoandum to the Act highlight that flexibility and adaptability should be considered in future tariff regulation.
Other important factors here are also consumer protection, affordability but also investability to make sure enough financial resources are available to meet the ambitious target. Heat companies will consequently be subject to a capped profitability based on their weighed average cost of capital, as determined by the Dutch regulatory authorities. This has recently been published for public consultation for the regulatory years 2026 – 2028.
To enable this shift in the determination of tariffs, regulatory accounting rules will be developed and introduced as well as a standardised way of determining the asset value. This method will provide an insight in the earning capacity of every heat network and is aimed to improve investability.
Municipalities will have an important role in the determination of geographical areas where heat networks are to be developed or expanded and it will appoint a heat company responsible for such area based on strict rules.
The Act also caters for the introduction of subordinate legislation where more details will be worked out which will be subject to public consultation and dispute resolution via the regulatory authorities or court involvement.
