Energy law is a wide-ranging legal area that is constantly changing. Generating sustainable energy becomes more and more important. In principle, energy law applies when energy is bought, supplied or generated. In this process, traditional energy suppliers as well as companies and private individuals can take part. The lawyers of Law & More closely follow all developments concerning energy law. Our legal counsels deal with all forms of energy, for example oil, gas, electricity, heat, wind and solar energy and biomass. Our clients are suppliers, producers, consumers and investors in energy. Suppliers of materials and services in the field of energy can also count on our advice. Furthermore, we work in the field of utility deliveries on industrial sites. In addition, products as steam and demineralised water are also discussed. Our specialists are aware of all relevant laws and regulations and innovative technologies with regard to energy. Law firm Law & More offers the following services from Eindhoven and Amsterdam:
- drafting contracts concerning energy and heat;
- offering advice with regard to the purchase and selling of energy;
- offering advice concerning compliance with energy legislation and energy agreements;
- offering advice with regard to the establishment of a sustainable energy policy;
- drafting energy-efficiency plans;
- applying for permits and exemptions;
- offering advice concerning emission and certificate trading.
Energy plays an important role in our current society. Nowadays, we cannot live without electricity, light and heat anymore. For the most part, energy is generated from so-called fossil energy sources: oil and gas reserves that are located inside the earth. However, using these fossil energy sources does come with negative consequences. First of all, fossil energy sources will not always be available: at a certain moment, the oil and gas reserves will be gone. Moreover, the use of fossil energy sources is bad for the environment. When these energy sources are burned, greenhouse gases are released. This has extensive consequences for the climate and the environment. In order to prevent this, alternative energy sources like water, wind, sunlight and biomass are used more often. These energy sources are inexhaustible and do not damage the environment.
In order to realise an energy and climate policy that is fit for the future, several rules with regard to energy are established. In the Netherlands, the Energy agreement for sustainable growth has been closed. This agreement mainly focusses on making energy more sustainable. The goal is to realise a fully sustainable energy supply by 2050. The Energy agreement contains several objectives, from which obligations for companies derive. These obligations mainly focus on energy saving. Furthermore, the Dutch government concludes multi-year agreements with a large number of sectors that monitor the improvement of energy efficiency. Companies that are part of such an agreement experience various benefits: it generates cost savings, process innovations and a sustainable image. On the other hand, multi-year agreements come with obligations for participants. Given the large number of rules that are established with regard to energy, these is a great chance that entrepreneurs will have to deal with energy law.
Electricity and gas
Suppliers of energy can generate energy themselves or purchase energy from other parties. Purchasing energy is possible in two ways: via over-the-counter trading or on the stock exchange. Over-the-counter trade means that there is a contract concluded between two parties. In over-the-counter trade, parties face the risk that the counterparty will go bankrupt. Therefore, it is very important for parties that deal with over-the-counter energy trading to ask for credit support. Credit support guarantees that the other party fulfils its obligations and that the supplier does not suffer any loss. There are several ways in which credit support can be gained, that provide various amounts of security towards parties. However, it is also possible to purchase energy on the stock exchange. When doing so, the stock exchange is the counter party and suppliers and purchasers remain anonymous. With regard to the trade of energy there is a day market and a futures market. On the day market, energy for the following day is purchased. On the futures market, long term energy contracts are concluded.
In many cases, the supply of electricity and gas takes place via an electricity or gas network. Persons or companies that supply energy to other consumers, are in principle not allowed to manage such a network. They are obligated to appoint a network manager. However, there are exceptions to this rule. When there is a closed distribution system or a direct line, the obligation to appoint a network manager does not apply. A closed distribution system is a business network, that is geographically limited and can only have a certain number of consumers. Owners of a closed distribution system can request an exemption from the obligation to appoint a network manager. A direct line exists when an electricity or gas line directly connects an energy producer with a consumer of energy. Since a direct line is not part of a network, there is no obligation to appoint a network manager.
For suppliers of energy it is important to determine whether there is a closed distribution system or a direct line, because this can come with various benefits. However, there are more aspects suppliers of energy should take in account. It is possible that suppliers of energy need a permit in order to supply electricity and gas to small consumers. Furthermore, suppliers must also take the provisions of the Dutch Heat Act into account, which effect the conclusion of heat contracts.
Emission trading and certificate trading
Making energy more sustainable also comes with opportunities for trade. This is apparent from the emerge of emission trading and certificate trading. In order to combat climate change, the emission of greenhouse gases must be prevented. In order to achieve this, the Europe Emission Trading System (EU ETS) is established. This instrument aims to reduce greenhouse gas emissions in a cost-effective manner. Large companies that emit greenhouse gases are obligated to take part in emission trading. The EU ETS yearly assigns a certain amount of emission rights to participating companies. For every tonne of CO2 that companies emit, they have to hand in an emission right. Companies that emit more than the number of emission rights they have available, must purchase additional emission rights. Companies that emit less than expected, have a surplus of emission rights that they can sell. This created demand and supply with regard to emission rights. Companies have to consider whether it is cheaper to purchase additional emission rights or to take measures themselves in order to reduce CO2 emissions.
Companies that are subject to the EU ETS are obligated to request an emission permit. This permit allows companies to emit greenhouse gases. After an emission permit is granted, companies will be eligible for free emission rights. It is also possible that companies that deal with emission rights need a permit based on the Dutch Law on financial supervision. As a result of a legislative amendment, emission rights fall under the definition ‘financial instruments’. From this moment on, parties that trade emission rights are in need of a permit. However, there are exemptions to this rule. Companies that are required to hand in emission rights in order to comply with legislation, are not obligated to request a permit based on the Dutch Law on financial supervision. This obligation also does not apply to companies that deal with emission trade as a side activity.
Besides emission trading, we also have certificate trade. All power that is generated is given a label: grey electricity or green electricity. Grey electricity is generated from fossil energy sources, while green electricity is generated from sustainable energy sources. Green energy will receive a Guarantee of Origin. This is a certificate that demonstrates the sustainable origin of the green energy. However, not enough green energy is generated in the Netherlands in order to fulfil the demand. Because of this, certificate trading was created. Certificates of Origin and energy are detached from each other. The certificates remain traceable and can be traded. Therefore, the certificates can end up on a different place than the place where the energy is actually used. Companies that generate a lot of green energy can sell their Guarantees of Origin. This trade takes place directly between market parties.