Achieving 100% carbon-free electricity production in the Netherlands by 2035, while ensuring reliability and affordability; this aim was established by the Dutch government, which intensified the national climate ambitions (Minister voor Klimaat en Energie, 2023a). However, even without considering this
intensified sustainability aim, the reliability of the electricity system is expected to decline beyond 2028 and surpass its norm by 2033, with an expected loss of load of 14.2 hours per year (TenneT, 2024). Central to this challenge is the crucial need for system flexibility to secure reliability (TNO, 2023). This need is heightened by the widespread integration of variable renewable energy sources (VRES) and
an expected surge in demand due to electrification efforts (TenneT, 2023).

Several technologies, such as demand-side response, interconnection, and storage, can partially provide for system flexibility (Aurora Energy Research, 2021). However, during situations with high demand and low VRES supply, such as ’kalte dunkelflaute’, there is a need for firm dispatchable generation capacity. However, projections on the expected operating hours and needed capacity during these hours vary widely. Different scenarios project a range between 4 GW and 20 GW by 2050 (Sijm, 2024). Currently, about 18 GW of firm capacity is installed in the form of gas power plants, compared
to a total of 56 GW of installed generation capacity in the Netherlands (ENTSO-E, 2024). Given the sustainability aim, this capacity would need to be decarbonized. However, only 58% of the capacity is technically feasible for retrofitting to operate on hydrogen (den Ouden et al., 2023). Therefore, this
thesis is built on the premise that investments in carbon-free firm capacity are crucial to achieving the 2035 sustainability aim, with a main focus on retrofitting current gas power plants to hydrogen power plants and potentially investing in new power plants.

Therefore, this thesis researched policy instruments that stakeholders and experts perceive as effective for incentivizing investments in firm carbon-free dispatchable electricity generation capacity while considering the 2035 100% carbon-free electricity production aim, overall system sustainability, reliability, and affordability. Additionally, this thesis aimed to provide explanations for differences in perceptions.

The research employed a qualitative exploratory and explanatory approach, using semi-structured interviews as the data collection method. A total of 14 interviews were conducted: 5 with stakeholders from (semi-)governmental organizations, 4 with stakeholders from electricity generation companies, 3
with experts from research institutes, 1 with a financial expert, and 1 with a stakeholder from an environmental organization. The interview data was analyzed using thematic analysis. First, to identify patterns of uncertainty factors that can challenge investments. Second, to identify potential policy instruments to mitigate uncertainties and enhance investment incentives. Third, to examine the perceived effects of these policy instruments regarding their effectiveness and impacts on sustainability, reliability, and affordability. Lastly, an explanatory approach was applied to identify potential explanations for differences in perceptions.

Several interconnected factors were identified that increase uncertainty in projecting the viability of investment business cases compared to conventional practices. These factors include, but are not limited to, uncertainty in operational costs, operating hours, electricity prices, and potential price cap
implementation. Additionally, these uncertainties are influenced by factors including base load capacity, intermittent VRES supply, flexibility-providing technologies, and inflexible load...