Whether an electricity or gas grid qualifies as a closed system is of considerable practical importance. The qualification determines whether the owner can apply to the ACM for recognition, or is instead obliged to appoint a grid operator, and what obligations rest on the owner towards the connected parties.
Since 1 January 2026 this matter has been governed by the Dutch Energy Act (Energiewet), which replaced the term “closed distribution system” and the associated exemption with recognition as a closed system, followed by the appointment of an operator. In this article we go through the statutory criteria of Article 3.7 Energiewet one by one. For the broader framework, we refer to our overview article on private grids and closed distribution systems.
First: is there a system at all?
Before the criteria of Article 3.7 Energiewet come into play, it must first be established that a distribution system exists at all.
An electricity distribution system is a set of cables and associated equipment for the transport of electricity below 110 kV. A gas distribution system concerns local or regional gas transport, excluding a gas production network.
In addition, the Energiewet recognises the installation and the direct line as separate categories. An installation is located behind the point of connection and is used or managed by a single connected party; it does not constitute a grid. A direct line is a separately defined connection between a production installation and one or more end users, for which a notification obligation to the ACM applies. The distinction between these three categories is factual in nature and deserves careful attention in practice.
The cumulative conditions of Article 3.7 Energiewet
Once it has been established that a distribution system exists, the ACM assesses on application whether the conditions of Article 3.7, first paragraph, Energiewet are met. These conditions apply cumulatively: all elements must be satisfied for recognition as a closed system to be possible. The main conditions are discussed below.
No existing operator and not part of an infrastructure group
No operator may already have been appointed for the system, and the system may not form part of an infrastructure group. This condition is self-evident, but deserves attention in the restructuring of existing grids or when acquiring a site on which an operator is already active.
A geographically bounded location with technical, organisational or functional links
The system must be located within a geographically bounded industrial or commercial site, or a site with shared services, such as a chemical park, a port or industrial estate, a business park, or a greenhouse horticulture area. In addition, the law requires that the system has technical, organisational or functional links within that location. A purely geographical delineation is therefore not sufficient; there must also be a substantive connection between the system and the location on which it is situated.
Fewer than one thousand connected parties
No more than fewer than one thousand end users may be connected to the system. One thousand connected parties therefore no longer falls within the statutory limit; nine hundred and ninety-nine is the highest number possible under this condition. For most industrial sites this is not a bottleneck, but at large business parks and multi-tenant complexes the count deserves attention, for example in the case of smaller tenants behind a shared connection. The precise counting methodology in such cases is not further elaborated in the law; where in doubt, we recommend aligning this with the ACM in advance.
No household end users
A closed system may, in principle, not supply household end users. The rationale is consumer protection: households belong on the public grid, with the corresponding safeguards. The law allows a limited exception for incidental use by a small number of household end users who are employed by, or have a comparable relationship with, the owner of the system, such as residents of a company dwelling on the site. This exception is consistent with European regulation.
Integrated processes or distribution to the owner
Finally, one of two substantive conditions must be met. Either the business or production processes of the connected parties are integrated with the system for specific technical or safety reasons, as is the case at a chemical cluster where installations of various companies are interwoven in terms of process and energy technology. Or the system primarily distributes electricity or gas to the owner or operator of the system, or to affiliated undertakings. General economic interconnectedness between the connected parties is not sufficient under the statutory text; the ACM requires concrete substantiation of either the technical integration or the primary distribution to the owner.
Safety, reliability and voltage level
In addition, the safety and reliability of the system must be adequately safeguarded, and for electricity a maximum voltage level of 220 kV applies. For a system yet to be constructed, recognition can already be applied for once the necessary permits, exemptions and consents have been obtained.
ACM decision period
Under Article 3.54, first paragraph, Energieregeling, the ACM must decide on an application for recognition within six months. This period can be extended once, by a maximum of six months. Applicants would do well to take this lead time into account when planning a transaction or project for which recognition as a closed system is required.
From recognition to the appointment of an operator
Recognition of the system by the ACM under Article 3.7 Energiewet is not the same as the appointment of an operator. Once the system has been recognised, the ACM appoints, on application, an operator nominated by the owner, under Article 3.6 Energiewet. For existing systems with an old exemption, Article 7.32 Energiewet provides transitional law: the owner of such a system is deemed, for the remaining term of the exemption, to hold a recognition and an appointment.
Consequences of recognition
Recognition as a closed system brings with it its own set of obligations, separate from the recognition criteria themselves. The connection and transport obligation of the operator is more specifically regulated than a general duty. Under Article 3.105, first paragraph, Energiewet, the operator must, on request, make an offer for the construction or modification of a connection, and, on request, an offer for making available, managing and maintaining the connection and for transport. The operator may refuse where there is reasonably insufficient transport capacity available, provided that refusal is properly substantiated.
The operator’s tariffs are also statutorily regulated: under Article 3.114, first paragraph, Energiewet, tariffs must be based on a calculation method published in advance and must be cost-reflective, transparent and non-discriminatory. The ACM can, following a complaint, require an adjustment of the method or the tariff.
In addition, a closed system is not automatically exempt from congestion management. Under Article 3.104, first paragraph, Energiewet, specific obligations from Chapter 9 are applied correspondingly to the operator of a closed system.
The Netcode elektriciteit (Electricity Grid Code) requires, in the event of a shortage of transport capacity, an investigation into, among other things, technical measures, physical congestion and congestion management, and the operator must apply additional provisions from the Netcode elektriciteit and the Informatiecode elektriciteit en gas (Information Code Electricity and Gas) in respect of market processes and electronic messaging. Whether, and to what extent, the operator itself falls under every individual provision of Chapter 9 as a grid operator depends on the specific obligation concerned and requires case-by-case assessment.
Withdrawal of recognition
Recognition as a closed system is not indefinitely secure. Under Article 3.2 Energiebesluit, the ACM can withdraw the recognition, among other things where the conditions of Article 3.7 Energiewet are no longer met, where the system is not actually managed by the appointed operator, in the event of certain breaches of the operator’s obligations, or where the application contained incorrect or incomplete information. Withdrawal is therefore a real legal consequence, not merely a theoretical possibility.
The European framework
The national criteria are largely aligned with Article 38 of Directive (EU) 2019/944 for electricity and Article 28 of Directive (EU) 2009/73 for gas. Both provisions refer to a geographically bounded industrial or commercial site or site with shared services, the exclusion of household customers save for incidental use by a small number of connected households, integration for specific technical or safety reasons or primary distribution to the owner, operator or affiliated undertakings, the possibility of exemption from prior tariff approval, and review of tariffs or calculation methods at the request of a user.
The directives themselves do not mention a number of connected parties; the limit of fewer than one thousand is a national condition under Article 3.7 Energiewet. For gas, Article 32 of Directive (EU) 2009/73 also requires third-party access on the basis of published and objectively applied tariffs, and for electricity, Articles 32 and 59 of Directive (EU) 2019/944 provide the context for distribution management, tariffs and access.
The qualification deserves ongoing attention
A grid that meets the criteria today may lose that status in practice. Growth in the number of connected parties, a change in the function of the site, the sale of business units, or the departure of the main user can result in the conditions of Article 3.7 Energiewet no longer being met, with possible withdrawal of the recognition as a consequence.
This is not a rule established by case law, but follows from the nature of the cumulative conditions: every relevant change must be reassessed against Article 3.7. We therefore recommend periodically checking whether all conditions continue to be met; this forms part of the normal management of a private grid.
Conclusion
Qualification as a closed system requires a factual and legal analysis of the grid, the site and the connected parties, assessed against the cumulative conditions of Article 3.7 Energiewet. Careful preparation prevents an application for recognition from failing, or an operator unknowingly managing a grid without valid title. Are you unsure whether your grid qualifies as a closed system, or would you like your existing recognition or exemption reviewed? Our energy law lawyers are happy to think along with you.
Frequently asked questions
What is the difference between a closed system and the public grid?
A closed system is a private grid at a bounded industrial or commercial site, to which, in principle, no households are connected and for which the owner itself nominates an operator. The public grid is managed by a regular grid operator and is, in principle, open to any user, including households.
How many connected parties may a closed system have at most?
Fewer than one thousand. One thousand connected parties no longer falls within the statutory limit; nine hundred and ninety-nine is the maximum. The precise counting methodology for, for example, tenants behind a shared connection is not statutorily elaborated; where in doubt, align this with the ACM in advance.
May a closed system supply households?
In principle, no. A limited exception applies for incidental use by a small number of household end users who are employed by, or have a comparable relationship with, the owner of the system, such as residents of a company dwelling on the site.
How long does the ACM recognition procedure take?
The ACM must, in principle, decide on an application for recognition within six months. This period can be extended once, by a maximum of six months. Take this into account when planning a transaction or project.
What happens to an existing exemption under the previous legislation?
For existing systems with an old exemption, Article 7.32 Energiewet provides transitional law: the owner is deemed, for the remaining term of the exemption, to hold a recognition and an appointment. A new application is therefore not required during that period.
Can a recognition, once granted, be withdrawn again?
Yes. Under Article 3.2 Energiebesluit, the ACM can withdraw the recognition, among other things where the conditions of Article 3.7 Energiewet are no longer met, where the system is not actually managed by the appointed operator, in the event of certain breaches of the operator’s obligations, or where the application contained incorrect or incomplete information.
Is a closed system exempt from congestion management?
No, not automatically. Under Article 3.104 Energiewet, specific obligations from Chapter 9 are applied correspondingly to the operator of a closed system. Whether, and to what extent, a specific obligation applies requires case-by-case assessment.
