The urgency for flexible energy production is rapidly increasing towards 2030
TenneT’s security of supply report (May 2024) warns of potential problems with the security of electricity supply in the Netherlands in 2033. This is due to a combination of growing electricity demand and a higher share of solar and wind power in the electricity mix. The decline of controllable generation capacity, such as gas power plants, and the limited supply of other forms of flexibility contribute to this threat. This problem is also visible in other north-western European countries, increasing the urgency to address this issue.
In the current situation, coal and gas plants are the main forms of adjustable capacity. However, due to the ban on coal power from 2030, by 2033 the Netherlands will rely on renewable energy, imports from neighbouring countries, gas power plants and battery storage to meet demand. About 9 GW of gas-fired power plants are expected to be operational in 2033, down from the current 12.5 GW. There is a risk that the number of available gas plants will decrease more or less simultaneously, which could seriously threaten security of supply.
The TEACOS model used in the report calculated that the Netherlands will need 23 GW of adjustable capacity in 2033, or 37.6 TWh on an annual basis (for 3,798 hours). This means that the Netherlands will depend on imports, gas power plants or industrial demand-side management 40% of the time. Interconnection capacity for imports is an important resource at 13.8 GW, but the availability of imports at times of scarcity is not guaranteed due to competition from other countries and geopolitical risks.
Battery capacity is seen as a complementary solution, but can only contribute for short periods and is limited by technical and market uncertainties. The remaining need for adjustable capacity should be met by gas-fired power plants, as the other options do not provide sufficient capacity.
The cost of shutting down or shifting in time industrial production, especially when it becomes mandatory, can be high and negatively impact businesses and households. Surrounding countries have introduced capacity mechanisms, where availability is rewarded. This option could also help in the Netherlands to ensure security of supply at lower social costs.
The report recommends creating an “insurance premium” for keeping adjustable generation capacity available, especially in the form of gas power plants, through, for instance, a capacity mechanism. This should help prevent the Netherlands from becoming dependent on unreliable imports and the expensive demand-side management option. In addition, it is suggested to look more broadly at security of supply, considering not only the cost of demand-side management but also the impact on value chains, investments and affordability of energy for households and businesses.
This report was written by Publieke Zaken, Energy Research & Strategy and Quo Mare on behalf of Engie Energie Nederland NV.