The medium- to long-term development of the electricity market is affected by a number of uncertain factors. These are some of the conclusions set out in the latest edition of the annual Security of Supply Monitoring Report, which was published today by electricity transmission operator TenneT.
Although electricity demand has declined steadily over the past few years, it is now expected to begin rising slightly based on the economic growth forecasts published by the Netherlands Bureau for Economic Policy Analysis (0.75 percent economic growth in 2014).
The figures for the domestic electricity supply are based on the installed operational production capacity, which currently totals approx. 28.7 gigawatts (GW). Thermal generation capacity (nuclear, coal-fired, gas-fired and biomass-fired power plants) accounts for approx. 25 GW of this total, while wind and solar energy account for 3.4 GW. The Netherlands also has approx 2.7 GW of non-operational or ‘mothballed’ capacity.
Energy producers have decommissioned and mothballed their generation capacity, and will continue to do so in the coming years. They have also cancelled plans to build new capacity. However, these cancellations will not cause problems in meeting domestic demand in the coming years, as 9.4 GW of new production capacity has been added in the past few years.
Expected developments in 2015-2021 period
Approx. 1.6 GW of new coal-fired capacity was taken into operation in early 2014. This capacity is included in the assessment of the security of supply in the calendar year 2015. In addition, there are plans to add 1.0 GW of new thermal generation capacity in the period up to 2021, including 0.3 GW in small-scale projects. Investments in new generation capacity may be related to the replacement of obsolete production units, reorganization into production units with a smaller capacity, or concentration of combined-heat-and-power (CHP) capacity in clusters of companies in the horticulture sector.
Under the Energy Agreement concluded in September 2013, the Netherlands will phase out the least technically efficient production units (which account for a total capacity of 2.66 GW). Furthermore, electricity producers intend to ‘mothball’ 0.7 GW of capacity, and to decommission approx. 0.6 GW of capacity in the period from 2014 up to and including 2020. An additional 2.9 GW of capacity has been earmarked for mothballing after 2020.
TenneT’s investments in increased import and export capacity provide additional security
Any possible future shortage of domestic production capacity compared to expected domestic demand has been greatly reduced or even eliminated thanks to TenneT’s investments in cross-border electricity connections (interconnectors).
The total interconnection capacity (usable for imports and/or exports) currently stands at 5,970 MW (5,670 MW plus 300 MW of intraday capacity). In the coming years, the total interconnection capacity will increase by 45 percent to reach 8,670 MW. This sharp rise is due to a 500 MW expansion of the capacity of the interconnector between Meeden (Netherlands) and Diele (Germany), the construction of a new 1500 MW interconnector between Doetinchem (Netherlands) and Wesel (Germany), and the construction of a new 700 MW subsea cable (COBRA-cable) linking the Netherlands and Denmark.
Renewable energy sources
Based on the Energy Agreement and the Vision Document on Onshore Wind Energy, the Security of Supply Monitoring Report forecasts 4.5 GW of operational offshore wind-powered capacity in 2023, and 6.0 GW of onshore wind-powered capacity in 2020. Based on the National Solar Power Action Plan, TenneT forecasts 4.0 GW of installed photovoltaic capacity in 2020.
Market parties reluctant to invest in thermal generation capacity, pressure on gas-fired power plants increases
Planned investments in large-scale subsidized renewable electricity production, the unfavourable market position of gas-fired power plants, excess capacity in the Netherlands, and the development of capacity markets in Belgium, France and the United Kingdom all lead to major uncertainty when it comes to investments in thermal generation capacity. Because of these factors, it is uncertain whether and when the existing plans for new thermal capacity will be realized. It is possible that capacity will continue to be decommissioned or mothballed in the coming years.
The average operating time of existing production units (particularly at gas-fired power plants) is decreasing due to the growing share of renewable production capacity in the North-West European energy market. As a result, gas-fired plants are not able to operate as efficiently as they did in the past.
Long-term forecasts affected by many uncertain factors
Although any look ahead even further into the future (2029) can only be indicative, current data indicate that the total production capacity at that time may be insufficient to meet domestic electricity demand. However, the shortfall would be limited. It should be noted that projections over such a long time scale are associated with a high degree of uncertainty with respect to energy producers’ plans to decommission production capacity.
In addition, it is very difficult to forecast electricity demand so far ahead into the future, as demand levels may be significantly affected by the possible large-scale use of electric vehicles and heat pumps, the success of energy conservation measure, and the future state of the economy.
