Cabinet sees no short-term need for capacity mechanism to ensure security of supply

Recent discussions with experts have shown that there is currently no immediate need for the introduction of a capacity mechanism to ensure the security of electricity supply in the Netherlands. This reports Minister Jetten for Climate & Energy in a letter to the House of Representatives, in which he shared the results of these discussions.

EZK: short-term security of supply guaranteed

The Ministry of Economic Affairs and Climate conducted a total of seven interviews with experts from the scientific community. From these it emerged that in the short and medium term no immediate risks are seen for the security of supply. Nevertheless, Jetten stressed that investments are needed to make the current capacity suitable for a carbon-free electricity sector in the longer term.

In particular, the growth of renewable energy sources such as solar and wind power presents new challenges in maintaining a stable electricity supply. This increase requires greater flexibility in the electricity system so that peaks and troughs in supply and demand can be accommodated. Interviews conducted by the Ministry of Economic Affairs revealed that investors do not have unquestioning confidence in the undisturbed operation of the energy-only market and the associated price fluctuations. Government intervention, for example to stimulate the energy transition, is seen as a potential additional uncertainty for security of supply.

No immediate need capacity mechanism

Despite the longer-term uncertainties, Jetten sees no short-term need to introduce a capacity mechanism. The experts spoken to argued that such an instrument might be needed in the future. It was emphasized that the risks involved in intervening in the market must be carefully taken into account in the elaboration. This would first require a detailed analysis of the (potential) security of supply problems, on which the design of the policy could be based.

Energy Storage NL shares the consideration of limiting market disruption, but sees a risk that security of supply issues will grow rapidly. This was evident in part from the last TenneT's Supply Security Monitor, which announced a need for some 10 GW of flexible power from batteries. With the current measures, this goal does not seem to be met. Therefore, we call on the government not to wait and identify solutions for security of supply now.

TenneT will publish a new update of the Security of Supply Monitor at the end of April. This will clarify the extent to which the situation calls for additional policy. In addition, the Minister is investigating in a European context whether cross-border options may be relevant for guaranteeing long-term security of supply.

Questions or comments following this post? Please email to info@energystoragenl.nl