Netherlands raises solutions for current grid-capacity shortages

On 28 June 2019, the Dutch Minister of Economic Affairs and Climate sent a letter to the House of Representatives that addressed the current capacity shortage on the Dutch grid with a series of solutions including developing strategies for congestion management, making legislative changes, amending the SDE+ subsidy application procedure and adopting regional energy strategies, taking into account the regional grid situation.

Specifically, the problem centres around areas in the provinces of Groningen, Drenthe, and Friesland where the grid has reached maximum capacity. With problems brewing in yet more provinces and a total of nine out of the twelve Dutch provinces either experiencing or expecting capacity shortages, the minister states that he anticipates a potential crisis that could place the wind and solar energy sector at risk.

What is the link between wind, solar, and capacity shortage in the Netherlands? Currently, multiple solar PV projects (with a total capacity of 8,500 MWp), which were awarded SDE+ subsidies between 2016 and 2018, are waiting to be connected to the grid.

In February 2019, the Netherlands Enterprise Agency (RVO) announced that it would assess on a case-by-case basis whether projects that experienced delays due to a lack of grid capacity can be granted an extension for the start date of the SDE+ subsidy period (i.e. greater than the one-year prolongation currently allowed). In response, the minister clarified in his letter that any additional extensions will only be granted under exceptional circumstances. The RVO will generally withdraw the SDE+ subsidy where a project is not operational within four years from the date the SDE+ subsidy was awarded.

The minister acknowledges that the reinforcement of the grid and the construction of new substations and high-voltage stations – all required to satisfy the increasing demand for capacity – have long lead times. Since demand for capacity is now growing much faster than anticipated, the situation calls for short-term solutions. In his letter, the minister proposed solutions in three areas: congestion management by grid operators; legislative amendments; amending requirements for granting SDE+ subsidies; and the adoption of regional energy strategies.

Congestion management

The minister has urged grid operators to improve their ability to manage congestion through strategies, such as financial rewards to parties that are willing to lower their electricity demand during high-demand periods, and purchasing electricity from battery owners or other providers of flexible usage. Acknowledging that storage is expensive with only limited availability, the minister indicated that this may change once a more flexible market is created since these congestion management policies would encourage investments in storage.

Legislative amendments

The minister is aiming to introduce several legislative amendments at the start of 2020 that should enable grid operators to respond to congestion. The following measures are being considered for inclusion in a new Energy Bill:

• further clarification of the grid operator's legal duties to connect and transport electricity, the period when a connection is to be completed and when it is possible for grid operators to refuse connection requests during capacity shortages;
• a distinction between connection and transportation for generators on the one hand and electricity users on the other hand;
• a distinction between existing transport agreements and new transport agreements;
• a new form of transportation agreement specifically for generators;
• prohibiting the division of solar parks into several smaller sections with individual grid connections, (a prohibition that already exists for wind parks);
• shared grid connections for solar and wind projects (referred to as cable pooling);
• making it possible for grid operators to limit guaranteed transport and offer transport with certain operational restrictions; and
• new tariff regulations aimed at providing incentives for reducing social costs (e.g. a tariff for generators and new ways for generators of renewable energy to seal contracts for transporation capacity).

The government is currently preparing a governmental decree to create exemptions from the general rule set out in the Energy Transition Act (Wet voortgang energietransitie) that the national high-voltage grid must be fully redundant. Such exemptions could enable the national high-voltage grid to cope with a 50% to 100% increase in production, which would be a significant step towards solving the current capacity shortage.

Furthermore, the Dutch regulator (ACM) and Dutch grid operators are exploring whether it would be useful to combine exemption applications from certain technical codes – submitted by renewable projects to reduce or eliminate congestion – in the areas where these projects will be developed.

Amendment of SDE+ application procedure

The SDE+ subsidy application procedure will be amended to prevent a significant part of the SDE+ budget to be allocated to projects that will not be able to obtain a grid connection in enough time. According to the minister, during the autumn 2019 SDE+ subsidy round each applicant for a renewable energy project will have to submit a statement from the grid operator indicating that capacity is available at the location of the planned project.

Several sector organisations have already objected to this new requirement, arguing that grid operators are obliged by law to honour requests to be connected to the grid. Moreover, they take the position that if grid operators have the ability to prevent projects from being developed by not providing the capacity statement required to qualify for a SDE+ subsidy, operators may no longer have the incentive to explore more complex solutions for the current congestion problem.

Regional Energy Strategies (RES)

Local governments will have to adopt regional energy strategies that take into account the availability of grid connection capacity in individual regions and specifically address the threat of capacity shortages.

According to the minister, the above solutions will not immediately solve the grid-capacity problem, and the situation may get worse before getting better in the coming months. But the Netherlands is working to increase available grid capacity as soon as possible in order to expand renewable production, all in an effort to meet the 2020 renewable energy objectives.

For more details on grid capacity and renewable energy solutions in the Netherlands, feel free to contact the local CMS experts.