ACM: fair distribution of grid costs to become even more important considering the expected substantial increase in grid tariffs

A study of the Netherlands Authority for Consumers and Markets (ACM) has revealed that the tariffs that households and businesses must pay for using the grid will go up substantially over the next 25 years. Given this substantial increase, it is essential that the costs are fairly distributed over all the different groups of users. For 2025, ACM expects a price increase of approximately 11 percent for the transport of electricity and natural gas. For an average household, this means an increase of approximately 60 euros per year (including VAT).

Each year, ACM sets the tariffs of system operators. ACM ensures that system operators earn sufficient revenues for maintenance, depreciations, cost of capital, and investments. In that context, ACM sees to it that the tariffs of system operators are not higher than necessary. The basic principle here is that grid users pay for the costs that they generate. In that way, the total costs are distributed fairly over all users. Not only is that fair, it is also transparent and efficient.

The study into the tariff trends until 2050 has revealed that, over the next 25 years, the costs for all grid users will go up approximately 7 billion euros from 18 to 25 billion. This means that the transport costs for electricity for an average household will increase from approximately 250 euros to 600-800 euros per year in 2050. Around 2050, the tariffs for large-scale users are likely to be twice or three times as high as today. This projection by ACM is in line with previous projections by transmission system operator (TSO) TenneT as well as with studies of several research firms.

Investments for the energy transition

The increase in the transport tariffs is the result of investments that system operators must make in their grids. In order to achieve the climate goals, many businesses and households are switching from fossil fuels to electricity generated from sustainable sources. At the same time, more and more electricity is produced by wind and solar parks. As a consequence, more and more electricity needs to be transported. In many places, the grid is already overloaded. That is why system operators must make large-scale investments in grid expansions and grid upgrades. TSO TenneT also needs to make major investments in the construction of the off-shore grid in the North Sea. This off-shore grid is partially subsidized by the Dutch central government. The remaining part must be covered through the tariffs.

Discount for flexible utilization

Large-scale users can get a discount on their grid tariffs if they utilize their connections in a flexible manner. This discount can be as high as 65 percent of the total grid costs. As a result of a more-flexible utilization, fewer grid upgrades will be necessary, and more businesses can be connected to the grid. These large-scale users are rewarded for that in the form of a discount.

Until January 1, 2024, a group of industrial large-scale users had been given a discount on their grid tariffs without these users having helped reduce the total costs. This discount (known as the VCR) had thus been paid for by all households and other businesses through higher tariffs. ACM discontinued this discount because a study had revealed that it was no longer justified, and because businesses that received that discount were not stimulated to utilize the grid in a more flexible manner.

ACM sees to it that the total costs are reasonable, and that those costs are distributed in a reasonable manner over the different groups of users, on the basis of objective, transparent, and non-discriminatory criteria. ACM will soon publish a study into the options for energy producers on how they can contribute to the grid costs in a fair manner, for example, in the form of a feed-in tariff.

For the Netherlands’ competitive position, it is vital that businesses within Europe are able to operate on a level playing field. In order to realize a more-level playing field in Europe, it is important that European rules and the methodology for the grid tariffs are harmonized. ACM is committed to these ambitions. In addition, ACM points out that the legislature has the ability to improve the competitive positions of certain groups of industrial large-scale users through different methods, for example, through subsidies and targeted tax measures as part of more tailor-made arrangements related to the sustainability transition. The legislature could additionally also decide to include a part of the required investments in the national budget as part of the energy transition.

2025 tariffs

ACM still needs to set the tariffs for 2025. System operators will submit their tariff proposals to ACM soon. In 2024, all users of the distribution systems for electricity and natural gas paid a total of approximately 7 billion euros for the transport of natural gas and electricity. In 2025, this is expected to rise to approximately 8 billion euros. Large-scale users that are directly connected to TenneT’s high-voltage grid (HS grid) or extra-high voltage grid (EHS grid) will pay approximately 2.6 billion euros in transport costs in 2025.

See also

17-09-2024 Trends in grid costs until 2050, and the cost distribution over groups of users (in Dutch)