ACM: investment plans of system operators demonstrate shortage of transport capacity due to growing demand
Starting in 2020, the Netherlands Authority for Consumers and Markets (ACM) assesses the investment plans that system operators of the electricity grids and gas networks are required to draw up every two years. In these plans, it is explained what investments in the networks are needed in order to meet future demand for energy.
The energy transition calls for a strengthening of the electricity grids
ACM’s assessment has revealed that the current shortage of transport capacity, which occurs in various locations on the grids, will continue to last for the next five to ten years. System operators Liander, Enduris, Enexis and TenneT are unable to realize in a timely manner all the investments that are needed to overcome the shortage. That may slow down the progress of the energy transition.
ACM has written a letter to the Dutch minister of Economic Affairs and Climate Policy (EZK) about the investment plans and its findings. Manon Leijten, Member of the Board of ACM, comments: ‘We have found that the system operators’ current investment plans do not solve the shortage of transport capacity that will occur over the next few years. That is an alarming situation, because it may slow down the progress of the energy transition. Extra efforts are thus needed from all market participants in order to make the transition a success.’
Lack of transport capacity is increasing
According to ACM, the problem of demand for transport capacity exceeding supply will only further increase over the next few years, since, in many locations, the timing of the planned investments in the grids lags behind projected demand. In some cases, system operators are able to solve this temporarily using operational measures such as congestion management. Yet, this will have consequences, too: for example, producers of sustainable energy can be temporarily refused transport capacity, or system operators are not immediately able to meet the additional demand for transport capacity that follows from the plans of local governments. There is no quick fix for the capacity problem, but ACM does underscore the need for a joint effort for finding long-term solutions.
Next round of assessments: improvement in investments plans needed
In the first round of assessments of the investment plans, ACM asked the system operators to adjust their plans. ACM found that some elements of the investments plans had been fleshed out insufficiently. Substantiation of the plans has already been improved, but the plans still do not meet all of the requirements. This first round of assessments was a new process for everyone involved. Further improving the plans would have cost a lot of time in this stage, while the system operators already started making preparations for the next round in 2022. That is why ACM and the system operators opt for a process where the next plans will be improved further, which must be submitted by January 1, 2022. In its capacity as expert, ACM is ready to sit down with system operators and stakeholders to find solutions for the long-term investment uncertainty together, combining different perspectives on the problem.
ACM’s role
Under the Dutch Electricity Act and Dutch Gas Act, system operators must include in their investments plans any planned expansion investments and replacement investments that are needed for the execution of its statutory duties. ACM assesses whether the system operator was reasonably able to draw up the investment plan, and whether the investment plan demonstrates the necessity of the investments.