ACM: investments and additional policies needed for increased flexibility in the electricity system

New investments and additional policies are needed in order to ensure that sufficient flexibility is available in the electricity system over the next ten years. That is one of the conclusions of the Netherlands Authority for Consumers and Markets (ACM) on the basis of the first assessment regarding flexibility needs (Flexibility Needs Assessment, FNA), which Dutch transmission system operator TenneT has drawn up together with the distribution system operators. This first assessment reveals that the Dutch electricity system needs much more flexibility over the next ten years.

Over the past few years, ACM has already taken various measures for promoting a more flexible utilization of the grid, for example, by introducing incentives in its tariff regulation, and by introducing new contract types that are attractive for large battery systems. Flexibility is the ability to adjust electricity production or consumption to what the electricity system needs at any given time, for example, by using batteries or by making arrangements with businesses to shift their electricity consumption to off-peak hours. Flexibility is needed for maintaining a balanced system, for example, with the fluctuating production of wind and solar energy. In addition, flexibility is important for dealing with the grid congestion problems.

In their assessment, the system operators have compiled an overview of how much and what kind of flexibility is needed in 2030 and 2035 for different purposes. This has revealed that, until 2035, there is primarily a need for increased flexibility on TenneT’s high-voltage grids. In their scenarios, the system operators assume that, over the next several years, businesses will heavily invest in increased flexibility, especially in the construction of large battery systems. However, it remains to be seen whether market participants will realize this growth in additional storage capacity over the next few years. In order to ensure that sufficient flexibility is available over the next ten years, new investments and additional policies are needed, according to ACM.

On the basis of the system operators’ assessment, the Ministry of Economic Affairs and Climate (EZK) has six months to set a flexibility goal. On the basis of that goal, the ministry can subsequently opt for additional policies, for example, aimed at eliminating barriers, or aimed at new subsidy schemes for non-fossil flexibility. In addition, the assessment helps market participants in their investment decision-making processes. Think of electricity producers, suppliers, battery operators, and businesses that wish to make electricity consumption more flexible.

ACM’s opinion, and next steps

ACM has examined whether the system operators’ assessment complies with the European Electricity Regulation. ACM has approved the assessment, but did inform the system operators that they need to take follows-up steps in order to further improve the overview of flexibility needs. For example, a more complete overview of the needs can be compiled, the assumptions can be substantiated better and in a more consistent manner, and the uncertainty surrounding those assumptions can be made more explicit. Over the next few months, ACM is ready to sit down with market participants and system operators to discuss possible improvements. Going forward, system operators will draw up a Flexibility Needs Assessment every two years.