Lower electricity prices because of improved coupling of electricity market

The Netherlands will improve the coupling of its electricity market with those of its neighboring countries. This has been announced today by the Netherlands Authority for Consumers and Markets (ACM). The improved coupling will take effect on May 21, 2015. Henk Don, Member of the Board of ACM, explains: “Because of the fact that a single market is created, electricity producers will be able to compete more fiercely with one another. As a result, the price of electricity in the Netherlands will drop. For businesses that use a lot of electricity such as steel manufacturers, energy savings can be as high as EUR 5 million per year. That is good for the Dutch economy. An average household in the Netherlands will save approximately EUR 10 per year.”

Improved network utilization

The existing electricity network will be utilized better than before. This is realized by using an improved calculation method for available capacity for cross-border transmission of electricity. As a result, more electricity can be transported. This so-called ‘Flow-based market coupling’ generates more welfare for all participating countries. The more efficient system of market coupling will be currently used between the Netherlands, Belgium, France, Germany, Luxembourg and Austria, but should eventually cover the entire European continent, thus creating a single market. Mr. Don adds: “This improved coupling will mean that transmission capacity will be less of a problem. For example, on days where Germany produces a lot of cheap solar or wind power, we are able to benefit from their lower electricity prices. The difference between prices in the Netherlands and in Germany decreases, and that is good for the competitiveness of businesses in the Netherlands.”

Legislation

Various ministries, transmission system operators, exchanges, market participants, and regulators have worked together very closely in order to realize this improved market coupling. With the introduction of Flow-based market coupling this May, the participating countries are ahead of European legislation, which is expected to be introduced in 2017. As a result, Dutch consumers will already be able to benefit from better electricity prices starting next month.