Security of gas supply
Security of supply exists when there is sufficient gas and electricity to meet the demand from households and businesses. In normal market conditions, gas storage facilities are filled between April and October. This is the injection season, when the gas prices are lower. From November until the end of March is the production season. This is when the gas prices are higher and gas is sold from the storage facilities. The difference between the buying price and the selling price is called the summer-winter spread. This positive difference covers the cost of gas storage and normally yields enough to be profitable. However, this was not self-evident in the summer of 2022 due to the high prices. The Cabinet used two agreements, subsidies, and collaboration with energy companies to ensure that our gas storage facilities were sufficiently filled prior to the winter of 2022/2023.
The geopolitical context of the war in Ukraine has exposed the importance of enhancing our supply security for natural gas. This would simultaneously reduce our dependence on Russia. Energie-Nederland is satisfied with the results of the measures. In the future, it must become clear whether the gas storage facilities can again be filled to a sufficient extent. Energie-Nederland opposees filling obligations for energy supplier. Given that the filling of storages required specific capacities, the amount of energy suppliers could decrease, weakening competition and thereby increasing price.
Security of electricity supply
Security of electricity supply is largely determined by the reliability of the network and the availability of sufficient generation capacity. In addition, storage capacity, demand response, and interconnections (high voltage lines between the Netherlands and other countries) also play a role. The grid operators are tasked with ensuring a robust electricity grid. The reliability of the grid is high. In 2022, customers were without electricity for an average of 22.1 minutes due to problems on the grid.
Grid operators are struggling to meet the sharp rise in demand for transmission capacity. This means congestions (overloading) on the network. Consumers or producers now often have to wait if they want more transmission capacity. Grid operators are working on investment plans and on the strengthening of the grid. The investment plan must also deliver insight into the difference between the required grid capacity that is considered feasible in a certain year: that way, the magnitude of the challenge will become clearer to all.
Besides the reliability of the grid for the sake of security of supply, the availability of sufficient electricity production capacity is also key. This should also take capacity for storage and demand response into account. The current market model assumes that market participants invest in additional capacity as soon as they expect shortages to occur and prices to rise as a result. This is called the Energy Only Market model, which until recently was the foundation of the electricity market. However, with the rise of weather-dependent electricity production, this model does not provide any security of investment for clean dispatchable generation. The key reason for this is that the market is unwilling to invest in this type of generation capacity, such as green hydrogen-fired power plant, because the number of hours such plants are active is extremely low.
Further, the uncertainty about public and political acceptance of certain technologies is an issue. Finally, there is the risk of market intervention in the event of scarcity prices being high.
Energie-Nederland is calling for a supplementary framework to secure investments in carbon-free and weather-independent generation capacity. There is a need for fast decisions here, as the lead-time is too long for the development of carbon-free adjustable output. The same is true for the implementation of a supplementary framework.