projections of the price of wholesale electricity in the ... · susannah grice...

Pöyry Management Consulting releases its latest edition of the definitive source of long-term projections for the Dutch wholesale electricity market

Pöyry Management Consulting has been publishing its report on the wholesale electricity market in the Netherlands since 2004.

This report provides a comprehensive review of the market rules, key players and historic trends. Wholesale prices are projected until 2040 under three scenarios, which span a range of wholesale electricity price outcomes. In addition the report considers the price discount that a typical intermittent renewable generator may capture in each scenario. The report is one of the leading sources of projections in the market and is used extensively by project developers and financial institutions to assess potential new power projects and plant acquisitions.

This edition has been fully revised and updated with our latest projections of commodity prices and demand. We account for recent developments in national and EU policy.

Our BID3 market model and detailed database of power plants are combined to provide what we believe is an unparalleled analysis of the market.

DUTCH ENERGY POLICY The Energieakkoord, released in September 2013, remains the guiding document for Dutch

Projections of the price of wholesale electricity in the Netherlands

JUNE 2016 EDITION

energy policy. Our scenarios take account of plans formed in the Energieakkoord and the subsequent refinements which have been made. In particular our scenarios take in to consideration the renewable energy targets, and the targets for onshore and offshore wind capacity, and current mothballing plans for thermal plants. The report includes detailed discussion of the renewable energy incentive scheme, the SDE+, explaining both the scheme for renewable technologies excluding offshore wind and the separate offshore wind auction process. It was agreed in the Energieakkoord that all pre-1990 coal stations will close before the end of 2017. The majority of coal plants affected by this agreement have now shut, with the remaining closures due by mid-2017. The report also considers the potential implications of the Urgenda ruling and the non-binding motion accepted by the Dutch Parliament in November 2015, requiring the government to present a plan for a coal exit before the elections in 2017.

GENERATON OVERSUPPLY There have been substantial additions of new generation capacity in the Dutch market in recent years, and a further wave of new coal capacity has now been commissioned. Despite recent plant closures and mothballing there remains a significant oversupply, and the

operating environment for thermal plant is highly challenging. Our modelling considers a range of demand growth and fuel price scenarios, giving projections for the development of the Dutch merit order and for the development of clean spark and dark spreads.

MARKET DESIGN A number of European governments are implementing or actively considering introducing capacity mechanisms and strategic reserves. This is due to concerns over security of supply and the impact of increased renewables on conventional generators. These schemes will provide revenue to generation capacity, in addition to revenue from the sale of energy. No such scheme is currently envisaged for the Netherlands. However, as the Dutch market is highly interconnected and more interconnection is planned, there could be very significant impacts from surrounding markets. Our main scenarios include planned and potential capacity mechanisms in surrounding markets, and our comprehensive European wide modelling allows us to capture the interactions across connected markets and the impact of surrounding capacity mechanisms on the wholesale electricity market in the Netherlands.

WHOLESALE ELECTRICITY PRICE PROJECTIONS FOR THE NETHERLANDS

June 2016 editionXXX_NetherlandsWholesaleElectricityReport_2016_Q2_v200.docx

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Figure 31 – Proposed locations for offshore wind tendering

Source: Ministry of Economic Affairs and the Ministry of Infrastructure and the Environment

3.4 National renewable support mechanisms

Figure 32 describes the five distinct phases of Dutch renewable support mechanisms since 2001. In each phase, support secured by projects under any one of the previous schemes has been ‘grandfathered’ (i.e. the original terms of support secured have been honoured). We describe these in turn in the following subsections, along with government plans for the future of renewable support.



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Figure 8 – Annual imports, exports and net flows across the Dutch border (TWh)

Source: ENTSO-E and Pöyry Management Consulting analysis

Figure 9 – Monthly Dutch cross-border flows (TWh)

Source: ENTSO-E and Pöyry Management Consulting analysis

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Figure 5 – Historical Dutch domestic electricity consumption (TWh)

Source: Statistics Netherlands; * 2015 data is provisional; **2014 data is provisional

2.1.2 Generation volumes

Table 5 provides details of the breakdown in net power generation per category of producer (TWh) between 2006 and 2015. The share of de-centralised production increased during 2006-2011 partly due to the growth in: (i) horticultural CHP installations (particularly over the period 2006-2008); and (ii) distribution-connected onshore wind. De-centralised production declined by roughly 4TWh between 2011 and 2012, levelling off from 2012 onwards at approximately 38TWh per year. This decline is driven by lower power demand and the less attractive place of the production units in the merit order.

Table 5 – Breakdown of net electricity power generation per category of producer (TWh)

† Includes all thermal plant delivering to the Dutch high voltage transmission system (>110kV). †† Comprises renewable generation, thermal plant delivering to the Dutch distribution grid ( 110kV) and autoproducers.

Source: Statistics Netherlands; * 2015 data is provisional

The importance of gas, and to a lesser extent, coal in the Dutch generation mix is highlighted in Figure 6, which shows gross electricity production by fuel between 2004 and 2015.

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Type 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015*Centralised† 67 70 68 72 76 71 64 63 68 72De-centralised†† 32 35 41 41 42 42 38 38 36 37Total 99 105 108 114 118 113 103 101 103 110


An ILEX Energy ReportJune 2016 edition

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MODELLING APPROACHBID3 is our linear optimisation model which analyses each hour across the year, based on historically consistent patterns of electricity demand, wind speed and other variables. It is used to project wholesale electricity under three scenarios:

• a High scenario where high demand is coupled with high fuel and carbon prices;

• a Central scenario based on central assumptions for fuel prices and demand growth; and

• a Low scenario where low demand and fuel prices combine to produce low electricity prices.

Each scenario contains an assessment of which projects will reach financial close. Longer term capacity additions are made by testing commercial viability of alternative new entrant technologies.

BID3 is also used to model plant-specific load factors, capture prices and merit orders, and its hourly resolution is essential for assessing the operation of plant which requires wind intermittency to be assessed with greater granularity (for example low load factor plant or storage technologies).

PÖYRY MARKET REPORTSPöyry Management Consulting produces Pöyry Market Reports for electricity, gas, carbon and green certificate markets across Europe and a number of countries within Latin America.

Pöyry Management Consulting’s energy practice provides strategic, commercial, regulatory and policy advice to the global energy market.

Our team of over 200 European energy market specialists, located across 12 offices and 10 countries, offers unparalleled expertise in the rapidly changing energy sector.

Pöyry Market Reports availableRegional / Bespoke Market Report availableBespoke Market anaysisPöyry Management Consulting offices

Contact Pöyry for more information:

Fleur Greetham [email protected]

Susannah [email protected]

Tomas [email protected]

Pöyry Management Consulting (UK) Ltd.King Charles House,

Park End St, Oxford OX1 1JD, UK

+44(0)1865 722660 Registered No. 2573801

www.poyry.co.uk

Pöyry is an international consulting and engineering company. We serve clients globally across the energy and industrial sectors and locally in our core markets. We deliver strategic advisory and engineering services, underpinned by strong project implementation capability and expertise. Our focus sectors are power generation, transmission & distribution, forest industry, chemicals & biorefining, mining & metals, transportation, water and real estate sectors. Pöyry has an extensive local office network employing about 6,000 experts.

projections of the price of wholesale electricity in the ... · susannah grice...

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