TenneT: The Netherlands may soon face power shortages, government should introduce capacity mechanisms

As electrification continues and dispatchable generation declines, security of supply is becoming an increasingly pressing issue across Europe. In a recent analysis, Dutch transmission system operator TenneT warned of a possible increase in periods of insufficient available capacity. The situation on the country’s grid could deteriorate significantly as early as 2030. The system operator is therefore urging the government to take swift action, primarily by introducing capacity mechanisms.

Ensuring a secure electricity supply has long been a topic of discussion, not only in Czechia, particularly in light of the gradual move away from coal-fired generation. Transmission system operators in individual countries regularly update their outlooks, focusing, among other things, on the risks of capacity shortages. One of them is TenneT, which manages the transmission grid in the Netherlands and parts of Germany.

According to the company, although electricity generation from solar and wind power plants continues to grow, and flexibility services from battery storage and demand-side management are also taking hold in the market, these are not enough to replace the capacity being lost from fossil fuel sources or meet rising electricity demand. Batteries and demand-side management in particular have limited potential to address prolonged capacity shortages on the grid.

Like other system operators, TenneT assesses the risk of supply shortages using indicators such as LOLE (Loss Of Load Expectation). This measures the number of hours in a given period when demand exceeds forecast generation, including imports. In all the scenarios considered, the number of such hours is expected to exceed the safety standard of a maximum of four hours from 2030 onwards.

The situation could become critical as early as the end of the decade

According to Reuters, the company says the number of hours with insufficient capacity is expected to rise to 37–46 hours a year between 2030 and 2035. The Netherlands is also likely to face a growing need to import electricity. While imports during periods of low generation are expected to amount to around 1 GW in 2028, they could rise to as much as 9 GW by 2035. Countries interconnected with the Netherlands, such as Germany, Belgium and Denmark, are also expected to face shortages of available capacity.

"Through its analysis, TenneT has been demonstrating for many years that what matters is not only rising electricity demand, but also the availability of sufficient dispatchable capacity in the Netherlands and neighbouring countries. The energy transition requires foresight and timely action," said Maarten Abbenhuis, the company’s chief executive.

For 2030, TenneT expects an additional capacity requirement of around 0.4 GW. However, if neighbouring countries fail to take sufficient measures to secure their own needs, this figure could rise to as much as 3.7 GW.

TenneT has therefore proposed several measures to the Dutch government. One key element is the introduction of capacity mechanisms, which would pay generation operators for available capacity. These should be introduced as early as the winter of 2029/2030, by which time the grid is expected to be under strain. The mechanisms should also explicitly provide for demand-side management, giving market participants certainty for any investments they may make.