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Markets

The energy sector is developing rapidly as increasing amounts of renewable energy flow into the system. The further integration of the NWE markets and increasing digitalisation are crucial to maintaining security of supply. In this context, we empower society by connecting European markets and ensuring a secure supply of energy at the best possible price. TenneT is a firm believer in a single European energy market and has therefore many interconnectors in place across national borders to support this market.

Highlights
InputStrategic prioritiesChallengesOutput
Renewable and conventional electricityDrive integration of the NWE electricity market, focusing on the Netherlands, Germany and BelgiumIncreasingly national focus of European politicsImport and export of electricity
Market dataRespond to the EC's 'winter package' proposals versus our vision on European cooperationCustomer satisfaction of 86%
Advance the use of data and analyticsLoop flows in neighbouring countries

Results

Integration of the NWE electricity market

The integration of the NWE electricity market is a priority for us and is driving us to increase our interconnection capacity.

In 2016, TenneT and our Danish counterpart Energinet.dk started construction of the COBRAcable, a high-voltage direct current (HVDC) sub-sea cable directly connecting the grids in the Netherlands and Denmark. The COBRAcable will have a capacity of approximately 700 MW and will be around 325 km long, running from Eemshaven in the Netherlands to Endrup in Denmark, via the German sector of the North Sea. We have also made progress on the NordLink, a 623 km cable connecting Germany and Norway. This project contributes to stabilising electricity prices in both countries, while also further facilitating European market integration.

Belgian TSO Elia and TenneT have agreed to upgrade the existing high-voltage grid by 2022, increasing capacity between Belgium and the Netherlands. This bilateral agreement aims to significantly strengthen the interconnectors, facilitating the flow of renewables, improving security of supply and integrating the European electricity market further. Innovations such as phase shifting transformers will help achieve this.

With more renewable energy flows into the system, operating our grid is becoming more challenging. This increase in energy flows means that supply is sometimes higher than the demand, resulting in reduced cross-border capacity and loop flows via our neighbouring countries, including Poland and Belgium. We are giving this issue our full attention and are in close contact with the TSOs and regulators involved.

Flexibility pilot

The increase in electricity from renewable sources will introduce more need for flexibility in the electricity system and will, in time, lead to a decline in the capacity offered by fossil-fuelled generation. At times, these larger power stations will be switched off. We need new solutions to cope with these fluctuations. For that reason, TenneT kicked off a pilot for providing primary reserve capacity using alternative technologies. We are already working on another pilot with The New Motion, involving the use of charging stations for electric cars as primary reserve capacity. We will use these pilots to assess whether parties other than conventional power plants can help provide primary reserve capacity. The participants in the pilot, besides The New Motion, are ENGIE, KPN, Peeeks and Senfa in the Netherlands and Volkswagen, SMA and BMW in Germany.

Ongoing improvements in electricity trading led to the launch of the M7 intraday trading platform for the Belgian-French and Belgian-Dutch bidding zones. M7 is now used across all continental EPEX SPOT intraday markets, replacing the EuroLight trading platform and connecting the Dutch and Belgian markets to the French, German, Swiss and Austrian intraday markets, thereby boosting liquidity.

For real-time import/export figures, click here.

The ongoing market integration in northwest Europe has led to an increased amount of hours where wholesale electricity prices are equal in different countries, also known as ‘price convergence’. Price convergence between the Netherlands and Germany has significantly increased in the period 2015-2016.

TenneT has published its yearly 'Market Review' since 2014, outlining developments in the northwest European electricity market, particularly in the Netherlands and Germany. This publication presents the highlights of the past year and puts the most important developments into perspective. To read more, click here.

“It is our job to facilitate the market as much as we possibly can, constantly seeking innovative solutions.”
Ben Voorhorst, Chief Operating Officer TenneT

In July 2016, a new law on electricity market design in Germany came into force. A so-called energy-only market 2.0 is seen as the best possible structure for integrating renewables into the system. This further developed electricity market aims to guarantee a secure, low-cost and environmentally compatible supply of electricity, enabling innovation and sustainability. In our view, this is a good development, as TenneT advocated for over 2.5 years for an energy-only market that would include more responsibility for balancing parties and be secured by a safety net.
A new cross-border monitoring process will continuously keep an eye on security of supply. In addition, several reserves (“outside of the market”) will be implemented to safeguard the system. In particular, the capacity reserve will ensure security of supply in the unlikely event that the market is unable to balance supply and demand.

In 2016, the pricing of renewable energy took a major step forward, paving the way for meeting Dutch renewables targets. Danish company DONG Energy won the first auction for the Dutch Borssele wind energy areas I and II with a breakthrough price of 7.27 euro cents per kWh. Later in the year, a consortium of Shell, Van Oord, Eneco and Mitsubishi/DGE won the second auction for Borssele III and IV, with their unprecedented offer of 5.45 euro cents per kWh. The tender model, which was recommended by TenneT, awards the concession to the party offering the lowest energy price. Borssele is the first of three large Dutch energy zones in the Dutch sector of the  North Sea.

"Appointing TenneT as grid operator at sea resulted in a cost reduction of 40% on the costs of grid connection of the wind farms."
H.G.J. Kamp, Dutch Minister of Economic Affairs
Source: Letter to Dutch Parliament "costs grid at sea"

A new market landscape, characterised by increased volatility and decentralisation, is developing in the energy sector. At the same time, rapid technological developments in computing and communication are transforming and/or disrupting many industries.

In the electricity market, we are seeing retail and wholesale markets integrating. This has led to a huge increase in data that needs to be managed. As a neutral facilitator – and also as a leader in data – TenneT is uniquely positioned to maintain the flexibility and resilience of our energy system, and because of this TenneT can create maximum value for society. TenneT is actively managing a digital transformation programme to position itself in this new electricity market landscape. As part of this, we are also delivering business improvements by advancing the use of data and analytics. In Germany, the new "Gesetz zur Digitalisierung der Energiewende", will give TenneT direct access to meter data.

One of the first steps we have taken to unlock data for our external stakeholders in the Netherlands is our energy system dashboard. This dashboard provides real-time information on load, production and import/export.

Customers

TenneT regards its relationship with customers as a collaborative business partnership, with regular dialogue and meetings held with parties including stakeholders responsible for energy balance, grid operators and other connected parties. Our customer base is growing and we are seeing more and more renewable electricity being produced. At the same time, we have seen that the increase in renewables and decrease in electricity prices are leading to other facilities being mothballed, as they are no longer proving economically viable.

Our customer satisfaction in the Netherlands this year was comparable to 2015, staying at a rather high level of 86%. We will continue to work on a high customer satisfaction rating in 2017. Our main priority is to improve our performance in terms of responding to customers’ requests.
We did not measure our customer satisfaction scores in Germany in 2016, but will conduct a customer survey in 2017.

Our challenges in markets

ChallengeAction
Markets
1The increasingly national focus of European politics means that the integration of European energy markets is not progressing as quickly as we hoped. This poses a challenge as further integration is crucial to security of supply as renewables continue to flow into the system.We are still engaged in many international market integration projects. With active participation, we are making sure that markets are becoming integrated and improvements are materialising. We have opened our Brussels office to be closely connected to the developments in Europe.
2The European Commission has launched its 'winter package' with their proposals for concrete measures about the electricity infrastructure in Europe, like regional control centres that manage the electricity networks.We are showing that there is already close cooperation between the national grids in Europe. In fact the European markets are physically and technically interconnected to guarantee security of supply.
3Germany and Austria currently form a common bidding zone in the European power market and the physical transportation capacity of the high voltage grid is limited, the market equilibrium leads to congestion in the power grid during many hours each year. As a consequence, loopflows occur in neighbouring countries, and costly remedial actions are needed more frequently.We prepare, together with the other German TSOs, the introduction of a capacity management on the German-Austrian border. The reconfiguration of the existing and well established German-Austrian bidding zone is a highly complex project. Capacity calculation must be coordinated between transmission system operators on both sides of the border and in neighbouring countries. The introduction is expected in July 2018.

Looking ahead

In the summer, we introduced our vision for an 'energy island' in the middle of the North Sea. The artificial island would create an energy hub for wind farms between the Netherlands, Belgium, the United Kingdom, Norway, Germany, and Denmark. The large-scale generation of solar and wind energy will be necessary to meet Europe's targets for reducing CO2 emissions. Individual member states will be unable to attain these high targets alone, so there is a need for unqualified cooperation. Although still in its infancy, the visionary project was enthusiastically received by the European Union (EU). The location of the island must meet several requirements however, e.g. there must be strong winds it must have a central location and the water should be relatively shallow. Based on these criteria, the Dogger Bank would qualify as a location for a central hub. To see our animation, click here.