Lack of flexibility threatens Dutch energy transition
New research zooms in on one of the biggest obstacles facing European countries on the road to a successful energy transition. The 2023 Energy Transition Readiness Index (ETRI) from the Association for Renewable Energy and Clean Technology (REA) provides insight into the so-called "flexibility gap" between energy supply and demand. More investments in demand flexibility are needed, such as the implementation of energy storage and demand response systems.
As fossil generation declines, national power grids must be able to balance more dynamic renewable generation with energy demand on a minute-by-minute basis. Investments in grid flexibility, such as energy storage solutions and demand response (better matching between supply and consumption moments), are crucial to future grid stability. But there is a growing gap between needed and realized investments. Open markets for flexibility are essential to promote these investments and avoid the flexibility gap.
The flexibility gap is highlighted in this year's 2023 Energy Transition Readiness Index (ETRI), co-sponsored by power management company Eaton and Foresight Group. The research on which the index is based compares the readiness of 14 national electricity markets to make the transition from fossil to renewable energy and examines, among other things, the flexibility gap between each country's goal for variable, renewable energy production by 2030 and the amount of associated flexibility the country would need by then.
A gap looms for the Netherlands
Of all the countries studied, the Netherlands has the most ambitious percentage growth target: an increase in renewable production from 41% of total consumption in 2022 to 86% in 2030. Thereby, technological factors such as grid access remain a significant barrier to solving flexibility challenges.
Furthermore, the following barriers emerge from the study for the Netherlands:
- The energy transition remains a public and political priority, but ambitious goals come with practical challenges that create uncertainty. The costs of the energy transition may not be well understood and there are no tools to share these costs fairly.
- Investments in the power grid and delays in grid connections are a concern, leading to a growing barrier to the integration of both renewables and flexibility solutions.
- Flexibility markets are seen as fair and open, and smaller flexibility resources have access to markets through aggregation methods - but their participation remains limited. There are concerns that technical requirements may impose additional costs on smaller market participants.
Besides the Netherlands, more countries face a tough challenge in terms of the flexibility gap. Germany and the United Kingdom face the largest flexibility gap by 2030, but Denmark, Greece, Ireland and Spain will also face difficulties. Only Norway, Finland and Sweden seem to be able to bridge the gap easily - their gap is smaller, partly because they have access to a lot of hydro power, but also because they have well-developed flexibility markets.
France and Italy have a smaller gap than some of their neighbors, but will nevertheless have to do more to attract the flexibility investments they will need by 2030. Switzerland faces a relatively small gap thanks to the high availability of flexible hydropower, but their regional governance structure creates poor coordination of policies to deliver all the flexibility they need. Poland is in the early stages of the energy transition, with strong ambitions but also challenges in financing the necessary investments to improve grid access for flexibility providers.
While the gap for Germany and the UK is at risk of becoming the largest, these two countries have also made the strongest improvements to make their markets attractive to investors since the ETRI survey began in 2019. With solid policy environments, both countries have greater potential to attract energy transition investments, bridge the flexibility gap and deliver high-renewable grids.
Coen van Beek, Sales Director Benelux at Eaton said, "The Netherlands faces major sustainability challenges; grid congestion, reducing harmful emissions, but also maintaining security of supply and price stability. Industry is eager to help solve these challenges. But to do so, the government must facilitate fair and transparent market access, so that investments in demand flexibility can be made with confidence: after all, stability and predictability of government policies are crucial for investors in these types of projects, as they often have long payback periods."