Overcapacity in the Dutch electricity market:
Market position Dutch CHP: short-term decline, long-term recovery
Market position in 2016 and 2019
Wholesale prices in Germany are 5 to 10 € / MWh, lower than in the Netherlands, a reason for structural net power import from Germany from 2000 to 3500 MWe. The Netherlands is currently operating both the old coal plants from the 1980s and the new full capacity plants. Thus only fueled engines still make operating hours.
The closure of old coal plants (as stipulated in the SER Energy Agreement) will create some room starting in 2016. But the cancellation of the tax on coal by January 1, 2016 is certain to keep prices under pressure that year. Further consolidation and adjustment of the market is inevitable for the recovery of market prices and operating margin of the energy companies.
Assuming that after July 1, 2017 all old coal plants will be decommissioned, some of the overcapacity in the market should be solved. In Germany, overcapacity will gradually reduce as well. That will lead to price recovery starting in 2017 or 2018. Especially in quarters 1 and 4, prices will recover somewhat. In quarters 2 and 3, daily rates remain under pressure through generation with solar panels.
Investments in new CHP for feeding the grid will not be profitable in the coming years. Based on variable costs, existing cogeneration won’t be feasible for this purpose. The operating hours for feeding are declining to approximately 3000 hours per year. It is to be expected that a rising appreciation for flexible power will bring some improvement. The use of combined heat and power for personal use (i.e. lighting of crops) is still cost-effective but fairly marginal in off-peak hours, depending on the situation.
Perspective 2022
In the long run an improvement in the spark spread is expected. Overcapacity in the Netherlands and Germany will decline. Imports from Germany will diminish as a result of the decommissioning of all nuclear power plants (Atomausstieg). In the Netherlands, demand will increase slightly by economic recovery, and the CO2 price will increase after 2020 through revision of the trading system.
First quarter and End of Year in particular will see improvement of the spark spread. In Q2 and Q3, the price will be strongly influenced by the wide availability of power from solar panels. Combined with improved yield through the use of flexible and fast power in the short-term, this will increase the profitability of (flexible) CHP. Investment in cogeneration with feeding the grid remains difficult, but in clever combinations with personal use, it can be possible.
The barometer was developed as part of Kas als Energiebron commissioned by LTO Glaskracht Netherlands and the Ministry of Economic Affairs.
Source: Sander Peeters (Energy Matters) Kas als Energiebron/LTO Glaskracht Nederland
