Egeruoh chigoziri

Re-regulating the Dutch Liberalized electricity market

Identifying the regulatory challenges to the Dutch electricity sector for full decarbonization by 2050

EGERUOH CHIGOZIRI C

Egeruoh Chigoziri Cyrinus 201117663

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Introduction

With the EU decarbonization target set for 2050 , all the member states needs a plan for the resultant full power system decarbonization goal and this does not have to be only state based but include a regional plan. This report looks at the Dutch electricity sector with its existing peculiar characteristics to design modifications to the existing regulatory framework based on the 1998 Dutch electricity act so that her power systems evolves towards meeting the full decarbonization goal. The shortcomings of the current Dutch regulatory framework was scrutinized and an evaluation into the diverse regulatory changes that could be implemented was made. This paper is broken into two sections. In section 1, for each of the aspects of the Dutch power sector value chain that was considered in section 2, an appropriate regulatory response was identified. These regulations anticipated and is set to encourage faster adoption of more sustainable forms of production, transport, distribution and consumption of electricity, and remove unnecessary existing barriers.

The future Dutch power system as a whole was looked into in section 2, considering that the 2050 plan will experience a strong presence of renewable sources of electricity generation, specifically very large penetration of intermittent generation ( mostly wind and solar, with or without storage) and carbon capture and storage plants to take care of Lucrum ceasans that will likely arise from the retirement of less relatively sustainable and obsolete production technologies to be replaced by “cleaner” ones. Expected large volumes of new investment will demand favorable investment climate to stimulate the investors in the “right” technologies. The resultant effect is that it is likely to result in a much higher and, probably, also much more volatile electricity prices which will drive huge and generalized implementation of energy efficiency and conservation that will include the output channel in the measures that will directly or indirectly impact on the consumption of electricity. To achieve this The Dutch plan to introduce the use of enhanced metering of electricity consumption to facilitate demand response in 2012 is essential and on time. This is because the enhanced metering and communications is expected to allow increased distribution automation and enhanced network supervision and control at transmission level and even distribution level. Also the escalating issue of quality of service in electricity supply was approached using the recent OFGEM model of the UK. Finally it was justified that it most likely and reasonable to assume that universal access to electricity will be achieved by 2050 although with associated conditions.

Section I

1 Energy legislation The energy legislation in the Netherlands cannot be discussed without incorporating gas and electricity;

however, most of the recommendation here will be for electricity although gas has to change as well and almost at the same time. There are selective changes that have to be done if the transition into the renewable energy dominated regime will come to stay. These will be based on the loopholes that are noticed in the current Dutch legislations based on electricity act of 1998. Other changes and procedure for these changes are explained relatively in detail in section 2.

1.1 Regulatory recommendation

It is strongly recommended that a legislation that will grant TenneT the right to siting major transmission network should be passed, in order to reverse the investment order and time of generators and networks to enable quick investment and locational signals. These legislations should be an extension of a harmonious law that permits the building of interconnectors between the countries of which Netherlands is coupled to.

Energiekamer should transit to dynamic pricing regulations and fixed network cost should be recovered through customer charges. NMa should have a representative that jointly monitors the coupled countries to avoid price disparity in these countries (Belgium, Norway).

A legislation on how and when to use electricity storage facility is paramount especially when it has to cross border and this should be an extension of a directive that should be issued on EU level since electricity does not follow transaction path and integration of EU network is necessary and obvious.

Cyber security is paramount and the power should be given to a branch of the NMa to enable data protection and security towards transition to smarter networks.


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1.2 Networks 1.2.1 Transmission

There should be legislative changes about the grid spurs in the grid code protecting the affected producers by humanitarian and universal access law .Gridcode should be modified to include grid spurs in other to anticipate micro grid solution when need be.

The Dutch congestion management is mostly by implicit auction explained in system code and this needs to be modified to enable loopholes that can accrue when there is excess renewable to avoid spilling as a strategic behaviour from non-dispatchable technologies of coupled countries. This will stimulate other countries to invest in storage. Metering code should be extended to distribution because of the DG’s and mechanism to separate the thin line between distribution and transmission should be established in the Gridcode. System code should be modified to take care of the balancing issues that will arise from distributed generations and the renewable energy sources that are non-dispatchable. 1.2.2 Distribution

Sequel to the issue that could arise from the two major constraints stemming from the high penetration of Distributed generations (DG)1, the following recommendations is suggested to the Dutch electricity sector and a reform in her 1998 electricity act. This should be done by the Energiekamer. DSO unbundling should abide by the provisions stipulated in the European Directive 2003/54/EC. This most likely may imply a design of measures for achieving a higher level of national compliance with the requirements of both legal and functional unbundling tailored towards accountability and transparency .A subsidiary of NMa should conduct frequent benchmarking analysis to measure performance and adjust to shortcomings arising from existence of entry barriers, network charging methodology and national regulatory framework (e.g., network regulation and support mechanisms/prioritized access) in place. The next regulatory challenge which is related with DSO revenues and incentives to integrate DG might point a finger to the need for incentives that will aid the improvement of network planning taking into account DG, to design regulatory arrangements for compensating DSO extra costs due to DG, and to improve DSO performance in quality of service taking into account DG. This may explicitly imply that outside the existence of incentive based mechanism indexed to inflation, there might be a need to implement use-of-system (UoS) charges for DG and/or support mechanisms applied to DG, differentiated by time of use (ToU) and voltage levels, together with economic incentives for the DG to provide ancillary services to help DSOs to operate the network (for instance, providing voltage control and reactive power support, with a more active management of the network by DSOs). Efficiency to DSO should include a better optimization of the existing facilities leading to efficient investment in new installations. However there is a strong requirement for a specific regulatory mechanism to compensate DSOs for incremental CAPEX & OPEX that will arise due to DG penetration to prevent anti-competitive behaviour from the DSO. DG penetration might not be evenly spread, hence the higher the DG penetration and concentration levels in an area the more the required compensation to the affected DSO for incremental energy losses. The responsibility should go to those generators connected in those areas that could be charged with an energy fee (€/kWh) proportional to the value of the incremental losses they produce in the network. This mechanism can be combined with the implementation of UoS charges for DG and/or support mechanisms applied to DG, with a voltage levels differentiation, which could incentivize the DG connected in lower voltage networks to reduce losses at higher voltage levels. As the DG becomes a significant portion of the generation, there is a need to charge them with the responsibility to help in the improvement of reliability indices in terms of duration and frequency of supply interruptions and voltage quality keeping voltage disturbances within defined limits especially when they are working in is landing mode in case of network outages. Compensations for DG that can provide ancillary services such as voltage control, frequency reserve, or black start to improve voltage quality is necessary. This can be encouraged by implementing -performance based regulation for quality of service targets that provides explicit incentives to DSOs for improving quality of service levels. - Dynamic efficiency based incentives for DSO whose innovation programs that aids deep transformation from passive to active management increasing DG participation in network control and DG contribution in case of network disturbances.

1 See distribution section


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- incentives to DG for providing ancillary services to relive the TSO’s burden and assist DSOs to in network operations related to issues of voltage control and reactive power support, frequency reserve, islanding operation aimed at net improvement in quality of service levels. Incentives to promote dynamic efficiency for the DSO to integrate DG should be added to the network regulation. This can be achieved by including R&D investments as a separate item in the Regulated Asset Base with higher rates of return or with a partial pass-through item. Another approach could be by using identified network innovation key performance indicators or by involving the regulators in the testing of some of these methods to confirm efficacy. Another crucial challenge is the need to send economic signals to DG for their efficient integration are which indirectly means a need for an efficient and effective design of support mechanism not only for DG connection charges and UoS charges but also for ancillary services and other network services provided by DG. A support mechanisms factoring in a significant DG shares should ensure compatibility with energy market prices and network UoS tariffs that will drive efficient DG operation and network location should be implemented. With respect to DG operation there is a need to achieve efficient market integration that will improve the net social value of the MWh to the consumers. RES_E promotion mechanism should be dynamic and have temporal discrimination to stimulate production during scarcity ( i.e. Implement feed-in tariffs with time discrimination or feed-in premiums on top of market prices that promote efficient DG operation, i.e. higher production at peak hours, and storage and controllability capabilities in medium and large size DG installations. ) Ensuring a level playing field for DG integration is necessary in Netherlands and this implies that DG connection charges should be paid once when the connection is required, regulated, based on simple rules and may or may not remains the shallow costs, i.e. the direct costs of connection. There should be transparency in calculating this cost and other associated network reinforcements and upgrades due to DG connections should be socialized among the network users and paid through the Use of System (UoS) charges. Depending on the circumstances, DG should pay or receive UoS charges which should be cost reflective accordingly and differentiated by time of use and voltage levels. DG connections at lower voltage levels and DG production at load peak hours should be incentivized to discourage instability in transmissions and this can be achieved by differentiated DG support mechanisms such as feed-in tariffs by voltage levels 1.3 Market power

There should be a law that prohibits the largest share holders in conventional generation to have larger amount of RES-E to avoid likelihood of abuse. Measurement of market power should not be based only on capacity but also production. The use of HHI index should be complemented with other methods and monitoring market power should be controlled both ex ante and ex post. 1.4 Retail

There is a need to redefine and make new legislations that will take care of supplier of last resort and define the procedures for transfer. Also a regulation needs to be in place to see how DG and RES-E, can be program responsible or not.

Section II 2 Leaving the EU 2050 decarbonization roadmap for the Netherlands to the “market”

The Dutch electricity regulation of 1998 has been adapted to take care of the turmoil’s that have existed in the days through the learning by doing (Ajodhia, Franken, & Van der Lippe, June ,2003), but to contribute their quota in the EU 2050 energy roadmap might mean extra adaptation. The Dutch is a good disciple of the market only system, however knowing that market is not perfect, one might have to complement this strategy with other mechanism. This is where regulation can be of help.

On a closer look at the EU 2050 energy roadmap as a country, the first challenge should be to consider whether it is worth a while to actually venture into this plan ab initio. Considering the fact that all the countries have their plan, meeting or even exceeding this target depends on variables like the cost of the technology that will be viable in the country in question because of lack of generosity and equality in the availability of primary source of energy, maturity of technology and the actual total percentage that can come online considering the installed capacity and implied lucrum ceasans if there becomes excessive penetration of electricity from renewable energy sources (RES-E). Also this decision cannot be taken unilaterally as acting independently of other EU member states can lead to blind investment or overinvestment. Hence there is a need for a long term strategic planning involving all countries with diverse abundance of primary source of energy with the ones that don’t have, to facilitate a regional economic development or at least avoid the issue of over investment.


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The next challenge of how to distribute RES to sectors considers the transport and the electrical sector as the major “victims”. However, it seems relatively cost effective and efficient to approach the RES plan from the electric sector. In other to make sure that reduction does not come as a public good, it is essential to raise the taxes in other sectors in other to avoid leakage and to provide incentive for innovation that will use clean electricity like electric cars and discourage their reckless squandering of fossil fuels without internalizing the externalities and also to stimulate research in the transport sector.

Focusing now on the electric sector with relatively easier and more matured technology, the third challenge could be how to redistribute the development percentages to the technologies available. Assigning this to the technologies with higher maturity might lead to the loss of innovation capabilities and discrimination, while an equal distribution of percentage of development might not be cost effective. To tackle this dilemma, it becomes necessary to implement different economic instrument to promote different technologies according to again, different variables. These variables include but not restricted to the cost effectiveness, protection of knowledge spill as a public good, non-discriminatory promotion, political acceptability, and maturity of technologies involved. The implied multi-criteria evaluation might be subjective to the Dutch cultural dimensions2 to avoid direct institutional transplantation3 and economic determinants that might attach different weights to the decision criteria. (Geert, Gert Jan, & Michae, 2010) (Martin, konstantinos, & Mamodouh, 2002)

The issue of funding could be one with conflicting factors. However, it apparently seems normal to distribute the funding across board in all the sectors, including the output channel, in order to stimulate the demand side response while making sure those taxes sustain competition and avoid leakage especially to the transport sector where the issue of renewable has seen a sluggish growth. The issue of Ramsey pricing, although might seem attractive still poses the challenge of discrimination and response of inelastic demand on the long term that might distort the investment recovery plan since the investment is long term based. The need to tax other sectors in other to ensure competition across sectors makes it obvious that a multi facet instrument is essential to promote RES plan and the funding might as well exploit different avenues while reducing discrimination to the minimum.

2.1 Regulation as a complement to the market

In as much as the Dutch regulators are good disciples of the “market paradigm” and its efficient allocation of resources, they are still conscious of the fact that this will work up to the extent the microeconomic structure of the Dutch electricity market permits and this in reality entails micro- granularity in market structures. Devoid of this perfection, its implication is not farfetched: difficulty and complications in the design, implementation and monitoring of markets which undoubtedly, is present in the Dutch electricity market. (Sioshansi & W, 2006)

The issue of the networks (distribution and transmission) is under consensus to be under regulation following their natural monopoly characteristics, however the generation and retail that is well suited to the competitive environment has not had a good history in the Netherlands considering the XS energy saga (Coquet, 2010). Moreover, the issue of market deciding the level of investment is almost compromising the minimum adequacy requirement in the Netherlands hence demanding the need for the regulator intervention. Sequel to these limitations of the market in taking care of long term availability of energy resources and also the strong need to influence the level of energy dependency and resources mix, there is a need to take care of contingencies arising due to this market failure in the Dutch market from the issue of security of supply and adequacy that might even worsen due to exposure to dependency. Looking at the support mechanisms for RES which is long term cannot be done effectively from the perspective of the market because of political interest, regulatory failures and uncertainty that accompanies long term investment, it seems apparent that there is a need to help the market with a strategic vision orientation so that agents can be assured of uncertainty minimization in long term investment.

Going a layer further in the exploration of the Dutch electricity market onion reveals a problem of adequacy since she is a net importer of electricity with more than 98% oil import in 20104 used mostly by the fossil fuel plants. Referencing the average of 50% primary energy dependency in Europe, the Netherlands can be assumed

2 Hofstede five dimension for Netherlands shows that they can have behaviour orientations to a particular group of EU countries 3 Martin de jong refutes the issue of forcing a policy on a country rather they should be allowed to adopt it. 4 http://ec.europa.eu/energy/publications/statistics/doc/2011-2009-country-factsheets.pdf


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vulnerable to energy dependency, relying mostly fossil fuels with energy dependency of 38%. Even though there was a proliferation of CHP and energy efficiency program, the issue of energy efficiency paradox remains relevant5 with the growth of energy intensity almost doubled (referenced to 2000) and their non encouraging effort to reduce GHG. Another source of complication is that the Netherland electricity system is capacity constrained and not energy constrained as there are no hydro in the Netherlands making them dependent on Gas especially since they have it in abundance in Groningen. With the Netherlands having the lowest share in Nuclear energy in the EU15 (4%) coupled with the German nuclear moratorium, the issue of adequacy and bad energy mix cannot be overemphasized6.

Another issue that cannot be neglected is the industrial growth rate of the Netherlands especially in the region of Rotterdam, Maastricht where the heavy industries are consuming power with a lot of emissions. The Netherlands is supposed to reduce their emission by 6% according to the Kyoto protocol burden sharing agreement before 2020 however; their emission is on the rise (200 Mt/CO2 eq) with 90% of that coming from the energy sector. Hence an eyebrow can be raised on the “total market control” and the quest for regulation as a complement is obvious and this can be long term and mostly indicative.

2.2 The role of indicative planning

Sticking to the market model in the absence of centralized planning, provokes the policy need to identify the lack of sustainability in the current regime, the minimum application timeline requirement, the role of RES-E and the required minimal mix, the method that can stimulate energy efficiency and conservation across sectors (especially electricity and transport) and the use of the market for obtaining signals. The regulator might be needed to design mechanisms for adequacy, incentives for RES-E support while avoiding discrimination in technologies, ensuring that the EU 2050 roadmap is achieved and ensuring universal access to electricity in the Netherlands. This complementary function requires a strategic appraisal and normative planning of the electricity generation in Netherlands and EU as a whole, and hence indicative planning might be an essential requirement.

The indicative planning which should be more than a scenario analysis7, will allow the degree of freedom that is healthy for the market while complementing the market in many situations. Its aim should be to enshrine what should happen in the future into a holistic approach considering all the stakeholders, clarifying the necessary requirements to achieve the EU 2050 target in the Netherlands in time frames of maybe 10, 15 and 30 years. Modifying J Black definition, “indicative planning should attempt to promote a more stable, rapid and efficient growth in the electricity market via the exchange of forecast leading to generally held set of consistent expectations especially with the 2050 target”

The role of indicating planning in the Dutch achievement of the 2050 plan will focus on the provision of a framework that is clear to all affected agents, encompassing the goals and the required resources needed to affect the regulated aspect of the electricity sector. This should include but not limited to the volume target of the renewable energy, the time and secured rate of penetration, the corresponding support mechanisms and dynamism that could accrue due to variation in technology maturity that might affect incentive methodology change, the lower boundary of reliability that can be accepted due to intermittent penetration of renewable and how to effectively engage the output channel. Also, it should outline the investment rate especially in lump sum infrastructures, issues of interconnectivity in the Netherlands for the security of networks, demand side management which should not be devoid of sound educational programme for consumer’s orientation. An upper layer of the indicative planning should acknowledge that the Netherlands cannot achieve this target only nationally, hence there should be regional analysis of the EU and the global implications of the carbon emissions and incorporate them and all these should be done in a manner that explores the challenges posed by delivering the EU's decarbonisation objective while at the same time ensuring security of energy supply and competitiveness in Netherlands. It should respond to a request from the European Council on the EU 2050 roadmap. The inner layer should focus on the Dutch electricity value chains and their connectivity.

5 Energy efficiency paradox

6 According to the fact sheet of 1, the energy mix of the Netherlands is 40% oil, 50% gas, 5% coal, 1 % nuclear and 45 renewable. However in electricity generation, renewable penetration is 9% with 62 %, 21% and 2% of generation from gas , coal and oil respectively

7 Unlike the 2030 transmission plan, a proper indicative planning should be inclusive


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3 Renewable generation The design of renewable energy sources of generation plan (RES) is no longer a single variable

constrained optimization problem in terms of looking at technologies constrains alone. Taking the EU member state into this context could mean extra variables like EU targets on reducing emissions, renewable energy and energy efficiency, constraints on energy security, differences in cost of technologies and their impact on the competitiveness of the economy and of course environmental impact. This could make this complex problem elude Energiekamer of feasible solution set or provide one with conflicting challenges. Because of the geographical location of the Netherlands and the associated weather conditions, this section will be based mostly on wind and biomass.

Bearing in mind that the objective of every EU member state of which the Netherlands is almost the same, which is to design a plan to achieve a target on renewable energy imposed by the EU at minimum cost and without putting security of supply of its consumers to risk. This could translate quantitatively to a 20% share of renewable energies in final energy consumption, implying a 40% share of renewable in the electricity demand by 2020 and an almost a 100 carbon free electricity by 2050. Moreover, understanding that climate change cannot be separated from the EU 2050 decarbonization target which concurs with the IPCC in its Fourth Assessment Report8 that recommends the target stabilization level of 450 ppmv CO2eq emissions with result of expected global mean temperature increase above pre-industrial level, at equilibrium, of 2.0 to 2.4 ºC from Annex I9 parties of which the Netherlands is a member. This should boil down to a decrease of about 25% and 40% below 1990 levels in 2020, and between 80% to 95%, below 1990 levels in 2050”. This will surely come at a cost, as it was estimated that a reduction of global GDP in the range of 3% total (or 0.2% per year) to nil by 2030, and up to 5.5% total by 2050. However, this might be if the basics are on the fossil fuel technologies, however incorporating the RES-E could change the results posing a challenge of how to achieve the development and the massive deployment of these new low carbon technologies as soon as possible.

In as much as it has been established that economic instruments are better than standards and there are pros and cons of using the price or quantity instruments, (Linares & Labandeira, 2010))10 and some other economist11 negates the belief of a single instruments to deal with the climate change. Hence one could not agree less that it is preferable to use a multi-instrument approach to support the renewable sources support while combating the associated climate change. This should be a carbon price established as the benchmark, preferably through the auction mechanisms with a safety valve to hedge against risk which can be in the form of a price ceiling and a price floor to avoid total price excursion. This could be complemented with a technology policy, technology standards, information and educational policies. Voluntary approaches should also be encouraged. The reasons follow.

The issue of the cost competitiveness of the RES-E can be a problem especially when the fossil fuel generations as cheaper. Two approaches can be to standardize some processes in the production lines that could reduce the emission or preferably, internalize the carbon price as an externality, thus paving way for the economic instruments. The argument against the standards is the lack of equimarginality which the economic instruments favors, however that does not rule out the entire use of standards in this multi-instrumentality approach. Because electricity is a homogenous good and the output channel (demand side management) is inelastic on the short term, there might be a need for standards when the output channel is to be included. A step further shows that when the economic instrument is to be used, a price or quantity instrument poses a challenge. Using a tradable quota as being used in the EU addresses the problem of volume uncertainty but not when there is no safety valve (as can be seen in the price of carbon that has just fallen) hence there might be a need for the safety valve as both a price floor to avoid what is currently going on and a price cap to avoid the carbon prices going through the roof. The cost of carbon should be high enough to discourage the construction of fossil fuel plants while making the RES-E technologies competitive. For the Netherlands, the adopted target of renewable is around 15% by 2020 and 30% by 2050. To achieve this, there will be a need for technology standard.

Leaving this target to the market is obviously unfeasible especially because of its long term orientation favoring a need for technology policies that will promote the amount of renewable penetration that is required especially support their R&D because knowledge spillover is a public good. This can be done through different

8 IPCC report 2007, see reference 9 Annex 1 countries are the OECD countries. http://unfccc.int/kyoto_protocol/items/3145.php 10 Pedro linares suggested multi-system because of the energy efficiency paradox 11 Others that supports multi—Newbery, Kohoene etc . See references

http://unfccc.int/kyoto_protocol/items/3145.php


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approaches depending on the maturity of the technology. For technologies that are still in the demonstration phase or in their cradle a policy that will push them into the market will be the right one. Hence there will be a need to have a technology push policies accepted into the Dutch regulation. This is essential as 90% of the electricity generation that are existing in the Netherlands are fossil fuel ( coal, oil, gas) and hence are polluting. Sequel to the long life of this generators, it is obvious that technologies like Carbon capture and storage has to be encouraged as an abatement technology to capture the emissions. Shutting down these plants will incur a double cost, firstly, the cost of renewable replacements within short periods and the associated lucrum ceasans.

Another pressing need for the renewable will be the technology mix that is to be achieved. Promoting technologies according to maturity will not only discriminate against growing technology, but will discourage proper technology mix, frustrate dynamic efficiency and encourage technology dependency. Thus in other to avoid these, a market pull mechanism that will compliment the technology push policies is essential. However, using the right according to battle et al 201112, RES-E support mechanism can be seen from 2 perspectives depending on the involvement of the regulator. If the Regulator provides an implicit payments or discounts or provide institutional support tools that include: research and development funding, below-cost provision of infrastructure or services (costs of technical adaptations such as shadow connection charging) , removal of costs of imbalances and ancillary services in general), and positive discriminatory rules (such as regulations facilitating grid access for RES-E power, RES-E dispatch priority in the EU and other: net metering, building codes, etc.).It can be referred to as indirect methods otherwise it is called the direct methods. Also for matured technologies , it could depend on the learning curve which can favour the quantity instrument if they are flat ( for matured technology) or price instrument if they are steep ( immature technology) 3.1 RES –E Support schemes

When categorizing the different types of support mechanisms available to electricity from renewable energy sources (RES-E), a fundamental distinction can be made between direct and indirect policy instruments. Direct policy measures aim to stimulate the installation of RES-E technologies immediately, whereas indirect instruments focus on improving long-term framework conditions. Besides regulatory instruments, voluntary approaches for the promotion of RES-E technologies also exist, mainly based on consumers’ willingness to pay premium rates for green electricity. Further important classification criteria are whether policy instruments address price or quantity, and whether they support investments or generation. Table 1 of appendix, shows the classifications and the best applications to the Dutch electricity market.

The Netherlands might not have the luxury of sunshine; however they can harness the offshore wind by the coast of Maastricht13. Nonetheless, the price of wind energy cannot compete with the price of fossil fuel unless there is a support mechanism. A price based mechanism to guarantee entrance into the market will favour the implementation of Feed-in-Tariffs (FIT)( although they have been using Feed in premium ) in the Dutch regulation which will promote investment by guaranteeing RES-E generators a specific price per MWh that is produced. To encourage development of new RES-E capacity, FIT must be high enough to ensure long-term recovery of costs for a given technology and the time duration should be up to 20 years to discourage investment uncertainty on the long run. Even though FIT can come in form of regulatory agreements or contracts ,a flat or stepped tariffs, because of variation in RES-E development especially considering wind , solar and biomass and also variation in siting and scale (e.g. onshore vs. offshore wind) a stepped” tariffs will be encouraged to differentiate levels of remuneration according to the RES-E profile. The payment will be decreasing and should be indexed to a lot of factors like the learning curve, and the influence of other RES-E technologies.

A quantity instrument can be applied also which should be enforceable and this can take the form of renewable portfolio standards (RPS), also referred to as tradable green certificates (TGCs) or renewable obligations (ROs) in the EU, establish quota requirements for consumers to have certain percentage of renewable in their consumption. This will help in price recouping for these technologies.

There will be cost associated with the integration of large scale wind. The balancing cost will rise because of the likely frequent need for more reserves and balancing services which will lead to a need for different reserves for Regulations, load following and scheduling. The associated cost increase will be because of the need for additional quick start capacity and conventional power plants running at technical minimum .Weak contribution of wind power to peak situations due to variability of wind power generation will lead to

12 Battle did a nice design on how penetration of different renewable can take care of the current issues of proper mix and who pays 13 The most likely renewable that will dominate the Netherlands RES-E is likely to be wind and a little of biomass since the APX has started

trading in biomass. the issue of wind is the high intermittency while biomass does not have intermittency


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additional reliability cost due additional installed generation capacity needed to achieve the same level of LOLP14.Additional congestion and losses cost will also accrue because of locations of the wind parks which most times leaves one with no choice and this is because the lead time of construction of wind plants is less than the time for network capacity expansion. There will also be associated connection cost and hence the need for network reinforcement.

3.2 Market design

The market design will determine the quality or accuracy of market signals .With the Dutch day ahead and intraday market being the most liquid, the volume of trade of the bilateral market (OTC) dominating the APX trade ( spot market) , it might be ill equipped for optimized generation scheduling. In terms of gate closure, there might be a need to reduce the time for real time emulation, to decrease imbalances. Balancing signals by TenneT should be cost reflective to induce efficient behaviour and this leaves a dilemma of single or dual balance prices15.

In terms of market signals, wind technologies have no way to react to market signal and the agreement might favor their non-exposure to market signals. However, this might be for the short term only. In the long run, there might be a need to expose wind to market signals since there are positive effects. These include optimal selection of wind site to harness the varying wind patterns that will take the different temporal value of energy expressed in forward and balancing market signals. Locational signal should entail the optimal selection of wind sites to minimize the congestion costs and losses hence favoring the adoption of locational network tariff or cost –reflective connection costs. There should be improvement in maintenance planning and improvement in technology combination in portfolio. Also exposure of wind energy to market signals will encourage control (reduction) of production for extreme cases of imbalance or network constraints, improvement of controllability by innovation, improvement in individual forecasting and system balance efficiency and transparency of the support schemes that were employed.

The wholesale market (APX) will have to adapt to these RES-E infiltration. There might be a need for priority in dispatch as the renewable cannot store the primary source of energy. Although this might distort the merit order for large penetration context (example solar or biomass), the increasing accuracy weather forecast can help reduce these uncertainties.

In the case of lucrum ceasans for the older technologies that are polluting, this avenue can be used to promote the CCS as a transition technology. The CCS technology could be broken down as a business in its value chain, which includes transport and storage and mandate the polluting technologies to use it if they want to continue to generate although this might demand a legal back up since they have license given to them. However CCS has to come out of the demonstration phase and there is a need for educational awareness to encourage its social acceptability. All these require an indicative planning in order to coherently implement them in the regulation adjustment.

3.3 Evaluation of the Different RES-E Support Schemes (Effectiveness and Economic Efficiency)

It is not all about the mechanism for supporting investments, there is a need for reviewing and evaluating the different RES-E support schemes described above, the key question is whether each of these policy instruments has been a success. In order to assess the success of the different policy instruments, the most important criteria are Effectiveness which checks if the RES-E support programmes lead to a significant increase in deployment of capacities from RES-E in relation to the additional potential. The effectiveness indicator measures the relationship of the new generated electricity within a certain time period to the potential of the technologies. Also the Economic efficiency checks the absolute support level compared to the actual generation costs of RES-E generators, and what was the trend in support over time. It also analyses if the net support level of RES-E generation is consistent with the corresponding effectiveness indicator. Other important performance criteria are the credibility for investors and the reduction of costs over time. 4 The regulation mechanism for the Dutch electricity Networks

The regulation of the networks in Netherlands shares some characteristics and regulated by the same authority: Energiekamer, although with variation in specifics hence the implied method of regulation differs a little. In general the Dutch electric network regulation is incentive based, which involves a yardstick ex-ante

14 Loss of load probability of the initial system will reduce due to high wind penetration. 15 See table 3


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methodology by an explicit use of benchmarking employing non –parametric frontier analysis called data enveloping analysis, with generic efficiency scores .

It is necessary to look at the performance of the networks from two perspectives viz efficiency and quality

which is still a regulatory concern the Netherlands now more complicated by the EU roadmap. Considering efficiency, the use of simple indicator of inefficiency which can be defined as the ratio of an output measure to an aggregate measure of inputs, even though it does not require a multivariate is not adequate to account for the environmental factors and more elaborate methods are generally preferred. These methods are generally based on distance functions called frontier analysis of which the Dutch uses DEA which is very recommendable. This benchmarking is used to deduce the level of attainable costs and in setting the X-factors within periodic price control reviews assuming that assumption that cost data of a group of firms are mutually informative

Measuring service quality can be linked to its importance to consumers, the controllability by network operators and its measurability by regulators. The choice of X has an influence on the migration of low carbon economy and thus a need to set out a new sustainable regulatory framework. Borrowing a leaf from the RIIO model (Revenue set to deliver strong Incentives, Innovation and Outputs) 16of the UK seems quite interesting in other to encourage the network industries to get fully involved in the delivery of a sustainable electricity sector and deliver long-term value for money network services for existing and future consumers

The current industry sector is adequate in running this although there might be need for offshoots of parastatal from the Energiekamer and NMa to take care of the indicative planning. The stakeholder should empower Energiekamer and the TenneT in network planning and expansion decision. The level of involvement of whom and how will vary17 and this will influence the level of third party modification request which should follow the rules meted out by NMa.

The result of this modification should be oriented to the delivery of safe and reliable services, non-discriminatory and timely connection and access terms, customer satisfaction, limited impact on the environment and delivery of social obligations. Regulatory control will remain ex-ante maintaining the upfront price control indexed to inflation using Consumer price index (CPI).

The length of the price control will be a bone of contention. The initial 4 years might not work well in the low carbon economy due to the influence of investment cycles and dynamic efficiency. An extension might be necessary which has to be at least 6 years initially (50% increment relative to the past time) which however, will have to be reviewed before the end to avoid gaming. This price period can be adjusted as time goes depending on the lesson learnt. This is expected to be proportionate since the Netherlands uses a yardstick measurement, however this can be internationally benchmarked but taking spatial and temporal differences into consideration.

In terms of incentives, this should be a carrot and stick mechanism, favoring the good and punishing the offenders. Penalties should be high enough to deter offenders which might get up to license revocation while reward should adequately stimulate performance. Finally, for distribution to have dynamic efficiency, it should have an innovation stimulus package limited in time that favors innovation in performance and cost savings as fast as possible. A detailed concern of distribution and transmission follows.

4.1 Distribution The Dutch are not new to distributed generation (DG) especially with the proliferation of micro combined

heat and power (CHP) in her power system, however currently; this does not contribute significantly18 to the total generation volume. Subsequently, when it does which is likely to be the case, there may be a lot of differences in the operation of their power system. Unbundling at the distribution level is very essential as it may negatively impact the access conditions for new DG operators trying to penetrate the market especially when Distribution system operators (DSO’s) exhibits anticompetitive behaviour if neglected.

16 OFGEM RIIO Model - http://www.ofgem.gov.uk/Media/FactSheets/Documents1/re-wiringbritainfs.pdf 17 Sherry R. "A Ladder of Citizen Participation," http://lithgow-schmidt.dk/sherry-arnstein/ladder-of-citizen-participation.html 18 What is significant can be relative

http://www.ofgem.gov.uk/Media/FactSheets/Documents1/re-wiringbritainfs.pdf

http://lithgow-schmidt.dk/sherry-arnstein/ladder-of-citizen-participation.html


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4.2 Distributed generation and smart metering The current Dutch electricity regime is expected to experience a significant metamorphosis, primarily

driven by the need to deliver a low carbon economy - with a target of more than 80 per cent reduction in greenhouse gas emissions by 2030 and decarbonizes electricity generation by 2050 – while maintaining security of supply. The drivers of change will be dynamic hence the network companies and the regulatory framework will need to evolve with it. These drivers that will be the offshoots of the replacement of ageing assets include the offshore networks, electric vehicles, electric heating, smart grids, electricity storage, new nuclear and having a predominant renewable energy sources. However, this is expected to come at a cost of which the security of supply; the issue that is mostly dreaded could be affected by local generation, energy efficiency, district heating and climate change adaptation. One could not agree less with the DG grid report19 that under the resultant decarbonized system, two broad categories of issues will most probably arise. This include how DSO regulation should be changed for enhancing the share of DG and the economic signals to be given to DG to achieve its active integration in distribution networks. However the rate of penetration of these drives the temporal dimension of the above two challenges

The penetration and integration of Distributed Energy Resources (DERs) is a major planning challenge to the DSOs. There will be a need for accurate assessment of the impact that DER will have, when it will have it and how , since the specifics of installed DERs may affect the control of the networks within limits, quality of supply losses and may have resultant financial hurdles. Limiting this to effect of inclusion of electric vehicles (EVs) on the distribution networks raises the question of efficient use of EVs as responsive demands and dispatchable storage.

The considerations for connection of EVs to the Dutch distribution networks are similar to that of other DERs and should be subject to the same technical, economic and regulatory challenges. Technical challenges can be analyzed in terms of three main categories of impacts: network demands, network voltage levels and secondary transformer overloading with general effects that includes large voltage drops, increased losses, voltage unbalance and other issues related to power quality20. Economic challenges include costs of infrastructure, maintenance and shifting the operation of distribution networks toward active instead of passive management21. The third and perhaps most important challenge is a regulatory one which demands a clear policy from both governments and utilities across car manufacturers and consumers However, it is unlikely that PHEVs will have the impact that some researchers are suggesting is possible hence might not be considered here .22 4.3 Transmission

The Dutch system comprises several regional grid administrators, while the national high-voltage grid is only managed by TenneT. The duties and areas of authority of all grid administrators have been laid down in the 1998 Electricity Act, and various transmission procedures and regulations is based on this act of which its implementation is monitored by the Office of Energy Regulation (DTe) on behalf of the government, by checking the services and tariffs of the grid administrators. In order to harmonize performance, the joint grid administrators have submitted an annex to the Act for the tariff structure and the technical conditions (regulations) to DTe. The technical regulations are summarized in codes which are the Grid Code, the System Code and the metering code and tariff code

TenneT is not lagging behind in the concern of the 2050 decarbonisation road map of the EU because of the detailed plan that they have 23 which might be called an indicative planning is supposed to provide an efficient transmission grid that facilitates a high degree of security of supply, and reacts in a timely fashion to developments in the energy market such as internationalization and the drive for greater sustainability

The Dutch electric transmission grid operates at a number of voltage levels (see figure appendix) where higher voltage levels (Extra high voltage (EHV) and high voltage (HV)) transmit large quantities of electricity

19 DG can be a serious issue when not taken care of . see reference by Gomez et al 20 V. H. Méndez, J. Rivier, J. I. d. l. Fuente, T. Gómez, J. Arceluz, J. Marín and A. Madurga. Impact of distributed generation on distribution

investment deferral. International Journal of Electrical Power & Energy Systems 28(4), pp. 244-252, 2006. 21 A. Vojdani. Smart integration. Power and Energy Magazine, IEEE 6(6), pp. 71-79, 2008 22 J. A. P. Lopes, N. Hatziargyriou, J. Mutale, P. Djapic and N. Jenkins. Integrating distributed generation into electric power systems: A review

of drivers, challenges and opportunities. Electric Power Systems Research 77(9), pp. 1189-1203, 2007. 23 Vision 2030 and quality and capacity plan .TenneT is tasked with providing an efficient transmission grid that facilitates a high degree of

security of supply, and reacts in a timely fashion to developments in the energy market such as internationalization and the drive for greater sustainability

http://www.tennet.org/english/transmission_system_services/procedures_regulations/codes/metering_code.aspx

http://www.tennet.org/english/transmission_system_services/procedures_regulations/codes/tariff_code.aspx


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over long distances with low levels of energy loss while the lower voltage levels are used to connect the consumers .This grid cannot be exonerated in the need to integrate the north west European electricity market even though it is obvious that the transition to a sustainable energy supply has posed other challenges. This is evident in the EHV that was meant to be an interconnection that has now changed its role24.

4.3.1 Sustainable development impact on the Dutch transmission grid

The impact of the carbon free electricity market in the EU will influence the Dutch grid of which most of the influences will be observed in

• The liberalization of the market has made the national borders less relevant in this respect as the investor’s decisions transcend national border (CWE coupling with the Belgian and German borders has shown the same price) (Energiekamer, 2011).

• The market integration and coupling is on the rise leading to a growing international trade in electricity resulting to increased transmission instability over longer distances across the Dutch border including the HVDC line with the UK and growing lines with other borders25.

• The location of the Netherlands with respect to the North Sea which is considerably an attractive location for large scale electricity production partly due to availability of sufficient cooling water and partly due to the excellent possibilities for shipping in fuels such as coal and biomass not neglecting the abundance of wind.

• Energy conservation, reduction of CO2 emissions and the increased use of sustainable energy, in pursuit of the EU 2050 agenda will result in new initiatives and the application of new technologies, Nonetheless, the electricity demand in Netherlands is expected to rise substantially.

In the response to these likely developments, four scenarios26, with the corresponding possible transmission grid configurations and their associated transmission capacities have been analysed for their resilience of which the analysis shows that the electricity transmission grid will increasingly have to handle large transmissions over longer and longer distances. The trend of ever greater distances between production locations and consumption centers is set to continue, resultant from some developments such as the construction of new power stations on the coast and the installation of large scale offshore wind farms.

4.3.2 Gray areas in current Dutch transmission regulation

The current legislation of the Dutch and the neighboring countries especially the ones with which her market is coupled. In terms of planning criteria, there might be a need to have a harmonized planning criteria with the neighbors and this should be frequently announced to the give the generators indications for investment location and also give locational signals. The TenneT should be given full responsibility to engage in well proven expansion for the Netherlands. Then for the interconnection expansion, there is a need to have a regional institution responsible for this with full power given although the might be a need for a competition authority in all the associated member states that can have a veto power when there is a fear of market power. Also the cost allocation should be harmonized and most probably be from the citizens.

The business models for transmission development should be a little ahead of the generation and should also be harmonized with the siting procedures and also explicit for the Netherlands and for the neighboring countries. The clearing of these gray areas will be a major step towards legislative support for the efficient transmission system in the coming regime.

4.3.2.1 Investment

Using the security of supply and cost effectiveness as the criteria for analyzing the pros and cons of investments in the EHV grid and the HV ,it is obvious that investments to respond to the earlier mention issues may result to adjustments to the grid structure, grid upgrades, better control of the grid, and modifications to EHV/HV interconnections

One loophole in the regulation can be observed in a situation where the HV grid is connected to the EHV grid via a single EHV/HV interconnection, this makes the underlying HV grid to become more susceptible to

24 The capacity planning docs 25 http://www.tennet.org/english/projects/Projec ts_Europe/Internationalesamenwerking.aspx 26 See appendix for scenario diagrams

http://www.tennet.org/english/projects/Projec%20ts_Europe/Internationalesamenwerking.aspx


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interconnection related ‘common cause failures’27 if structural changes are not made to the EHV/HV interconnection. This is a problem as the grid code does not consider the common cause failure because grid code recognized only the failure of single component during operation and not during simultaneous failure of two components.

In as much as structural changes in configuration like the transformer substation might provide an effective solution to this problem, analysis with a mid to long term focus indicates that splitting the EHV/HV substation’s busbars into sections instead of investing in HV connections between the high voltage grid sections is the most cost effective approach because it fully resolves three long term challenges of controlling the effects of parallel transmissions on the HV grid, managing the short circuit capacity in the EHV and HV transmission grid and reducing the long outage duration that may result from a common cause failure. This is however more expensive.

In light of the above limitation of the grid code, issues of grid spurs that is a major concern as it neglects some part transmission grid of 110 kV and 150 kV spurs with a total load of 100 MW or less. In the regulatory response to this there is a need to upgrade those spurs with a load that currently exceeds 100 MW or will do in the near future by TenneT which involves an investment of 127 million euro in these upgrades over the coming years with the expectation of reducing consumers in the Netherlands dependent on spurs by a 33%. 28According to the Grid Code and analysis of social costs and benefits, spurs with a load of less than 100 MW does not merit structural investments. The lack of economic justification of these investments within the context of current legislation will demand a change in the prevailing legislative regime and authorization from the Office of Energy Regulation. However this can be justified using the equality rights and lack of discrimination.

4.3.2.2 Access

With the strategic location of Netherlands near the North Sea, the development of offshore wind farms is expected and this will step by step with the first step being the construction of a number of wind farms closer the coast. Their most economically efficient access to the grid is expected to be via the onshore grid, singly as via a high voltage AC cable connection. The plan for the deeper offshore connection will be via the development of a ‘collecting station’ (the ‘Socket at Sea’ project) which will be transmitted to one of the onshore 380 kV grid’s four coastal locations 29by means of a high voltage AC connection. However, for wind farms with greater capacity (or energy extraction areas) and with deeper offshore location, the sockets will be used to connect them to onshore grid via a DC line. Rules of connection whether deep or shallow needs to be set because of the cost that is involved and hence, a regulation for this is essential.

4.3.2.3 Tradeoff between centralized and decentralized planning

The issue of balancing that TenneT currently achieves by regulating large scale production units and keeping several major industrial producers on call to provide emergency capacity if necessary works .

However on the advent of sustainability objectives set out by the European Union and the Dutch government .The implication is that current flexibility arrangements might no longer be sufficient in the future as a result of likely high increase in the generation of electricity by sustainable methods, including very large numbers of small scale energy sources which are close to consumers (e.g. photovoltaic systems integrated into buildings) and large scale energy sources which are usually far away from consumers (e.g. offshore wind energy). This kind of electricity generation is source dependent (supply driven) with high output variability (fluctuating, intermittent).

In terms of investment, the integration these sources on a large scale requires the use of intelligent, flexible technologies in the electricity system. Another complication is the decentralized regime in generation which results in bidirectional traffic in the distribution grids, with high intermittency leading to imbalance. Hence balancing will have to change and not by using the traditional matching of supply to demand rather better

27 A common cause failure is defined as a failure of two or more components (leading to an interruption in the supply of electricity) which can be

attributed to a single cause. 28 TenneT’s Quality and Capacity Plan 29 The four locations are the coastal locations Eemshaven, IJmuiden, Maasvlakte and Borssele.


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flexibility is essential in which includes demand side response, controllable consumption including the use of electric cars and storage systems 5 Locational signals for new generation

A clear look at Figure 3 and 4 in the appendix shows that a large penetration of renewable will most likely shift balancing from “business as usual “of demand matching supply to something innovative. Ab initio, locational signals in electricity pricing applies only to the transmission level which is certain to change with the change in regime. The application of locational signals can be categorized into short term signals and long term signals. For the Dutch electricity transmission grid, the short term signals ( energy prices ) has been in form of implicit and explicit capacity auctions that is relevant in their trilateral market coupling while the long term signal ( network tariff)has been a postage stamp. In as much as these choices could have been driven by simplicity, the complexity of the system did not disappear by their use and is likely to worsen.

In the situation of excess proliferation of the RES-E capacity which is obvious as shown in figure 5 of the appendix, it becomes succinct that a need of strategy is essential that will drive both long term objectives while not causing chaos in the short time. There is a need to differentiate horizontal signals, referring to price differentiation per location on the same voltage level, and vertical signals, referring to price differentiation between voltage levels. While the former case relates to only transmission, there is a need to include distribution in order to ensure an optimal dispatch of DG units in the later regime.

5.1 Impact on Transmission

In the transmission network in the Netherlands, the short term signals can be continued especially with the extent of maturity and vibrancy of their auction market. However the long term signals may need to be reviewed, having in mind that there is a need to make DG connected to the transmission grid effective and to ensure that cost causality principle rules. A clear understanding that electricity flow does not commercial transaction will provoke a suggestion of a methodology that is maintains cost causality while retaining the simplicity and clarity of use points all fingers to average participation.

Average participation is a good method for the Dutch considering them as an integral path of the EU network, a major force in the North sea wind farm project and also better than the existing postage stamp.

5.2 Impact on Distribution

Locational signal is very essential with the likely development which can be seen in the disparity between figure 3 and figure 4 of the appendix. The implied need for locational coordination is to solve the dilemma of avoidance but not to impede necessary investment in the network. This is necessary since the liberalization with the sustainable generation regime could lead to a decentralized system at distribution level working with a decentralized market system hence the need to achieve coordination so that network and energy charges should reflect the actual network condition in both long term and short term. Not only that, this could stimulate distributed generation and demand to relieve the system in case of instability and attract flexible users (controllable generation / demand or storage) to suitable Because of the difficulty in using the locational marginal pricing like the nodal pricing in distribution that arises through the dense network, a no cost reflective pricing in distribution is used in Netherlands with shallow connection charges and locational differentiation is still rare. Thus with the likely development in the distribution level, it becomes apparent that a voluntary agreements between system participants that can create a pareto improvement, reward a grid friendly behaviours and compensate for control might be a good solution to the Netherlands. This is called smart contracts.

The smart contract30 is designed to be an individual agreement that is not mandatory which target specific users that are influenced by the DG proliferation while sparing the little consumers. It is designed to comply with the priority of dispatch for RES-E while not compromising regional competitiveness in attracting new industry. It may entail some standardization to drop transaction cost, varies according to location, size of user, pattern and flexibility of network use. Although a voluntary agreement, it uses standard tariff as a fall back

30 Locational signals to reduce network investments in smart distribution grids: What works and what not? Christine Brandstätt ,Gert Brunekreeft, Nele Friedrichsen


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solution which can be default tariff for most customers or individual contracting where additional benefit is possible. An extra advantage of smart contract is that no major system reform required except a few requirements concerning market design and regulatory approval is only for standard (fall-back) tariffs

In order to implement smart contract in Netherlands, there is a need to set a level playing ground and put certain things in order. There is a need to incentivize The DSO’s to optimize network development in preparation for the penetration of renewable and also incentivize network users to accept smart contracts. Also the electricity regulation need to allow for the voluntarily in this arrangement and allow network operators or retailers to have flexible charging. Also this cannot be effective without smart metering which the Dutch wants to roll out en masse in 2012. Thus there is a need to adjust the tariff code of the regulation to take care of this 6 Generation adequacy

One fact that is obvious with the penetration of renewable is that the Dutch electricity system becomes more energy constrained than capacity constrained. A closer look at figure 4 in the appendix again will explain the implications of adequacy in the presence of generation mix which is assumed to be optimal considering this energy constraint. However, how to reach the level of optimality in the mix and in the investment is a question that the Dutch electricity sector needs to look into. The introduction of large penetration of Wind, photovoltaic solar and concentrated solar power without storage will lead a gap in variability, unpredictability and locational dependency, hence the need for attention in the regulation that affects this intermittency decisions. Intermittency can be preferably seen from the spectacles of Ignacio Perez Arriaga as the combination of limited controllable variability and partial unpredictability31. Even though these characteristics exist, their combination makes the issue complex especially when the volume of impact is relatively high. In terms of intermittency characteristics of the renewable in the Dutch system, it will be mostly looked at in terms of wind generation rather than solar generation.

The concern for this intermittency can span from technical issues of reliability, need for increase of required flexibility in the power system by the better utilization of transmission capacity, effective demand side management to employing more storage. Economically, this will definitely influence the market rules which will need adaptation to effectively emulate real time operation and hence translate to different patterns in the electricity prices. This brings up the regulatory issues of the efficient scheme that needs to be adopted in order to make the intermittent generation financially viable. These concerns when adequately treated will influence the volume and the cost of investment. The issue of capacity mechanism will now involve flexibility.

6.1 Flexibility as a tradable commodity Because the proliferation of RES-E will bring a lot of flexibility issues, there might be a need to have

flexibility traded like capacity, if not this will lead to having a reserve that is almost as much as the installed capacity of RES-E which does not make economical sense. The Dutch can be advised to have a limited amount of Nuclear but because of the associated NIMBY and BANANA , it might be very difficult to achieve.

Riding at the back of the reliability option that was excellently designed by Ignacio Perez Arriaga and that has been successfully implemented in many power systems, one can extend this to flexibility in the system adequacy requirements. Therefore, it is necessary to provide a much stronger incentives for Flexible reliability-oriented operation because the proliferation of RES_E makes the system more energy limited than capacity limited. Through these incentives, the markets bring the consumers a broader security that the contracted generation equipment will be available during the critical periods to provide capacity and flexibility at the same time. This will be like a derivative call option with a physical delivery obligation is tied to the option, in order to provide stronger incentives for the generators and to make sure that the more flexible reliable production units will be in a better position at the reliability market.

The generators for the reliable flexibility provision will be assessed based on the following properties

31See Ignacio framework presentation in 2011 MITEI symposium for a perfect approach that can be tailored to fit many situations


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Then an auction is organized for these generators that will be categorised into different groups of load following, regulating and scheduling where the auctioneer has to determine, in advance, at least the following parameters:

- the strike price, s : which based on reliability option standard , should not be too low, since it acts as a price cap for demand and somehow represents the frontier between the “normal” energy prices and the “near-rationing” energy prices,

- The time horizon: typically a year; the seller can be required to generate the committed capacity at the expected flexibility at any time during that period,

- The total amount of power to be bought and at what range of rate should it be produced, - The value of the explicit penalty for capacity tied to flexibility - The generators submit one or several bids to the auction, expressing quantity at a flexibility range that is

standardized (the capacity they want to sell) and price (the required premium). - The market is cleared as a simple auction and all of the accepted bids receive the premium that was

solicited by the marginal bid. 6.2 Investments in adequacy In terms of investment, it has been shown that Feed in Premium has been generally successful especially in

Spain and Germany32 . This is because premium has proved to be better when combined with market signals in creating the incentives for wind and solar plants to adjust according to the market conditions and help improve prediction of their output together with the management of maintenance operations. In terms of cost, the location and technologies will mostly influence the cost of wind and solar especially when geographically dispersed. This means that the cost might not only be the cost of the generation, but also the cost of reinforcement of the transmission lines. The implication of these designs on market architecture determinants is shown in table 2 of the appendix and the reason for the support of Feed in premium for the Dutch can be seen to be based on basically how RES-E producers (especially wind) are exposed to market signals in forward markets, balancing markets, congestion and losses while not neglecting the pricing, connection and network tariff.

The issue of having the right instruments that stimulate the right investment as the optimal cost is not the only issue of adequacy when it comes to large penetration of renewable because the larger the share of the renewable generation, the higher the intermittency. In the case of wind, variability can be reduced by aggregation of wind turbines over a large geographic area. Predictability can be reduced by reducing forecasting to almost emulate real time and with closer spatial aggregation of generators while considering a large geographical areas. The case of solar can be a little bit different as it is affected by diurnal and seasonal patterns with the patterns occurring at midday and at summer that happens to be the time of peak demand of electricity. Nonetheless the issue of cloud speed and geographical area cannot be neglected. Thus in general, mitigation of variability can be by combination of spatial diversity, use of advance forecasting techniques, reduction of unit commitment planning timeframe (scheduling interval) and the use of capacity mechanism.

The use of capacity mechanism is essential. The best approach is the one that takes care of variability in generation and demand that can be slow or fast , occurring from a non event or for contingency purposes and this can be found in operating reserve sometimes called moth ball reserve. Following the analysis of Milliham et al33, the Dutch can be advised to have a variety of operating reserves. There is a need for a mix in the characteristics of the generators that used for operating reserve. For the ones that will be used for non event, there is a need for regulating reserve that will have a fast response and a load following reserve that will have a slow response. In terms of contingency reserves, the operating reserves that serve this purpose can be frequency responsive reserves that have fast response and supplemental reserve that have slow response. In the case of slow events, the ramping reserve is for fast response while the supplemental reserve is for the slow response. This operating reserve or mothball reserve are usually old plants that have a little time to be decommissioned hence with little fixed cost ( maintenance cost ) and their associated variable cost. The use of mothball reserve does not only offer the advantages of cheaper price but the variety that can be gotten for different purposes.

Another source of help in terms adequacy can be the demand response by the means of variant retail electricity rate like the real time pricing and interruptible load agreement. The issue of real time price can be

32http://www.worldfuturecouncil.org/fileadmin/user_upload/Miguel/feedin_systems_spain_germany_long_en.pdf 33 See references


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easily done since 2012 will see a lot of installation of smart meters that can enable this hence help in smoothing the load.

7 Market power

The definition of market power for the electricity market in the Netherlands can only be coherent if there is a general agreement on the definition of what is the relevant market and the way the regulator looks at the mergers and acquisition in this relevant market. However, concentrating on the market alone can lead to a need for the Dutch to reduce market power hence market power is defined based on production and capacity. Analysis of the market power is mostly performance and structural based, however emphasis is on measuring the structure of bulk power and the conventional tool is the Herfindahl Hirschman index which is the sum of the squared market shares of every firm in the power market

According to the 2011 Energiekamer report to the EU, there are approximately 25 with three quarters of the production controlled by the largest four. Interpreting the implication of this by the degree of concentration showed that the static HHI index is 1433 and the dynamic HHI index is 1810 as of 2010 when that data was available. This means that there might not be market power in installed capacity but likely to be in the production capacity and this calls for a serious concern as market power comes in energy constraining and not capacity withdrawal.

The market structure of the Dutch electricity retail is dominated by three large suppliers that are incumbents, four relatively small companies and quite some numbers of small companies. Looking at the market share by the concentration ratio of the incumbents (C3), as of 2011 their market share is above 80% which is not very healthy. However switching of retailers has been relatively active in the retail market. Even though there has been a lot of mergers and acquisition since full liberalization in 2004 in the Dutch electricity market allowing international penetration, there has been market power. This is because all the mergers and acquisition has been a large company that acquires large Dutch companies to become bigger. In terms of vertical integration, there is above 60% production supply linkage which makes the entry of smaller companies very difficult.

Energiekamer monitors the barrier to entry and competition issues in the Netherlands; however they focused on the monitor of the concentration over the years, not the establishment of market dominance. With this in mind, there might be an issue in the renewable energy generation. One of the issues is that because of time limitation and resource availability, the bigger companies might be given more licenses to build renewable generation and this will impede the microstructure of the market. This is obvious, since if they build more renewable and retire their older generations as mothball reserve, their market power increases. Thus it becomes apparent that the Energiekamer while monitoring the concentration ratios in the market should try to monitor dominance. The use of concentration ratios and HHI in generation should be applied in all mergers and acquisition to limit the market power both in the installed capacity and production capacity to limit pivotal supplier. Hence it is important to use residual supply index to monitor the amount of powers given to renewable energy suppliers in order to control market power ex-ante. While competition should be monitored ex-post with Lerner’s index. 8 Wholesale market design - refining the Dutch electricity market architecture

Having a level playing ground, not only in the origin and destination of generated electricity but also as close to real time as much as possible determines the level of competition wholesale prices and to maximizing social welfare and the Dutch has been in this business for long. This has been the main driver of constant move towards the integration of the Dutch wholesale electricity market with the surrounding markets. In 2010 there was coupling of the day-ahead market within the CWE-region. Not only that, there was also an integration of the CWE-market with the Nordic electricity market by means of a tight volume , introduction of the Elbas platform for intraday trade on the Dutch-Belgian border and the integration of NorNed in this tight volume coupling. This will surely promote the implicit trading method that they prefer, but the issue is how this could metamorphosis or degenerate in the light of large penetration of renewable with high intermittency.

Taking care of the intermittency will mean tremendous changes to the current Dutch electricity market in terms of rules of dispatch that will need creation of additional flexibility, backup services and storage facilities. There should be rules that will take care of when to use storage and the backup services. It should determine if the storage and backup services should be used as reserves in the peak period of in case of balancing. Also the use of storage and backup electricity across the border will be a case that needs legislation that might be regional and this is essential for the Dutch because of the extent of market coupling that is going in. The


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fundamental implication of this is that the rules that govern the wholesale market of the Dutch cannot be adjusted in isolation. All the same the organization of the Dutch market can be seen from the diagram below with each of the market defined by different rules. The Dutch market design changes and the associated risk that will vary due to the penetration of the RES-E are summarized in table 3 of appendix.

The issue of market design as earlier done in the RES-E section, shows that the most liquid market (intraday market) might need to change to a centralized system since decentralized system with low power traded in the APX might not allow an optimized generation scheduling. The gate closure might change from four hours to somewhat closer to hourly trading to allow better forecast of wind. The efficacy in market design will determine if TenneT will use dual or single balancing. This will also affect the power given to the TenneT in short term and long term locational pricing. The lesser the short term locational market signal, the more likely TenneT might tend towards redispatching to solve congestion problems.

Moreover there might be a need to take care of the grid infrastructures will need an overhaul, to deal with completely new requirements. These will include “de-localizing” injection of wind production and facilitating additional flexibility on the demand side via “smart” grids. This challenge could mean a need to change the derivative market implying the need of a state-of-the art approach to risk assessment that will encompass portfolio management, asset optimization and investment evaluation. This sophisticated approach will be possible if the Dutch wholesale market has a high level of transparency hence encouraging trading to be used as a major tool. Trading will be very essential in understanding the value of the flexibility needed to cope with intermittent renewable power production, and to adapt during a transition. A recommendable major step has been adopted to do this in which the APX has lunched the exchange of the trading of biomass after developing a referenced price index for standardized wood pellets in 2008. This biomass exchange, developed in synergy with Port of Rotterdam, is launched in two phases with the first stage providing an opportunity to trade standardized, non-cleared products where the physical settlement is arranged bilaterally by the counterparties and the second phase planned for 2012, entailing the implementation of clearing services for wood pellets contracts, which will provide further financial security to market participant.

This might need to be extended to an appropriate market design which will be essential in achieving a well functioning wholesale market with price formation based on fundamentals. While moving in the direction of a harmonized regional market and European market design while keeping in mind, in particular during this transition decade, that too many regulatory changes could be dangerously disruptive. One of the disruptive regulatory changes might be the need to use smart meters to encourage demand side management that will be essential in reducing intermittency. The issue of utilization of the operating reserves and its charges depends on who acquires them. If operating reserves are moth ball reserves and are acquired by the TSO, then there might be a need to charging that should be regulated in a manner that will be sustainable and encourage adequacy and firmness. This method will method might need the intermittent generators to pay. However, if the RES-E follows the program responsibility of the Dutch system and there is effective derivative market in the renewable, then this might not be possible as the derivative market can balance this. However, this will require that the mothball reserves enter the derivative markets also.

9 Retail market design

The Dutch electricity retail system is expected to have a change with the EU 2050 decarbonisation goal. Energy efficiency and conservation especially in terms of electricity conservation is on the on the increase and will influence the retail market and the method of retailing. The driving forces include greenhouse gas concern, excessive use on-peak due to the absence of real-time pricing, the economic and political costs of expanding transmission and generation capacity, and the energy paradox problem (a widespread belief that consumers fail to invest in privately cost-effective, energy-efficient technologies because of limits in information and


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bounded rationality). The implication of the energy paradox34 which is present in the characteristics of the Dutch energy usage, coupled with the density of the distribution networks is that energy efficiency cannot be addressed simply by adopting rules or institutions marginal prices expanding the use of smart meters, real-time price information, and automated controls that allow time-variant pricing and provide missing incentives to use energy more efficiently only. There is a need for a regulatory instrument that could aid this transition and stimulate it effectively while being assisted by demand side management (DSM). Thus there is a need for a multi instrument policy that will be very essential in blocking the energy leakage. 9.1 The Dutch electricity Retail Market in the face of total decarbonisation

The first is to have a price control mechanism that will make the consumers aware of the price implication of their usage. This the Dutch has started by trying to install smart meters in 2012. However the intermittency in the generation can lead to high price excursions that might have a lot of social and political implications. Hence to help the smart metering, it is suggested for the Energiekamer to have a legal and regulatory framework that will support technology policies. These standards will entail standards in electrical equipment and installation in the building sector with minimum requirement standards. Then there is also a need for educational policies alongside all these. This is required to enable public awareness in the intermittency and implication of sustainable energy to encourage acceptance and it added benefits which is the freedom to plan what you use. However the most important aspect is to encourage DSM

To design an effective DSM framework there is a need for a DSM policy that will seek to reduce customer energy bills in a cost-effective manner, reduce capital spending on new energy system infrastructure, encourage an optimal mix of energy supply and demand and minimize environmental and social impacts due to energy infrastructure and use. A little downward to retail, the subset of DSM that is very essential is the demand response (DR) which includes the activities to reduce or shift electricity use to improve electric grid reliability, manage electricity costs, and ensure that customers receive signals that encourage load reduction during times when the electricity grid is near the upper limit of its capacity. To stimulate the DR in the Dutch electricity retail, this can be done in two ways. Firstly through Emergency Load Response programs which are interventions aimed at avoiding shortfalls in energy supply. Usually, the Transmission System Operator (TSO) offers remuneration to particular categories of consumers amenable to planned and unplanned interruptions to their energy supply in order to prevent critical situations in network operations. Such consumers are generally industrial and large commercial operators, whose supply is interrupted when resources supplied by the TSO on the dispatching services market are insufficient to maintain the safe operation of the system.

The second method is by Demand Side Bidding (DSB) which is a mechanism that enables consumers, either directly or through a broker (maybe their retailer), to participate in the electricity market or in the operation of the system through offers that cause changes in their normal consumption profile. This mechanism can be very helpful as it enables consumers to participate actively in the market and while giving them price signals that, by reflecting of actual costs, would result in a higher efficiency of the energy system.

After developing the system, the next issue is the implementation system. The DSO should be accountable for DSM within its service territory, but not be required to implement program design, delivery, and evaluation because they will know the amount of reduction in infrastructure that results and they should measure the DSM program cost-effectiveness and DSM performance should be based on the Total Resource Cost ("TRC") test. The Energiekamer should have a central role in DSM policy development and regulatory oversight. The retailers should be responsible for the educational program and evaluation.

34 Energy paradox see Linares in the reference

System Operator

(TENNET)

Program responsible parties

(Back up parties)

Eligible

customer

Network

operator

operator

Supplier (Supplier of last resort)

Generators (DG and

RES_E with

Conventional)

Connection and transport Energy programmes and imbalances Supply of electric energy

Systeem codes

Electricity act 1998,

technical codes and

travien codes

Need a legislation of program

responsibility party of last resort

Art 3.1.13

systeem

Code

Proper legislation in case of

bankruptcy

Regulated contract Contract status unclear Likely connection need

9.2 Redesigning the Dutch retail market to fit the target. The picture by the side depicts what the Dutch retail market looks like. The respective

legislations that guide the retail market are specified in black while the red represents the needed legislations. The double arrowed lines, shows regulated contract if thick and unclear contract if the line broken. The pink arrow shows a needed connection that has to be regulated since it is bold. For example, the lack of proper legislations in case of bankruptcy is responsible for the XS energy calamity in Netherlands. Thus there will be a need to design legislations that will specifically call out that is the supplier of last resort and the rules of the game. There might also be need for back up supplier of last resort that has to be specified in the system code. The program responsible party of last resort has to be specified in legislations and the law should specify is DG and RES-E should be accountable for these. The suggestion is that non dispatchable DG and RES_E can be exempted

The need to include the DG’s and RES_E in the program responsibility is essential as this might reduce market power and forecast and investment in forecast technologies to reduce intermittency.


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10 The CO2 market and prices One of the things that cannot be avoided with the EU 2050 reduction target is the fact that power plants

are already on ground, polluting and need to stop. This implies that while the renewable energies are trying to make their way into the Dutch electrical sector, dominate the generation, there is a need to limit the GHG emission because of their long life in the atmosphere and consequently a need for a CO2 market. The approach to this can be by command and control or by an economic instrument. However the EU foresaw this on time and instituted the cap and trade system called the European emission trading system (ETS) and the Dutch is abiding by it. In as much as the ETS is a quantity based economic instrument that provides equimarginality, responds to inflation and uncertainty in abatement volume development, it is not a one size fit all and hence not fool proof to other issues. Hence there is a need to use a multi- instrument approach to achieve the target in 2050.

The ETS system doesn’t have to be eroded, however, the 2013 revision has to be done smartly. Considering existing power plants on ground which for the Dutch is dominated by fossil fuel can be a serious factor that might determine the method of awarding the certificate a there will be a need to compensate them. This is the basics of grandfathering .However, awarding the certificate through grandfathering might be a barrier to entry and might not stimulate the renewable energy market. This implies that a certain percentage of the certificate can be grandfathered in other to cover the resultant lucrum ceasans while the rest will be auctioned. Another way can be to give the already existing generator investors a certain percentage of the license and auction the entire certificates. Also there will be need for a safety net in other to stimulate the renewable penetration. Considering the economic crises, the ETS might need to be redesigned with a cap and a floor (safety valve). A cap to avoid large carbon cost excursion and a floor to prevent drop in carbon price below a threshold that it becomes detrimental to the entry of renewable.

The cap and trade system will not only affect investment but will definitely affect the wholesale market as this might distort the merit order. The rate and magnitude of distortion depends on the rate of penetration of renewable and the associated carbon price. If the carbon price is high enough to make renewable competitive and the conditions for merit order dispatch changes priority to environmental friendliness (when a renewable and fossil fuel plants are of the same price), there will be pressure to modify the merit order dispatch. For this to be effective also there should be adequate renewable generation enough to make sure that removal of fossil fuel plant will not be pivotal. In order to force the fossil fuel plants to retire, there might be a need for other regulations also. This could include technology policies that could insist on the combination of CCS and fossil fuel plants from 2020 and making the renewable very competitive to the fossil fuel plants.

11 Universal Electricity Access

The best way to approach universal access is to have a single definition of universal access to electricity based on the definition by IEA as “a household having a reliable and affordable access to a first connection to electricity and then an increasing level of electricity consumption over time to reach the regional average” and this will be the basics for this analysis. This is essential if the poverty level of the world needs to be reduced, then access to electric energy cannot be ignored. 11.1 Who needs access and how can we reach them

According to UNEP35 , a global aggregate data for 2000 indicated that around 27 per cent of the world's populations (i.e. 1.6 billion people) still do not have access to electricity; that more than 99 per cent of those without electricity live in developing countries; and 80% of this live in rural areas. Africa accounts for about 32 percent of the world population without electricity. In Africa, more than 83 per cent of the rural population lacks access to electricity with 92 per cent for sub-Saharan Africa relative to South Asia is 70 per cent. Hence UNEP projected that at the rate of connections of the past decade, it would take more than 40 years to electrify South Asia and almost twice as long for sub-Saharan Africa and one could not wonder less why the Human development index of Sub Saharan Africa is very disappointing. In the Sub-Saharan Africa, the highest population without electricity is from Nigeria according to IEA report36, hence most of the analysis here will be

35 GNESD centers for excellence did a good research on this. 36 IEA shows that Nigeria has 76 million people without electricity that represents 49% of her population


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from the perspective of Nigeria. This however can be generalized partly because of the identity in the cosmopolitan nature of the sub-Saharan Africa and partly because of the similar demographic characteristics

Before looking at the prospects of having universal access to electricity for all, there is a need to understand that this problem cannot be designed in terms of energy alone. There is a need to understand why the sub-Saharan African is in abject poverty although countries like Nigeria and Angola are world major producers of oil. This cannot be separated from the issue of ethnicity complicated by religious dichotomy (Christians and Muslims) intertwined in nepotism and corruption that makes government more of agreement than governance leading to political regime swings among tribes making it difficult to attract a long term investment of which electricity is. This translates to that fact that this analysis for universal access will be abused on a liberalized system, assuming political stability that will allow investors come in but not forgetting that the problem of instability is more of a political policy problem than economic restrictions. Hence the likelihood of achieving universal access by 2005 lies in the hands of achieving political harmony that will encourage long term investors but might not necessarily is in the framework of full electricity value chain unbundling especially because of the role renewable and micro grid might play.

In as much as there is differences in the cultures of people which Hofstede37 analysed in cultural dimensions, there might a need to strategically and tactfully emulate industry leading systems and especially where they have proven to be very useful and helped development and electricity reform is one of these methodologies. Nonetheless, one would concur with martin de Jong38 that direct institutional transfer and copying can be a disaster, hence the need to structurally reform any electricity sector knowing that it is different and electric sector reform and restructuring followed by unbundling is not a one size fit all application. However, having global criteria for evaluation of its success has shown that there is a need for restructuring the electric power systems of the developing countries and the sub-Saharan Africa in general and thus is expectant that the restructuring of the electricity sector is essential to the achievement of the universal access. This can also be seen from the market perspective, where the investors will like to cover the much available market as possible provided it is profitable. According to the GNESD Centers of Excellence39 the application of electricity reform needs an assessment of the impact and effectiveness and this can be grouped as Access and Affordability. In as much as access is the major issue, it cannot be separated from affordability especially considering that the lack of access is in areas of the world and also sub Saharan Africa is where people live below the poverty line. Three indicators were used to assess access which includes National electrification levels that will provide an estimate of the proportion of the population that has physical access to electricity. Then the National electrification rate (i.e. the rate at which new connections are being made) to indicate the acceleration extent of a particular reform (or possibly retarding) to access to electricity. Then electricity consumption per capita an indicator can provide some pointers as to how reforms affect the poor which is also a function of other variables such as tariff and types of appliances used. Affordability will be used to access how the income affects and is affected by the electricity access which is very essential in terms of cost benefit analysis. The first indicator for affordability is Electricity tariffs which when combined with income data can indicate to what extent various groups in society can afford electricity. Then the next, household expenditure for electricity as a proportion of total household income will indicate the burden which access and use of energy services can place on the budgets of poorer households together with the likely extent of expected subsidization. With these indicators in the background, the extent of reform, the speed of reform and the details of reform can be determined for each of the countries that are involved. The following measures can be very helpful in forming a necessary part of reform if access to electricity services by the poor (especially in sub Saharan African) is to be improved. Firstly, there is a need for a strong political commitment to improve access to electricity by poor households. This stems from the fact that there is a need for a good and stable political climate to create the soft landing for investors who might be from the developed countries and to guarantee less risk for the financial institution to engage in long term contract. Then the issue of corruption needs to be tackled to ensure that the government of the developing countries ring-fence of finances for electrification of poor areas. This program should also explicitly focus on poor

37 Hofstede dimension on Africa 38 Martin de Jong six rules 39 = 33


21

households and on the sequencing of reforms. There should also be consultations with poor households on the electrification process.

The easiest way to reduce green house gas is to include the developing country in the system by using a lot of renewable to produce energy. In as much as this might seem unfair because of the cost of electricity generation, it might be easy because these areas are located in the primary source of energy rich regions of the world (e.g. sub Saharan Africa with lots of sunshine). Also, because most of these places are rural areas with spatial geographical distribution in terms of population, it is essential to use a smart system that will reduce transmission cost, hence the need for off grid and micro-grid designs. The countries might not consider a mandatory target of RES-E , nonetheless, it might be easier to use RES_E to generate electricity than to use the fossil fuel due to the issue of double energy trading ( gas and electricity ) of which they might not need ( sub Saharan Africa does not need cooling.

A lot of financing mechanism can play a role here, although it depends on bankability which invariably depends on the stability of political climate and long term orientation to investment. All things being equal, multilateral credit agencies can provide funding through Grants, equity contribution, loans, insurance by the countries EXIM40 bank, subsidies for the use of RES-E and guarantees through government commitment. Also funding can come from the private sector. 11.2 Universal access and renewable

The level of universal access will be a gradual migratory system that will see different phases. Also it is imperative that lack of access to electricity is linked to poverty and rural areas hence renewable are not only a choice for generation but almost the best solution. Because of the spatial spread of the rural communities grid extension will be very expensive partially because of distance and partially because of the associated connection cost might be very expensive for the rural citizens even when shallow. Hence there is a need for an alternative solution. One method is by having a microgrid based on renewable and cheap conventional or by having a self owned technology like solar PV heavily subsidized by the government. In any of the cases, a double dividend is gotten; the grid extension issue is avoided and access to electricity is given. The leverage the microgrid has over household PV is that in the case of extension of the grid, it can be connected to the general grid as the population of the rural communities increase, although the associated cost and time is relatively higher.

In as much as renewable in rural communities without access is a good solution for quick access and relatively cheaper, it might not be very politically accepted to give them a mandatory target for RES_E. However they can be convinced to adopt these technologies based on the abundance of natural resources that is around them that determines the primary source. This can be an indirect method of meeting a compulsory target noting that a greater percentage of the sub Saharan African population has no electricity and they are in the rural areas hence when provided with this source of electricity can imply a high level of penetration of RES_E. Also, aid from countries like Netherlands to these countries and investment from the Dutch companies in these areas can be in terms of RES-E technologies and this can help high level of penetration in this technologies , promote the RES-E market and subsequently help in reduction of climate change.

Also a joint implementation of large renewable in areas like North Africa (which is in process41) can help both the countries where this large renewable sources are situated and also provide imported energy to Europe, this also boils down to political stability through promotion of global peace which is essential in having a proper utilization of the RES-E primary sources which paradoxically is not evenly spread with the associated technological knowledge and expertise. Hence a movement towards a global grid might be necessary in granting “universal access” is inevitable in 50 years and beyond, so that access to primary sources could transcend national and international borders and economical system of the world can be harmonized through universal access to electricity.

40 Export and import bank as export credit agencies 41 www.desertec.org


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12 Appendix

Figure 1 the Dutch Grid structure Figure 2 the future Scenarios

Figure 3 Reserve systems

Figure 4; The new reserve system and control


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Figure 5 Likely wind energy ingress routes Table 1 support mechanisms

Table 2 Analysis of support mechanism for the Dutch electric sector (0 represents the status quo)


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Table 3- Adjustment in the Dutch Market architecture.


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Technology

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