TenneT: costs of preventing grid failures with 35% reduced

The cost of preventing outages on the electricity grid will drop to €1.1 bln in 2023 from €1.7 bln in 2022. The main reason for the decrease is lower energy prices, said high-voltage grid operator TenneT Monday in its annual publication on the European electricity market.

These so-called imbalance costs incurred by TenneT increased in recent years precisely because of the increase in solar panels and wind turbines. Electricity generation in the Netherlands is becoming increasingly dependent on the weather, and as a result the supply is less predictable than a decade ago. As a result, TenneT is incurring more costs to keep electricity supply and demand in balance. This is necessary to prevent major power outages.

Lower net rates
TenneT is delaying passing these costs on as net tariffs on citizens' and businesses' energy bills. These will also drop because of the current decline, but only in two years, says the grid operator. Incidentally, that does not necessarily mean that energy bills will drop, says Anton Tijdink, TenneT's market design expert. Other costs are rising, such as those for expanding the power grid and for offshore wind.

In recent years there has been much talk from politicians and society about rising energy bills. In particular, grid tariffs and taxes are increasing. What this means for the feed-in fee that many energy companies have recently started charging is impossible to say. According to Tijdink, the costs TenneT incurs for imbalance are different from the risk premiums energy suppliers have to pay due to the increase in solar panels.

Imbalance costs dropped last year due to lower energy prices. According to TenneT, the average electricity price in Western Europe fell by 61% to €97 per megawatt hour in 2023. In 2022, power prices rose to unprecedented levels due to the war in Ukraine and the removal of Russia as a gas exporter. Although prices have fallen, they are still higher than before the war.

TenneT also sees that the power grid is being better balanced, probably due to an increase in batteries. 'That is positive. The imbalance costs will not increase indefinitely is our expectation,' says Tijdink.

Finally, power exports from the Netherlands rose to record levels, the market update shows. The production of solar and wind power increased by 30%, with solar panels growing especially fast.

Source; FD.co.uk, Orla McDonald, 13-06-2024