Distributed energy resources for congestion management in the Dutch electricity system

Abstract

Rapid intake of intermittent generation units, more decentralised production and electrification of demand impose serious challenges on transmission- and distribution electricity grids. Part of this challenge is an increasing amount of congestion on the grids. The Dutch redispatch market for congestion management needs to be adapted to include small-scale flexible assets in the electricity system for congestion remedial purposes. It is however unknown how the institutional configuration of this market-based congestion management system should be altered to facilitate small-scall flexible assets to provide their flexibility. To do suggestions to improve the current market design, this research combined an institutional analysis based on transaction cost theory with a market design approach. The research has looked at how the transaction from a congestion service provider is currently aligned with the current governance structure, such that possible misalignments could be found. Next, a design space was constructed indicating several choices leading to the eventual market design. By relating this design space to the earlier found problems, different means were found in- and outside the design space. This research has found two main issues that need to be solved. First, a solution needs to be sought regarding the relationship between a congestion service provider and a balancing responsible party. Secondly, it was found that the transaction of flexibility from a congestion service provider to a system operator is surrounded with too much uncertainty and asset specificity is too high. These characteristics of the transaction lead to transaction costs. Given the incentives that follow from the current market-based governance structure, these transaction costs are too high and hamper market parties in utilising their flexibility. The research thereafter has provided insights in means to lower transaction costs related to this uncertainty and asset specificity. Examples of these means are related to the information provision by system operators, defining capacity-based products and making changes to current product definitions.
Further research is necessary to investigate the impact of the broad landscape of transactions in relation to the transaction that was examined in this research. Further research could also focus more on the relation between physical congestion and structural congestions, and relate congestion to other system services.