Security of supply during the energy transition

Abstract

The climate change is evident and a big contributor to the negative effects of the climate change is the energy production sector. Therefore, the energy production must shift towards a more environment friendly mix. Changing our energy sources to mostly renewable energy sources comes with many challenges.
The way the current Dutch electricity market is designed will lead to a drop in electricity prices on the wholesale market, when the market is penetrated with a high concentration of renewable energy sources. So the electricity market mechanism needs to be reformed to have a price determination system better suited for energy sources with low marginal costs. Furthermore, a capacity remuneration system needs to be implemented to create enough investment incentive in controllable energy capacity to maintain a high level of security of supply in the Dutch energy system during the energy transition.
There exist many different forms of capacity remuneration mechanisms, but the strategic reserve and capacity markets are examined to check which one would work best in the Dutch energy system. In a strategic reserve a central authority sets the capacity volume, which will be contracted by an operator. This operator will dispatch the contracted capacity when needed. In a capacity market a central authority determines the amount of capacity each consumer should acquire through buying capacity credits on the market.
To determine which capacity remuneration mechanism would deliver the highest level of security of supply, simulations of the Dutch energy system are run. The simulations were done using the models AMIRIS and EMLab, which are coupled to give a more accurate representation of reality. The coupling takes place in the Spine Toolbox. The capacity remuneration mechanisms were created in Python and can be activated as modules in the Spine Toolbox.
The vertices are sketched of the possible future energy scenario of the Netherlands in 2050. These vertices are the so called scenarios, regional governance, national governance, European CO2-governance and international governance. The simulations were run with a scenario in which the energy demand stays equal and with a scenario where the energy demand descends similar to the international governance scenario. The international governance scenario was chosen to base the simulations on, because the simulations make profit driven decisions, similar to the international governance scenario.
The results of the simulations show that, firstly, without any governmental interference, a (near) zero-carbon energy system will not be achieved in 2050. Secondly, when running the energy-only market in a realistic scenario, no shortage hours will occur and the system had sufficient generation capacity for supplying the demand, even in a "dunkelflaute" scenario. Thirdly, the basic version of the strategic reserve offered the least costly solution for society for providing sufficient security of supply, so no significant shortage periods will occur in a realistic scenario. Finally, the best option for maintaining security of supply in the Netherlands during the transition to a zero-carbon energy system is the implementation of the yearly capacity market.