Rethinking Flexible Connection Agreements

Abstract

Grid congestion has become a structural constraint on the Dutch energy transition, yet the flexible grid connection agreements introduced to facilitate Battery Energy Storage Systems (BESS) under congested conditions remain poorly understood as integrated institutional arrangements. While these agreements are intended to unlock network capacity through non-firm access, they also create an institutional paradox: the technologies best suited to alleviate congestion are increasingly constrained by access arrangements originally designed for passive network users. This thesis investigates how the institutional design of flexible connection agreements influences the financial viability, operational behaviour, and system alignment of utility-scale BESS in the Netherlands.

An exploratory sequential research design is adopted, combining qualitative institutional analysis with quantitative policy evaluation. First, 33 Dutch regulatory and stakeholder documents are analysed to identify recurring institutional frictions, which are synthesised into three structural tensions: temporal misalignment, asymmetric risk and value allocation, and a disconnect between operational control and financial responsibility. These tensions are subsequently operationalised as four contractual design properties: compensation structure, firmness, volume orientation, and directive control. Their effects are evaluated using a Mixed-Integer Linear Programming (MILP) Policy Testbed that simulates the operation of a 10 MW / 20 MWh utility-scale BESS across 200 independent Monte Carlo market realisations. The evaluation covers four existing Dutch flexible connection agreements, the Alternative Transport Right (ATR85), Capacity Limiting Contract (CBC), Capacity Steering Contract (CSC), and Time-Based Transport Right (TBTR), together with two prospective contract designs, Volume Bound and Firmness Gradient, developed to isolate the independent effects of individual contractual properties.

The results demonstrate that the principal barrier to battery bankability lies upstream of contract design itself. The high-voltage transport tariff alone absorbs approximately 70% of gross market revenues, rendering the unconstrained benchmark structurally non-bankable. Among the evaluated agreements, only the Capacity Limiting Contract consistently restores financial viability. However, it achieves this through a compensation coverage ratio of up to 1,596% of demonstrated operational risk, indicating that bankability is restored through financial transfers sufficiently large to offset the underlying tariff burden rather than through proportionate risk compensation. By contrast, fixed tariff-discount arrangements, particularly the Time-Based Transport Right, remain financially unviable because rigid transport windows conflict with high-value market opportunities.

Beyond financial performance, no single contractual design property simultaneously optimises all evaluation dimensions. Directive control, implemented through the Capacity Steering Contract, delivers the strongest congestion alignment but depends critically on accurate DSO forecasting and activation timing. Volume-oriented arrangements reduce battery degradation and extend operational lifetime, while their contribution to congestion management is regime dependent, improving outcomes in urban, demand-driven networks but potentially worsening them in rural, generation-driven systems. Overall, the findings demonstrate that the effectiveness of flexible connection agreements is determined by their underlying design properties rather than by contractual labels alone. More fundamentally, they indicate that existing agreements are compensating for structural shortcomings in the Dutch grid tariff architecture, suggesting that the greatest opportunity for future reform lies in grid-access pricing rather than incremental contract redesign.