System effects of cross-border transmission capacity and seasonal storage on the future Dutch power system

Abstract

The Dutch government aims at 70% of electricity production from renewable energy sources in 2030 in order to reach a CO2 emission reduction of 49% as compared to 1990 levels. With the increasing share of variable renewables in the European power system, it becomes increasingly more important to find a way to deal with generation volatility. The Northwest European electricity system is particularly suitable for wind energy due to its vicinity to the North Sea. The large share of wind power generation can cause seasonal flexibility needs in the Northwest European power system. This research is focussed on the system effects of seasonal energy storage and cross-border transmission capacity on the future Dutch power system with a large share of wind energy. System effects in this context are the effects on the Dutch electricity market regarding the dispatch of both flexibility options. Moreover, complementarity between the two options is researched. The unit commitment economic dispatch model Powerflex is used to analyse different levels of storage capacity in the Netherlands and different levels of interconnection between the Netherlands and Germany. The model was extended with a storage module based on dynamic programming for the purpose of this study. The storage is connected to the electricity market and to a hydrogen market with hydrogen price based on the production costs of steam reforming of natural gas. It can be concluded that cross-border transmission capacity leads to small system benefits if it is used to interconnect areas with similar RES potential, weather patterns and demand patterns. Moreover, it was found that storage capacity complements (increases the need for) interconnection capacity deployment, while interconnection capacity does not influence the need for storage capacity. Additionally, storage capacity leads to fewer price extremes and a reduction of curtailment needs. A storage capacity of 50% of the maximum negative residual demand in the Netherlands has been identified as an upper bound of storage requirements in the Netherlands. Limitations to this research are the limited scope with the Netherlands and Germany, the unrestricted hydrogen demand and the limited number of flexibility options. The results can be influenced if a more diverse set of flexibility options is modelled, such as curtailment, demand response and different storage technologies. A more diversified storage portfolio and more flexibility options are expected to lead to smaller storage requirements. Moreover, future research should focus on the limited predictability of renewable generation, research a broader set of flexibility options and on cost-benefit analyses of specific cases. Policy recommendations are to promote the development of hydrogen storage, encourage a highly interconnected European electricity grid and secure back-up capacity by for instance capacity remunerations as their profitability lowers when storage capacity is available.