The Cabinet is working on an electricity capacity market to ensure sufficient capacity remains available at times when solar and wind power supply little electricity. Fully coal-fired power plants cannot participate in this, writes Minister S. van Veldhoven-van der Meer for Climate and Green Growth in response to parliamentary questions from CDA MP Henk Jumelet. Other forms of controllable capacity remain possible. Gas-fired power plants, hydrogen power plants, and biomass power plants can participate under certain conditions. Battery systems and demand response may also play a role.
Certainty when sun and wind deliver less
The Netherlands is receiving increasingly more electricity from solar and wind. This reduces emissions from power production but also makes the electricity system more dependent on the weather. On days with little wind and sun, sufficient other capacity must be available. A capacity market rewards this availability. Parties are then paid not only for the electricity they supply but also for capacity that is standing by. This could be a power plant producing extra electricity, but also a battery or a company temporarily reducing its power consumption.
The Cabinet has included in the coalition agreement that a capacity market must be established. The precise form is not yet known. In a letter regarding security of supply, the Minister intends to provide the House of Representatives with further information before the summer regarding the timeline and the steps that are still required.
European rules exclude coal
The scope for a capacity market is largely determined by European rules. A capacity mechanism must comply with the European Electricity Regulation, Regulation EU 2019/943. This sets requirements for the CO2 emissions of participating power plants. According to Van Veldhoven, European sustainability requirements exclude fully coal-fired power plants. These requirements are part of the state aid rules that a capacity mechanism must comply with and apply to all Member States. Therefore, the Netherlands cannot include fully coal-fired power plants in its own capacity mechanism.
The regulation sets two limits: 550 grams of CO2 per kilowatt-hour and an annual average of 350 kilograms of CO2 per kilowatt of installed capacity. The Minister writes that the European Commission is still being consulted to determine whether power plants must meet both conditions simultaneously.
Biomass offers a route to controllable power
The exclusion applies to electricity from fully coal-fired power plants. An existing plant is not automatically excluded as an installation. According to the minister, participation may be possible if a plant meets European CO2 requirements, for example by switching to another fuel such as biomass.
Biomass therefore remains a clear option for controllable power. Such capacity is needed when the electricity system requires additional supply, especially at times when production from solar and wind is low and demand for electricity remains high. Biomass power plants can then contribute to security of supply, as they are not dependent on the current weather.
That role does, however, require clear conditions. European emission rules, state aid conditions, costs and benefits, and Dutch sustainability requirements play a role in this. The distinction is clear. Fully coal-fired production is excluded, while other forms of controllable capacity can still be assessed.
Batteries and demand response alongside power plants
The Minister also points to technologies that are not fuel-fired power plants. A capacity mechanism must be designed to be technology-neutral. Within such a framework, demand response and energy storage via batteries can also contribute to security of supply. Demand response means that companies or other users temporarily adjust their electricity demand. Batteries can store electricity when there is ample supply and feed it back later when demand rises. This gives the electricity system more room to absorb fluctuations in supply and demand.
The elaboration of the capacity market must clarify how such different forms of flexibility compare with one another. A gas power plant, a biomass power plant, a battery, and a company that temporarily uses less electricity do not provide exactly the same service. However, they can all help prevent shortages at critical moments.
Decisions regarding capacity will follow later
Van Veldhoven has not yet outlined a definitive design for the Dutch capacity market. She writes that the Cabinet is looking at experiences in neighboring countries, including Belgium, where fully coal-fired power plants are also not part of the capacity mechanism. The choices regarding participation, compensation, and sustainability requirements have yet to be made.
With regard to biomass, the next steps revolve primarily around the conditions the Cabinet will soon set. The Minister mentions biomass as a possible alternative fuel for power plants that wish to meet European CO2 requirements. This keeps open the option to use bio-based raw materials for controllable capacity, provided it aligns with sustainability requirements and the broader assessment of availability, costs, and application.
The announced letter regarding security of supply should clarify how the Cabinet intends to make that assessment. Until then, it is established that coal falls outside the capacity market. Biomass, batteries, demand response, gas, and hydrogen remain part of the further elaboration.
Source: House of Representatives, answer to parliamentary questions from Member Jumelet regarding the elaboration of a capacity mechanism to guarantee the security of electricity supply and the role of coal-fired power plants: https://www.tweedekamer.nl/kamerstukken/kamervragen/detail?did=2026D24315&id=2026Z07153
Photo: Martijn Beekman
