The cabinet is introducing a market-wide capacity mechanism to prevent the Netherlands from having insufficient electricity in the long term when solar and wind produce little. This could work out favorably for controllable bioenergy, as the new system rewards exactly what biomass and biogas plants do well: supplying electricity when it is needed.
Minister Van Veldhoven of Climate and Green Growth announced the decision in a letter to the House of Representatives dated June 19. The first auction is scheduled to take place in 2028, and the mechanism must be operational in the winter of 2029-2030. Implementation is still subject to approval by the European Commission.
Under this mechanism, parties capable of supplying power or temporarily scaling back their consumption will receive compensation for holding capacity in reserve, even if that capacity is only utilized to a limited extent. The impetus for this is the Security of Supply Monitor from grid operator TenneT. This shows that the standard of a maximum of four hours of expected power shortages per year will be exceeded around 2030 in all scenarios, as demand grows due to data centers and electrification while controllable production capacity decreases. TenneT will organize the auctions, in which selected parties will receive compensation on top of their regular revenues on the electricity market.
An advantage that sun and wind do not have
Herein lies the opportunity for the bioenergy sector. Biomass and biogas plants are not dependent on the weather and can produce on demand. A bio-CHP, an installation that generates both heat and electricity simultaneously (combined heat and power), or a biogas plant that can quickly scale up and down, aligns well with what a capacity market values. Because European regulations stipulate that the mechanism be technology-neutral, batteries and demand response can participate alongside power plants, and in principle, therefore, controllable bio-power as well. Demand response means that companies temporarily reduce their electricity consumption during peak periods.
Until now, bioenergy was primarily valued for the amount of green electricity it produces and the resulting CO2 reduction. With the capacity market, a new form of value is added: the certainty that an installation is in place and can deliver when the system is under pressure. For installations that can respond quickly to price signals, or that combine heat and electricity, this can become a second source of income.
Now is the time to sit down at the table
The capacity market marks a shift in the Dutch energy system, from a focus on maximizing sustainable production to a separate reward for availability and flexibility. This plays into the hands of controllable renewable sources. The Ministry of Climate and Green Growth, regulator ACM, and TenneT will further develop the scheme in the coming period, together with involved parties, taking into account the update of the National Energy System Plan, which will be published around the summer.
The real gains are to be made in the elaboration. Trade association VEMW is urging for swift clarity regarding the deployment and preconditions for biomass, so that existing controllable capacity does not disappear prematurely. As soon as those conditions are in place and the European Commission gives its approval, bio-installations can register for the first auction in 2028.
Source: Central Government
Illustration created using AI.
