Report on Monitoring of security of supply 2004-2012

29-04-2005 Over the past few years, the energy sector has moved from a system of central planning to a free market. In a market‑based system suppliers and customers create a balance between supply and demand, in accordance with the principle of 'price produces supply'. But is the supply always sufficient? The report on monitoring of security of supply tries to answer this question.

The report on the Monitoring of the security of supply deals with this question in more detail. You can download the report below.

Security of supply in the electricity market: background

Oversupply and scarcity occur in cycles. Are market parties aware of the risks and do they adjust their behaviour accordingly, for example by taking out long‑term contracts for the supply or purchase of power? The Dutch government considers a balanced electricity market to be of such overriding social importance that it warrants standard monitoring of the development of demand and supply.

The government has therefore asked TenneT to monitor the development of supply and demand. TenneT has developed a new assessment method for this purpose. Several market parties participated voluntarily in the initial two monitoring reports. In 2005, the monitoring exercise and the required data collection were carried out on a statutory basis for the first time. Partly on the basis of the results of the monitoring exercise, the government can decide whether measures are called for.

The concept of ‘security of supply’

Security of supply can be interpreted in a number of ways. In this survey, the emphasis is on the long‑term balance between demand and supply, i.e. will the market be able to provide sufficient supply in the longer term to meet the projected demand? In other words, security of supply is not about short‑term interruptions in the power supply due to grid failure.

‘Security of provision’ is another term that is frequently used in discussions on the subject. This is a considerably more comprehensive concept in that it focuses on the entire energy chain from fuel to conversion, transmission and delivery.

Assessment method

TenneT determines the level of production capacity that is anticipated by market parties and how this relates to prevailing power demand trends. TenneT then determines to what extent the domestic supply can meet the domestic demand. In this model, this is referred to as the margin or ‘leeway’ in the available production capacity.

Electricity producers indicate to TenneT how much production capacity they expect to have at their disposal in the coming years. The demand trend is then determined using data provided by the Netherlands Bureau of Economic Policy Analysis (CPB). TenneT then determines how much ‘leeway’ is available to allow for instant compensation in the event of a sudden interruption in power production or unexpected fluctuations in demand.

With this new assessment method, it is possible to determine the degree to which the Netherlands will have to depend on reserve capacity and/or imports in achieving the required margin. The security of supply is under threat, for example, if the available margin remains insufficient even if all import capacity is used and all reserve capacity is deployed. In the model, this is referred to as the ‘critical margin’ of production capacity.

A new element in this monitoring exercise is the introduction of a second set of assessment parameters based on the ‘Loss of Load Expectation’ (LOLE) method. In view of the key significance of the monitoring exercise, it has been decided that a second method should be introduced to enable verification of the results obtained using the existing method. In addition, the LOLE method is in line with the system applied to assess the security of supply in neighbouring countries. Using the LOLE method can therefore produce a basis for international comparison. 

Downloads

Report Monitoring reliability of supply 2004-2012 (pdf 149,64 Kb)
Report Monitoring reliability of supply 2004-2012, supplement 1 (pdf 120,44 Kb)
Report Monitoring reliability of supply 2004-2012, supplement 2 (pdf 66,61 Kb)