Impact of Dutch annual grid fees on large-scale battery energy storage systems

Abstract

This thesis examines the impact of the new Dutch annual grid fees policy proposed by TenneT on the annual net-profits of a typical 2-hour BESS in the Netherlands. BESS have the ability to adjust their total production capacity, enhancing the stability of electrical grids, allowing for peak shaving practices, and supporting the transition towards a more carbon-neutral and resilient energy infrastructure by storing electricity that would otherwise be curtailed. Therefore, effective control strategies and energy policies are necessary to optimize the beneficial characteristics of BESS.

However, the current energy policies in The Netherlands are preventing the potential rate of deployment for BESS. This is predominantly caused by the annual grid fees that BESS operators need to pay for power consumption. Consequently, the target set out by TenneT to have installed around 10 GW of flexible storage capacity by 2030 will be hard to achieve. In November 2023, TenneT has published a proposal to reduce the annual grid fees for BESS in return for a NFA contract signed by the BESS operator. This NFA contract entails that TenneT has the right to curtail the BESS for up to 15 percent of the time in a year. In addition, the proposal stated that demand charges will be priced dynamically based on time-of-consumption. As, TenneT’s fundamental analysis is not publicly shared, there is no visibility amongst BESS operators how this new energy policy scheme would affect their annual net-profits. Therefore, a Day-Ahead perfect foresight recursive optimization model was developed in Python, simulating BESS operations under the currently applicable policy scheme (baseline scenario) and new policy scheme (proposed scenario’). This research is pioneering in co-optimizing multiple markets simultaneously while evaluating TenneT’s latest annual grid fees scheme. Its findings provide valuable insights for BESS operators and TenneT in navigating policy debates and making informed decisions regarding energy policies and BESS deployment.

The study found that implementing the new policy scheme would lead to increasing net profits for BESS due to a significant reduction in grid fees. Additionally, sensitivity analyses revealed significant insights: the choice of historical pricing data and the selection of curtailment days had a large impact on the identification of the most lucrative scenario, whereas longer BESS duration predominantly augmented annual net-profits for the baseline scenario. Future research could enhance the developed optimization model by incorporating forecasted pricing data, additional electricity markets to trade in, and time-based expectations of congestion for more accurate projections.