The Dutch government has set out plans to introduce a market-wide capacity mechanism amid concerns of rising Loss of Load Expectations (LOLE), with first auctions targeted for 2028. The decision, set out in a 19 June letter to Parliament, follows TenneT’s latest Security of Supply Monitor report.
This chart shows our latest stochastic projection of NL power prices to 2035. The mean price holds broadly steady across the horizon but the upper tail (P90/P95) spikes progressively higher year on year and winter peaks becoming more exaggerated.
This signals a structural tightening. With TenneT deeming ~1.7 GW of thermal gas capacity as economically ‘at risk’ and expecting an electricity demand increase of 55–70% by 2035, the NL market sees a shrinking backstop of flexible supply to meet the peak demand hours. When that backstop shrinks, prices spike even higher and the market struggles to clear. These are the hours TenneT’s adequacy modelling flags as loss-of-load risk, with LOLE projected to breach the 4-hour standard from 2030 and reach 37–46 hours per year by 2035.
Rather than holding reserve capacity outside the market, the market-wide design proposed by the Dutch government pays all eligible capacity to be available, procured competitively through technology agnostic auctions. This is designed to maintain the existing fleet of generation and incentivise new investment in gas, batteries and demand response.
A key open design question is how the auction will de-rate each technology. Short-duration batteries are likely to receive a materially lower capacity credit than thermal flex such as CCGTs, given their limited contribution during prolonged low-wind, low-solar periods. Whether TenneT sets these de-rating factors on reliability at moments of scarcity rather than total availability will be central to how much each technology can earn, and to whether the mechanism procures enough firm capacity.
For more information, contact Arshpreet Dhatt arshpreet.dhatt@timera-energy.com or Steven Coppack (Power Director) steven.coppack@timera-energy.com.