New calculation model is the next step in unification of European energy market

More energy can be transported over the border without having to build a single pylon. This is due to the implementation of the Flow-based model. The smarter calculation model is the next step in the unification of the European energy market.

On 21 May, the Flow-based model will take effect, announced the ACM. The new calculation model links the Dutch, Belgian, French, German, Luxembourg and Austrian energy markets more closely with each other. At the moment, there is already a lot of trade in electricity over the borders, but many businesses reserve in advance a specific border capacity. In practice, this means that there is sometimes a difference between the reserved and the actual transported value. That is going to change. The capacity will, from now on, be calculated on the basis of the economic surplus of the various spot markets.

This economic coupling is a further coupling of the European energy markets, says John Kruijt of Enova. "Eventually everything will be linked together and electricity will travel from the areas with the lowest production costs to the areas with the highest yields and the prices will become much more even as a result." By looking at the economic optimal capacity and not the advanced reserved capacity, more electricity can be transported.

According to tests in 2013, the price in different markets in almost 40% of incidences was the same due to the Flow-based model, while in the current system that is only the case in 13% of incidences. Given that the price in Germany is generally lower than in the Netherlands, it is likely that a fall in the price in the Netherlands will follow.

What are the results for horticulture? "On the one hand, the traditional Dutch electricity products (primarily those from gas) will be hit harder when the electricity prices fall. Eventually, the result will be further closures of power stations, which will have the benefit of reducing the problems of overproduction which is a current problem in the Netherlands. Therefore lower prices will speed up the solution to overproduction," says Kruijt. "On the other hand, when gas plants are more frequently out of service through lower prices, the problem of limited powerlines will grow and lead to a growing demand from the WKK horticulture to step in during shortages in power supplies and disappointing import, for example when the sustainable generation in Germany falls behind expectations. Those are the moments when the unevenness of prices can increase and the WKK horticulture can still provide good efficiency, provided that people are smart enough to know how to deal with an unbalanced market."

For more information:

John Kruijt

Enova B.V.

Cypresbaan 43

2908 LT Capelle aan den Ijssel

06 - 1091 30 63

088 – 4565050

info@enova.nl