Annual Market Update 2020

Electricity market insights

7 April 2021 Introduction Introduction Annual Market Update 2020, an market review focused on the and , including wider European trends

Main findings This Annual Market Update (AMU) is focussed on relevant developments on the Central Western European electricity markets, and the Dutch and German electricity markets in particular. This is the third edition of the Wholesale market prices TenneT Annual Market Update. Previous editions of the AMU and its predecessor the TenneT Market Review can be found here.

Fuel prices & The developments in the Annual Market Update are structured alongside several main topics: generators • The chapter Wholesale market prices discusses wholesale day-ahead and identifies price trends. • As our electricity system is still highly dependent on fossil-fuelled power, the chapter Fuel prices describes Capacity & developments in hard coal, natural gas and emission allowance prices, as well as the margins for generators. generation • The chapter Capacity & generation focuses on the supply side of the electricity system and discusses developments in installed capacity and generation.

RES support • Support for renewables in the Dutch and German system are discussed in the chapter RES support schemes, schemes by looking at budget distribution, awarded capacity and generation in the subsidy schemes. • In the chapter Wholesale market integration the storyline zooms out and includes the interactions of the Dutch Wholesale market and German electricity system with neighbouring systems. Additionally, the ongoing efforts of coupling EU integration electricity markets are discussed in this chapter. • The last two chapters focus on mechanisms in place to ensure the stability and functioning of the electricity system for both the Netherlands and Germany: Balancing measures, to ensure supply and demand is equal at Balancing all times; and redispatch measures, to resolve congestion in the grid.

Congestion management

2 7 April 2021 Main Findings (1/3) Introduction Lower wholesale prices across Europe in 2020, significantly impacted by the covid-19 pandemic

Main Wholesale electricity prices across Europe decreased in 2020. The annual average day-ahead electricity price findings decreased within the CWE region with 19% to 32 €/MWh. Between March and June all European countries installed restrictive measures in a response to the covid-19 pandemic spread across the globe. In these months day-ahead electricity prices dropped to monthly average prices in the range of 17-25 €/MWh. After this first series Wholesale market prices of restrictive measures, some degree of relieve in measures were implemented that resulted in increased economic activity and corresponding demand for energy. Since June the day-ahead electricity prices kept rising and surpassing the yearly average level of around 39 €/MWh since September.

Fuel prices & generators Additionally wholesale prices within the CWE region remained at a similar converge of 43% compared to 42% in 2019. For the Netherlands the amount of hours with full price convergence slightly decreased with all neighbours

Capacity & and reached 49% full convergence with Germany, which was 1%pp less than in 2019. For Germany full generation convergence with most of its neighbours decreased, mainly due to a decrease in convergence with non-CWE neighbours.

RES support schemes Annual average CO2 price remained stable compared to 2019 but 2020 closed at a record high 30,9 €/tCO2. Coal and Gas prices decreased compared to 2019 Wholesale market integration This decrease in wholesale electricity prices across Europe is mainly explained by a significant decrease in annual average natural gas (35%) and coal prices (22%). The annual average carbon emission allowance (EUA) price remained stable around 25 €/t CO2, a -1% decrease compared to 2019. But in difference to 2019 the spread of the Balancing EUA price over the year was much larger. In the first period after the restrictive measures were implemented the EUA price dropped to 15 €/tCO2. Ever since the EUA price increased, closing 2020 at a record high of 30,9 €/tCO2 almost 6 €/tCO2 higher than the annual average. The effect of these changes in fuel and carbon prices Congestion management resulted from January until October in coal-to-gas switching due to higher generator margins for gas-fired power plants compared to coal-fired power plants in both the Dutch and German markets.

3 7 April 2021 Main Findings (2/3) Introduction The Netherlands became a net exporter in 2020 for the first time since 1981 Germany significantly reduced hard coal, lignite and nuclear in it’s power mix

Main The Netherlands reached a net export position over 2020 for the first time since 1981. This coincided with an findings increase in total generation. As a consequence of coal-to-gas switching, generation based on natural gas significantly increased and generation based on coal significantly decreased. Generation from wind and solar increased with 40% to 23 TWh. Additionally around 4,2 TWh of biomass co-firing in coal-fired power plants was Wholesale market prices certified, meaning 4,7 TWh of total generation in coal-fired power plants can be attributed to the biomass co-firing.

Total generation in Germany decreased with 26 TWh (-5%) over 2020. Generation from the most carbon intensive Fuel prices & generators polluters hard coal and lignite decreased most with a combined reduction of 33 TWh compared to 2019. Whereas nuclear decreased 10 TWh (-14%). These reductions were partly offset by the increase of Gas 9 TWh (+17%), Solar and Wind 11 TWh (+6%) and a reduced export position. Capacity & generation 26 GW and 55 TWh/yr RES is granted subsidy under the Dutch SDE+ RES in Germany reached almost 250 TWh in 2020 and 33 B€ in EEG costs RES support schemes In 2020 round I, less funds were made available for SDE+ subsidies compared to previous SDE+ rounds. Solar projects still had the largest share in allocated SDE+ subsidies by 2,2 B€ in 2020 round I. The cumulative Wholesale market development of awarded projects in SDE+ show more than 26 GW of renewable capacity is expected to be integration installed which accounts for an annual generation of around 55 TWh, of which 11 TWh by unsubsidised offshore wind.

Balancing Total generation of renewables in Germany reached almost 250 TWh. The corresponding costs in 2020 are estimated to be around 33 B€. Recent Feed-in-Premium auctions show most tenders in which the available volume remains untendered and prices clear at the installed cap of around 6,2 ct€/kWh. The available tender Congestion management volume for solar was awarded in all recent auctions, clearing around 5,3 ct€/kWh.

4 7 April 2021 Main Findings (3/3) Introduction Increased prices capacity for Dutch FRR in 2020 compared to 2019 Capacity prices for NL FRR balancing products decreased Introduction of 4-hour products for FCR and a decrease of the common price significantly

Main findings Capacity prices for Dutch Frequency Restoration Reserves (FRR) increased in 2020. This effect can partly be contributed to the increase in contracted capacity. The increased demand for upwards capacity is the result of the dimensioning of mFRR+aFRR that increased due to the operational return of Claus C 1.340MW in 2020.

Wholesale market prices Rather stable German aFRR prices throughout 2020 with slightly increased volumes compared to 2019 as an outcome of new dynamic dimensioning approach for both aFRR and mFRR volumes (determined for each 4-h-

Fuel prices & product timeframe individually). generators

Capacity prices for Frequency Containment Reserves (FCR) for the common region decreased in 2020 compared

Capacity & to 2019. For the Dutch share of FCR the prices increased. Furthermore, since July 2020, FCR capacity is generation auctioned daily for 4-hour products instead of for daily products. Dutch congestion management costs increased 27% in 2020 compared to 2019

RES support schemes whereas German costs remained comparable to 2019 Costs for congestion management in the Netherlands increased to €77,6 million in 2020(+27%). Most costs were

Wholesale related to redispatch, and a smaller share can be attributed to restriction contracts, which are contracts with market integration market parties to withhold a share of production for a certain period. Across the border in Germany, cost for congestion management in the first three quarters (Q4 data unavailable yet) of 2020 were in the order of €1 billion, comparable.

Balancing 83 GWh of redispatch volume was contracted through the GOPACS platform in 2020. In September 2019 the first Intraday Congestion Spreads (IDCONS) were activated via the Grid Operators Platform for Congestion Solutions

Congestion (GOPACS). GOPACS is a TSO-DSO coordinated market-based congestion management platform that enables management intraday bids with a geo-tag to be used for congestion management as well (see for more info www.gopacs.eu).

5 7 April 2021 Wholesale market prices

6 7 April 2021 Market Timeframes Introduction The wholesale market consists of several sub-markets

Market Timeframe and Balancing Main findings

Wholesale market prices

Fuel prices & generators

Capacity & generation

RES support schemes

Wholesale market integration ■ The figure above shows the relation between the different timeframes of the wholesale market and the balancing market. In wholesale markets, electricity generators sell electricity to large industrial consumers and electricity suppliers. The

Balancing electricity suppliers sell electricity to the final consumer in retail markets. The scope of this Annual Market Update is on wholesale markets. ■ Balancing and redispatch are system services that are important features of the electricity system. TSOs procure balancing reserves that can be activated in real-time to resolve disruptions in system balance. Also, TSOs perform Congestion management network security analyses to identify congestion, which is resolved by activating redispatch.

7 7 April 2021 Day-ahead prices Europe Introduction 2020: significant decrease of day-ahead prices across Europe

Main Yearly Average DA Prices Europe findings 2019 2020

Wholesale market prices € / MWh 60 Fuel prices & generators 50

40 Capacity & generation 30

20

RES support schemes 10

Wholesale market integration

Balancing ■ Annual average day-ahead prices of almost all European countries significantly decreased from 2019 to 2020. ■ Norway and Sweden experienced the steepest decline in the range of 60% - 80 %. ■ , Spain and Finland experienced a decrease around 30%. Congestion management ■ In most other countries the decrease as in a range of 20% - 25%.

8 7 April 2021 Source: MRC Market Coupling Day-ahead prices CWE Introduction Prices significantly decreased in spring in response to Covid-19 related restrictions

Main Monthly Average Day-ahead Wholesale Prices in the CWE region findings €/MWh 100 -22%

Wholesale 90 market prices 80 70 -19% Fuel prices & 60 generators 50 40 30 Capacity & generation 20 10 0 RES support schemes J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J J A S O N D 2018 2019 2020 NL BE DE/AT* DE* AT* FR yearly average Wholesale * On October 1st, 2018 the German/Austrian bidding zone split into two separate bidding zones market integration ■ The average day-ahead (DA) electricity price decreased within the Central Western European (CWE) region by 19% to 32 €/MWh. ■ Overall, DA prices in the CWE region decreased, mainly due to effects of the restrictive measures that most governments took in response to the Covid-19 pandemic. These resulted in a decrease in demand for electricity and gas, which pushed Balancing down the marginal cost for generators which in return lead to a significant drop in average DA prices. Also the increase of renewables had a price damping effect. Additionally within the CWE region DA prices had a high level of convergence relative to 2018. Congestion ■ management Demand for gas and electricity increased again after the relieve of measures around May and June. These were price lifting effects, for both gas and electricity, contributing to the increase in DA prices since May. In addition, also typical fall and winter uncertainty regarding nuclear availability in France and Belgium contributed to higher prices because of tight availability. 9 7 April 2021 Source: MRC Market Coupling Day-ahead prices – price volatility Introduction Price volatility increased in 2020

Main Spread of Day-ahead prices in selected European countries findings 2019 2020

€/MWh €/MWh 100 100 95% Wholesale CWE Other CWE Other percentile market prices 90 90 75% 80 80 percentile median Fuel prices & 70 70 generators 25% 60 60 percentile

50 50 5% Capacity & percentile generation 40 40

30 30

RES support 20 20 schemes 10 10

0 0 Wholesale market AT DE BE FR NL GB DK1 DK2 NO2 SE4 PL CZ CH AT DE BE FR NL GB DK1 DK2 NO2 SE4 PL CZ CH integration

■ Balancing Higher volatility in general in almost all selected countries and smaller differences in volatility between CWE countries in 2020 compared to 2019. Because prices were lower in Q2 2020 compared to 2019 partly due to the covid-19 related restrictions and higher in Q4 2020 compared to 2019, the volatility over the year increased. ■ Norwegian prices mostly set by the marginal opportunity cost of hydro, these costs were low in 2020 due to the high Congestion management availability of hydro stocks as a result of melting water.

10 7 April 2021 Source: MRC Market Coupling Day-ahead prices CWE – negative prices Introduction Increase of hours per year with negative prices within CWE and neighbours

Main Negative Day-ahead Wholesale Prices Example: 21-4-2020 German Day-ahead wholesale prices and electricity mix findings Nr. of hours GW €/MWh 350 100 50 CWE Other Wholesale 90 market prices 300 80 0

250 70

Fuel prices & 60 -50 generators 200 50 150 40 -100

Capacity & generation 100 30 20 -150 50 10 RES support schemes 0 0 -200 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 AT DE BE FR NL GB PL CH DK1 DK2 NO2 SE4 CZ 21-4-2020 2018 2019 2020 Nuclear Lignite Hard Coal Gas Wholesale Pumped St orage Other Wind Solar market integration Load DA price DE ■ The number of hours per year at which day-ahead markets cleared at negative prices increased in the CWE region, GB, and some Nordic bidding zones. Germany reached 297 hours of negative prices which is 3,5% of all hours in 2020. ■ The example shows the day-ahead prices and hourly generation mix in Germany on a day with significant negative prices. Balancing ■ Negative prices as outcome of the day-ahead auction signal the willingness of producers to pay off takers of their power. This is possible because there are also other remunerations beside the day-ahead market. If those remunerations exceed the costs for negative prices at day-ahead, a positive return is still made. Remunerations can come from a.) other markets, e.g. Congestion management must-run installations for heat, b) network operators, e.g. support system quality, or c) governments, e.g. regulation / subsidies for renewables. In addition, less-/in-flexible thermal power plants that incur heavy start/stop costs and risks will accept a negative price if these costs are lower than the start/stop costs + risks. 11 7 April 2021 Source: MRC Market Coupling; Fraunhofer Energy Charts www.energy-charts.de Fuel Prices & Generators

12 7 April 2021 Fuel Prices Introduction Natural Gas Prices decreased with 35%, Coal prices decreased with 22% on average compared to 2019

Main Natural Gas Prices Coal Prices findings

€/MWhth €/MWhth -28% 30 14 -36% Wholesale market prices 12 25

10 -22% 20 Fuel prices & -35% generators 8 15 6 Capacity & generation 10 4

5 2 RES support schemes 0 0 2018 2019 2020 2018 2019 2020 Gas price Yearly average Coal price Yearly average Wholesale market Gas prices are based on OTC natural gas prices at the Dutch virtual Coal prices are based on the over the counter API#2 integration exchange Title Transfer Facility (TTF). price index. ■ Fuel prices decreased on decreased demand for fuel induced by tough restriction measures of European governments in response to Covid-19.

Balancing ■ Natural gas demand decreased for both the industrial sector as well as the electricity sector, resulting in a drop in Natural gas prices of 35%. ■ Coal prices decreased with 22%. This was affected partly due to a decrease in demand for power as well but more

Congestion particularly by a reduced demand for power from coal-fired generation due to uncompetitive margins (see Generator management Margins NL and DE).

13 7 April 2021 Source: energate Carbon Prices Introduction Year-on-year carbon prices remained stable around 25 €/tCO2 in 2019 and 2020 Closing carbon price in 2020 reached a record high of 30,9 €/tCO2

Main CO2 Emissions Allowance (EU ETS) Prices findings

€/tCO2 35 Wholesale +61% -1% market prices 30

Fuel prices & 25 generators 20

Capacity & 15 generation

10

RES support schemes 5

0 Wholesale 2018 2019 2020 market integration CO2 price Yearly average

■ After the CO2 Emission Allowances price stabilised around 25 €/tCO2 during 2019, the yearly average price for 2020 remained rather stable with a year-on-year decrease of 1%. ■ Balancing Volatility was much higher in 2020 with lower dips and higher peaks. The strong dip occurred when Europe responded to the covid-19 pandemic with heavy restrictions. The peak marked a record high of 30,9 €/tCO2 by the end of 2020, closing the year almost 6 €/tCO2 higher than the yearly average.

■ The upwards trend of the CO2 Emission Allowances prices in 2020 is partly the result of the new agreed EU Green Deal. Congestion management The 40% CO2 Emission reduction target for 2030 compared to 1990 emissions is lifted towards 55%.

14 7 April 2021 Source: energate Generator Margins NL Introduction Coal-to-gas switching from January to November Negative spreads coal- and gas-fired generation in April and May

Main Dutch Monthly Average Clean Dark Spread and Clean Spark Spread findings €/MWh 30

Wholesale market prices 20

Fuel prices & 10 generators

0

Capacity & generation -10

-20 RES support schemes J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J J A S O N D 2018 2019 2020

Wholesale Clean Dark Spread Base Clean Dark Spread New Clean Spark Spread Base Clean Spark Spread Peak market Assumptions integration Coal: efficiency Base 40%, New 45%, emission factor 91,7 tCO2/TJth, heating value 25,1 MJ/kg; Gas: efficiency Base & Peak 55% emission factor 55,6 tCO2/TJth,. ■ At the start of 2021, up to November, the Clean Dark Spread Base and new (for modern high efficient coal-fired power plants) decreased below the Clean Spark Spread Base suggesting coal-to-gas switching. This indicates the point at which

Balancing it is more profitable to produce electricity from natural gas than from coal. ■ The effects of coal-to-gas switching in the actual monthly generation mix (Generation in the Netherlands) shows a significant decrease in generation from coal-fired power plants and an increase in the generation of gas-fired power

Congestion plants. In June and July the difference between the Clean Spark spread base and the Clean Dark spread base and new management was highest, resulting in the lowest contribution of Coal-fired generation in the generation mix.

15 7 April 2021 Source: energate, MRC Market Coupling Generator Margins DE Introduction Negative spreads for Base gas-fired generation from February till May and for Base coal-fired generation from January till August

Main German Monthly Average Clean Dark Spread and Clean Spark Spread findings €/MWh 30

Wholesale market prices 20

Fuel prices & 10 generators

0

Capacity & generation -10

-20 RES support schemes J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J J A S O N D 2018 2019 2020

Wholesale Clean Dark Spread Base Clean Dark Spread New Clean Spark Spread Base Clean Spark Spread Peak market integration Assumptions Coal: efficiency Base 40%, New 45%, emission factor 91,7 tCO2/TJth, heating value 25,1 MJ/kg; Gas: efficiency Base & Peak 55% emission factor 55,6 tCO2/TJth,. ■ The German Clean Dark and Clean Spark Spreads show a similar pattern. Coal-to-gas switching occurs as well from January till November. Exception to the Dutch pattern is the negative margins in February till May (clean spark spread

Balancing base) as a result of high renewable in-feed in Germany suppressing monthly average day-ahead prices down below healthy margins of both coal- and gas-fired power plants. ■ This effect was amplified by reduced loads all over Europe due to Covid-19 related restrictions. In April the Clean Spark Spread Peak was even lower than the Base (in both NL and DE), signalling that day-ahead prices during the day were Congestion management lower than the daily average prices.

16 7 April 2021 Source: energate, MRC Market Coupling Capacity & generation

17 7 April 2021 Capacity in the Netherlands Introduction Main capacity increase by Solar PV, which grew by 3,1 GW 1,9 GW of mothballed capacity was made operational again

Main Dutch Operational Capacity Dutch Mothballed Capacity Changes (Δ2020-2019) findings GW GW GW 45 4 8 7,3 41 Wholesale 40 market prices 6 35 33 2,9 31 3 2,8

Fuel prices & 30 4 generators 25 2 2 20 Capacity & generation 15 0 1 10 0,6 RES support -2 schemes 5 -2,2 0 0 -4 Wholesale 2018 2019 2020 2018 2019 2020 Operational Mothballed market integration Solar Offshore wind Onshore wind Biomass Hydro Oil Natural gas Hard coal Nuclear Other The figures represent the end-of-year installed capacity as observed on December 31st of 2018, 2019 and 2020 ■ Operational capacity increased by 7,3 GW, roughly half is the result of solar PV which grew by 3 GW in 2020. Onshore Balancing wind accounted for 1 GW. The 1,4 GW additional offshore wind capacity are the first two out of five 700 MW offshore wind sites that were part of the 2013 energy agreement, I&II 700MW and III&IV 700MW. ■ Due to improved market conditions for gas-fired power plants (see Fuel Prices & Generators ) almost all mothballed Congestion management capacity re-entered the market with 1,9 GW, of which the Claus C gas-fired power plant with 1,3 GW is the largest connection. Because this is the largest single connection in the Dutch grid this also had implications for the dimensioning of the FRR capacity (see Balancing). 18 7 April 2021 Source: TenneT NL, CBS Generation in the Netherlands Introduction Reduced coal-fired and increased gas-fired and biomass co-firing generation Record high export volumes in July and August

Main Dutch Yearly Gross Electricity Generation Dutch Monthly Generation, net Imports and Exports findings TWh TWh 120 12 Wholesale 100 102 market prices 100 94 10

8 80 Fuel prices & generators 6 60 4

Capacity & 40 generation 2

20 0

RES support schemes 0 -2 2018 2019 2020 J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J J A S O N D 2018 2019 2020 Wholesale market Nuclear Hard coal Certified co-fired biomass Waste Natural gas Wind Uncategorized integration Net import (+) / export (-) Load + grid losses *Generation shown is electricity infeed measured on public grids: ~82-85% of total NL generation. Uncategorised: units <10MW. Solar generation and some onshore wind not available in measurements. . ■ In June and July the difference between the Clean Spark spread base and the Clean Dark spread base and new was Balancing highest, resulting in the lowest contribution of Coal-fired generation in the generation mix (Generator Margins NL). ■ Biomass co-firing increased in 2020 up to 4,5 TWh, this is still 2,1 TWh short of the expected 6,7 TWh annual generation expected from the SDE+ subsidies when co-firing of biomass will be fully reached (NL: Cumulative development SDE+) Congestion management ■ July and August had record high exports due to the high competitiveness of the Dutch gas dominated generation mix. Monthly average day-ahead prices were lowest within the CWE region and the difference between the clean spark spread and clean dark spread was highest in these months. 19 7 April 2021 Source: TenneT NL, CertiQ Solar and Wind Generation in the Netherlands Introduction Offshore wind generation increased up to 6 TWh in 2020 Solar generation increased up to 8 TWh in 2020

Main Dutch Solar and Wind Generation annually and monthly findings TWh TWh 25 2, 5

Wholesale market prices

20 2, 0

Fuel prices & generators 15 1, 5

Capacity & 10 1, 0 generation

5 0, 5 RES support schemes

0 0, 0 J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J J A S O N D Wholesale 2018 2019 2020 market 2018 2019 2020 integration Solar Wind onshore Wind offshore

■ Solar generation increased most of the weather dependent renewable generation sources in the Netherlands up to 8 TWh Balancing (+49%) , a logical consequence of the 3 GW installed capacity increase in 2020. ■ Offshore wind generation increased most relatively with an increase of 66% growing towards 6 TWh generation in 2020. This was the result of the first two offshore wind sites from the 2013 energy agreement, Borssele I&II 700MW and III&IV Congestion 700MW, which started generating in 2020. management ■ The monthly pattern shows that wind and solar were complementary on a monthly aggregated level with typically more solar in the summer and more wind in the winter. Variability on an hourly or daily level is significantly larger. 20 7 April 2021 Source: energieopwek.nl Capacity in Germany Introduction Increase in RES and Gas-fired Generation, reduction of hard coal-fired generation Strategic reserve implemented in 2020 for the first time

Main German Operational Capacity German Reserve and Mothballed Capacity Changes (∆2019-2020) findings GW GW GW 250 12 10 8,8

211 213 8 Wholesale 204 9,6 market prices 10 200 6 8,3 8 4 150 Fuel prices & 2 generators 6 0 100 -0,3 4 -2 Capacity & -1,3 2,3 generation 2,0 -4 50 2 -6 -6,1 RES support 0 0 -8 schemes 2018 2019 2020 Reserves* Mothballed Reserves Mothballed Operational Reserves Mothballed 2019 2020 Solar Offshore Wind Onshore wind Biomass Hydro Other Wholesale market Oil Natural gas Lignite Hard coal integration * Consist of ‘Sicherheitsbereitschaft’ outside market back-up capacity, and ‘Netzreserve’ used for congestion management ■ Operational capacity increased by 2 GW. PV solar grew by roughly 4 GW and wind by 2 GW while coal capacity decreased by almost 4 GW. More than 1 GW of gas-fired capacity from reserves came back into the operational fleet due to improved market conditions (Generator Margins DE). Balancing ■ Strategic reserve scheme introduced in Oct. 2020. For first delivery period a total of ca. 1 GW gas-fired capacity contracted. This capacity is kept outside the market. The strategic reserves are plotted in the operational capacity category in this classification of the Kraftwerklisste from the Bundesnetzagentur. Congestion management ■ According to nuclear phase-out plans, one nuclear power plant was shut down in 2020 (ca. 1 GW).

21 7 April 2021 Source: Kraftwerkliste Bundesnetzagentur, ENTSO-E Transparancy Platform Generation in Germany Introduction Overall generation in Germany decreased in 2020 compared to 2019 Largest reduction for hard coal, lignite and nuclear generation

Main German Yearly Gross Electricity Generation findings TWh TWh 600 60 537 516 Wholesale 490 market prices 500 50 40 400 Fuel prices & generators 30 300 20

Capacity & 200 generation 10

100 0

RES support schemes 0 -10 2018 2019 2020 J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J J A S O N D 2018 2019 2020 Wholesale Nuclear Hard coal Lignite Biomass Oil Natural gas Hydro Wind Solar Uncategorized market integration Net import (+) / export (-) Load

■ Total generation in Germany decreased in 2020 compared to 2019 with 26 TWh (-5%). Generation from hard coal decreased with 13 TWh (-27%) lignite with 20 TWh (-20%) and nuclear with 10 TWh (-14%). This reduction was partly Balancing offset by the increase in gas 9 TWh (+17%) solar and wind 11 TWh (+6%) and a reduced net export position. ■ Biomass and hydro based generation remained a similar generation output over the past three years. ■ Total generation and load in Q2 2020 seems to be significantly below the generation and load in the same period in 2018 Congestion management and 2019 which likely shows some effect of the Covid-19 related restrictions on the total consumption in Germany.

22 7 April 2021 Source: Fraunhofer Energy Charts www.energy-charts.de Solar and Wind generation in Germany Introduction Solar generation increased 9,5% compared to 2019

Main Annual and Monthly Solar and Wind Generation Germany findings TWh TWh 200 25

Wholesale 180 market prices 160 20

140 Fuel prices & generators 120 15

100

Capacity & 80 10 generation 60

40 5 RES support schemes 20

0 0 Wholesale 2018 2019 2020 J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J J A S O N D market integration 2018 2019 2020 Solar Wind

■ In 2020 Solar generation was up 9,5% compared to 2019, reaching 51 TWh which was a logical consequence of the Balancing 4 GW additions in solar capacity. Wind generation increased only marginally up to 132 TWh (+3,5%) ■ The monthly pattern shows that wind and solar were complementary on a monthly aggregated level by typically more solar in the summer and more wind in the winter. Variability on an hourly or daily level are likely to be significantly larger. Congestion management

23 7 April 2021 Source: Fraunhofer Energy Charts www.energy-charts.de RES support schemes

24 7 April 2021 NL: Budget Distribution SDE+ Introduction Decreased budget for SDE+ since 2019 Solar taking around half of the 2020 round I available budget

Main Budget Distribution per SDE+ Round findings Billion € ■ The SDE+ is an operating (feed- 14 in-tariff) subsidy. Producers receive a guaranteed payment Wholesale market prices (subsidy) for the energy they 12 generate from renewable sources. ■ In relation to the expected Fuel prices & 10 technological improvements and generators associated cost reductions, the available SDE+ budget is 8 decreasing. This decision was Capacity & made to ensure sufficient generation 6 competition in development of renewable energy projects. ■ In 2020 round I, several subsidy RES support 4 schemes requests were rejected due to insufficient adherence to 2 requirements set by the Wholesale market Netherlands Enterprise Agency integration (RVO). 0 2012 2013 2014 2015 2016 I 2016 II 2017 I 2017 II 2018 I 2018 II 2019 I 2019 II 2020 I ■ Available grid capacity became part of the requirements for the Solar Onshore wind Balancing project assessments since 2019 Biomass co-firing Hydro round II. Heat/gas/CHP/all other technologies Rejected submissions ■ Solar took slightly more than half of the budget for 2020 I, almost Congestion Available budget management no budget was allocated to wind onshore projects.

25 7 April 2021 Source: RVO NL: Cumulative development SDE+ Introduction Over 26 GW renewable electricity capacity is projected to be installed under the SDE+ subsidy scheme End of Year Cumulative Capacity to be installed under End of Year Cumulative Electricity Generation to be generated Main annually under SDE+ findings SDE+

GW TWh/yr 30 60

Wholesale market prices 25 50

Fuel prices & 20 40 generators

15 30

Capacity & generation 10 20

RES support 5 10 schemes

0 0 Wholesale 2012 2013 2014 2015 2016 2017 2018 2019 2020 2012 2013 2014 2015 2016 2017 2018 2019 2020 market integration Solar Onshore wind Biomass co-firing Hydro Offshore wind Offshore wind unsubsidised *Note that 2020 round II is excluded in 2020 figures ■ After 8,5 years of SDE+ subsidy schemes, more than 26 GW of awarded capacity of solar, on- and offshore wind, hydro, biomass co-firing is in operation or is planned to be installed. 2,3 GW of this capacity is unsubsidised offshore wind. Balancing ■ This cumulative capacity will be good for 55 TWh annual generation of which 11 TWh from unsubsidised offshore wind. With an annual consumption of 117 TWh in 2018 (AMU 2018), renewable generation resulting from SDE+ subsidies (excluding the unsubsidised offshore wind) would correspond to 38% of total annual consumption. Congestion management ■ A clear discrepancy is seen between awarded capacity and awarded electricity generation. Even though the majority of capacity was awarded to solar in recent years, electricity generation from wind is higher. This can be attributed to the higher load factor of these technologies. 26 7 April 2021 Source: RVO DE: Cumulative development EEG payments Introduction Increased total EEG payments for 2020

End of Year Cumulative Payments to Renewable Support Renewable Generation Main Scheme (EEG) findings

Billion € TWh

Wholesale 35 300 market prices 30 250

Fuel prices & 25 generators 200 20 150 Capacity & generation 15 100 10

RES support schemes 5 50

0 0 Wholesale market 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 integration Solar Biomass Onshore wind Offshore wind Hydro Total Solar Biomass Wind Hydro

Balancing ■ Overall lower electricity wholesale price level led to a substantial increase in payments to renewable generators under the EEG scheme in 2020 (in total: 33,1 billion €; numbers preliminary) ■ As a result, for the first time in the history of the Renewable Energy Sources Act, the EEG surcharge was subsidized by Congestion management federal funds. The surcharge was fixed at 6,5 ct/kWh for 2021. It would otherwise have risen to 9,7 ct/kWh

27 7 April 2021 Source: Bundesnetzagentur DE: Development of feed-in premiums Introduction Level of feed-in premiums (FiP) for new onshore wind installations remains constant in 2020 with awarded FiP close to bid cap of 6,2 ct€/kWh

Main EEG Auction results for the onshore wind Feed-in Premiums (FIP) findings MW ct€/kWh 1.500 10 Wholesale market prices 1.200 8 6,2 6,3 6,1 6,1 6,2 6,2 6,2 6,1 6,2 6,1 6,1 6,1 6,2 6,1 Fuel prices & 5,7 5,7 generators 900 6 4,7 4,3 3,8

Capacity & 600 4 generation

300 2

RES support schemes 0 0

Wholesale market integration 05-2017 08-2017 11-2017 02-2018 05-2018 08-2018 10-2018 02-2019 05-2019 08-2019 09-2019 10-2019 12-2019 02-2020 03-2020 06-2020 07-2020 09-2020 10-2020 awarded capacity (MW) tendered volume (MW) average awarded FiP bid cap

■ Balancing As in 2019, undersubscribed auctions in 2020 indicate a rather low degree of competition among bidders. As a result, awarded feed-in premiums on average close to bid cap of 6,2 ct€/kWh. ■ In total, only 2,3 GW of capacity was awarded in 2020 (2019: 1,8 GW). This awarded capacity is still significantly below the politically set target for new onshore wind capacity. As a consequence, no significant increase of new wind capacity Congestion management coming online in the next years to be expected.

28 7 April 2021 Source: Bundesnetzagentur DE: Development of feed-in premiums Introduction Average FiP for new PV installations (> 750 kW) in 2020 continues to be in the range of 5,2 ct€/kWh

Main EEG Auction results for the PV solar Feed-in Premiums (FIP) findings MW ct€/kWh 1.500 10

Wholesale market prices 1.200 8 6,6 6,6 Fuel prices & 5,7 5,6 generators 5,5 5,3 900 5,0 5,2 5,2 5,2 5,2 6 4,9 4,7 4,8 4,9 4,3 4,6

Capacity & 600 4 generation

300 2

RES support schemes 0 0

Wholesale market integration 05-2017 08-2017 11-2017 02-2018 05-2018 08-2018 10-2018 02-2019 05-2019 08-2019 09-2019 10-2019 12-2019 02-2020 03-2020 06-2020 07-2020 awarded capacity (MW) tendered volume (MW) average awarded FiP bid cap

■ Balancing In contrast to tenders for new wind capacity, auctions for new PV installations larger than 750 kW were all oversubscribed in 2020 leading to more competition among project developers as also reflected in the average awarded FiP being lower than the maximum bid size (bid cap of 7,5ct€/kWh). ■ Lowest submitted bid in 2020 was 3,55 ct€/kWh showing the high degree of maturity and cost competitiveness large PV Congestion management projects have reached.

29 7 April 2021 Source: Bundesnetzagentur Wholesale market integration

30 7 April 2021 Aggregated Exchange EU Introduction Shift from importer to exporter in the Netherlands, Spain and Ireland Reduced exports in France and Germany, reduced imports in the UK and Italy

Main Yearly Aggregated Import and Export Volumes findings 2019 2020

TWh/year Net export Wholesale market prices 70

30

Fuel prices & generators 0

-30 Capacity & generation

-70

RES support schemes

Wholesale market integration

■ The Netherlands, Spain and Ireland shifted from a net import position in 2019 towards a net export position in 2020. These three countries have a significant share of gas-fired capacity in their generation mix. The increased and very Balancing competitive margins for gas fired generation made these countries more competitive with net exports as a result. ■ France and Germany exported less electricity in 2020 compared to 2019, whereas the UK and Italy imported less. ■ Norway increased it’s export position significantly due to a very competitive generation mix of hydro power and a high Congestion management availability of the hydro buffers.

31 7 April 2021 Source: ENTSO-E Transparency Platform Cross-border Flows 2019 Introduction Most NL imports came from DE and most exports went to the UK Most DE imports came from FR and most exports went to CH

Main Physical Cross Border Flows 2019 findings

■ The Netherlands received most of its imports from Germany (9,1 Wholesale market prices TWh). This is complemented by imports from Belgium (4,5TWh) and Norway via NorNed (2,4 TWh. The majority of exports Fuel prices & generators were going to the UK (6,2 TWh), followed by Belgium (5,4 TWh). ■ Germany’s main exports went to Capacity & Switzerland (13 TWh), Austria generation (11.1 TWh), Poland (10,1 TWh ) and the Netherlands (9,1 TWh). Total imports were much lower RES support schemes as Germany is a net exporting country, but were mostly received from France (14,8 Wholesale TWh), the Netherlands (2,9 market integration TWh) and Denmark (2,7 TWh). ■ Note that this figure shows physical flows between countries, which are different from scheduled commercial exchanges between bidding zones. Balancing

Congestion management

32 7 April 2021 Source: ENTSO-E Transparency Platform Cross-border Flows 2020 Introduction Go-Live of NordLink DE-NO interconnector and Allegro DE-BE interconnector

Main Physical Cross Border Flows 2020 findings

■ NL – DE imports and exports Wholesale were more balanced in 2020 market prices due to a very competitive market gas-fired based capacity mix due to very high margins for Fuel prices & gas-fired power. generators ■ Netherlands became a net exporter in 2020.

Capacity & ■ Go-live of Allegro interconnector generation between BE and DE on November 9th 2020 and NordLink between DE and NO th RES support on December 8 2020 resulted schemes in the first BE-DE and DE-NO flows respectively. ■ Wholesale Note that this figure shows physical market flows between countries, which are integration different from scheduled commercial exchanges between bidding zones.

Balancing

Congestion management

33 7 April 2021 Source: ENTSO-E Transparency Platform Cross-border flows NL Introduction The Netherlands became a net exporter for the first time since 1981 with a net export of 2,6 TWh

Main Dutch yearly import, export and net import findings TWh 40

Wholesale market prices 30

20 Fuel prices & generators 10

Capacity & 0 generation

-10

RES support schemes -20

-30 Wholesale market integration 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Import Export Net import

■ Balancing For the first time since 1981 the Netherlands became a net exporter of electricity. This was mainly the result of decreased imports that show a decreasing trend since 2014 (with an exception for 2018). Exports have remained relatively stable within a range of 18 TWh to 22 TWh since 2014. ■ The net export position reflect the improved competitiveness of gas-fired generation, which is the main source of power Congestion management for the Netherlands.

34 7 April 2021 Source: CBS Net Positions CWE Introduction Increased and exporting net positions for both NL and BE Decreased and exporting net positions for Germany and France

Main Spread of day-ahead net position in CWE findings GW Germany DE GW France FR 12 12 95% percentile 9 9 Wholesale market prices 6 6 75% percentile 3 3 median 0 0 Fuel prices & 25% percentile generators -3 -3

-6 -6 5% percentile 2018 2019 2020 2018 2019 2020 Importing | Exporting Capacity & GW Netherlands NL GW Belgium BE GW Austria AT generation 5 5 5

3 3 3

RES support 1 1 1 schemes -1 -1 -1

-3 -3 Wholesale -3 market integration Importing | Exporting -5 -5 -5 2018 2019 2020 2018 2019 2020 2019 2020 ‘Net Position' means the netted sum of electricity exports and imports for each market time unit (hourly and Day-ahead in above graph) for a bidding zone ■ Both NL and BE increased their annual export position in 2020 compared to previous years by an increased amount of Balancing hours with a positive net position (which reflects a net export of electricity). ■ FR and DE had a decreased annual export position in 2020 compared to 2019. For France the export position is still dominantly exporting. For Germany the net position became much more volatile with a significant increase in net importing Congestion positions. management ■ Austria remained a dominant net import position with a slight increase in volatility.

35 7 April 2021 Source: MRC Market Coupling Price Areas in CWE Introduction Stable amount of hours with full price convergence in 2020 compared to 2019, higher compered to 2018

Main Monthly Distribution of Day-ahead Price Areas in the CWE Region findings DE / AT Bidding zone split 100%

Wholesale 90% market prices

80%

70% Fuel prices & generators 60%

50%

Capacity & generation 40%

30%

RES support 20% schemes 10%

Wholesale 0% market J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J J A S O N D integration 2018 2019 2020 1 2 3 4 5 Yearly average

■ The figure shows the time distribution of the number of day-ahead price areas in the CWE region bidding zones. When Balancing there is one price area, full price convergence occurs (all bidding zones have the same price). ■ There was full price convergence (1 price area) for 43% of the time in 2020, which is almost equal to 42% in 2019 and significantly higher than the 33% in 2018. Congestion management ■ Full price convergence in 2020 was highest in June with 65% and lowest in January with 28%.

36 7 April 2021 Source: MRC Market Coupling DA Price Convergence 2019 Introduction High convergence within the CWE region & DE-DK

Main Day-ahead Price Convergence for Selected Countries in 2019 findings

■ Relatively high convergence for CWE countries and DE-DK. Lower Wholesale market prices convergence between CWE and other countries. ■ Centrally located countries that are included in the flow-based DA market Fuel prices & generators coupling had higher price convergence with each other. ■ For some bidding zone borders there is inherently zero or low price Capacity & generation convergence as: ▫ Grid losses are implicitly included in market coupling (e.g. NL-GB, NL-NO2) ▫ For explicit coupled borders, the RES support schemes capacity auction price needs to be added to the DA prices (DE-PL, DE- CZ, AT-CZ, AT-HU, all CH borders).

Wholesale market integration Notes for figure: ■ DA price convergence in white, black numbers show how often the DA price was higher in that country. ■ Percentages do not always count up to 100% Balancing due to rounding

Congestion management

37 7 April 2021 Source: MRC Market Coupling DA Price Convergence 2020 Introduction Similar convergence within all CWE borders in 2020 compared 2019

Main Day-ahead Price Convergence for Selected Countries in 2020 findings

■ 2020 DA price convergence remained roughly similar to 2019 Wholesale market prices within all CWE borders ■ Full convergence for NL with DE in 49% of the time(-1%pp) which is comparable to 2019, and 30% of Fuel prices & generators the time DE prices were higher than NL(+10%pp). ■ Between DE had the highest full convergence with AT with 55% Capacity & generation which is a reduction of 1%pp compared to 2019. ■ BE prices less often higher than FR (-6 %pp) and less often higher than RES support schemes NL (-6 %pp).

Notes for figure: Wholesale ■ market DA price convergence in white, black integration numbers show how often the DA price was higher in that country. ■ Percentages do not always count up to 100% due to rounding

Balancing

Congestion management

38 7 April 2021 Source: MRC Market Coupling Balancing

39 7 April 2021 Net Imbalance Volumes NL Introduction Increased number of ISP’s in long system Imbalance Cluster

Main Imbalance Volume Distribution in the Netherlands findings Number of ISPs 4.000

Wholesale 3.500 market prices 3.000

2.500 Fuel prices & generators 2.000

1.500

1.000 Capacity & generation 500

0

RES support >150

schemes <-150 0 to 12. 5 -12.5 to 0 to -12.5 12.5 to 25 25 to 37.5 37.5 to 50 50 to 62.5 62.5 to 75 75 to 87.5 87.5 to 100 -87.5 to -75 to -87.5 -62.5 to -75 -50 to -62.5 -37.5 to -50 -25 to -37.5 -12.5 to -25 100 to 112.5 112. 5 to 125 125 to 137.5 137. 5 to 150 -100 to -87.5 to -100

-150 to -137.5 to -150 -125 to -137.5 -112.5 to -125 -100 to -112.5 < short long> Wholesale 2018 2019 2020 Imbalance Cluster (MWh) market integration ■ This figure shows the total number of Imbalance Settlement Periods(ISPs) per year in which the net system imbalance volume fell within a certain cluster of net imbalance volumes. ■ The imbalance Volume distribution in 2020 shows some more skewedness towards the right side indicating an increase of Balancing the number of ISP’s in a long system Imbalance Cluster compared to the previous year. ■ Since 2013, a continuing trend was seen: a decreasing number of ISPs with low net imbalance volumes and an increasing number of ISPs with high net imbalance volumes. This trend seems to have stopped in 2019 compared to 2018. Congestion management

40 7 April 2021 Source: TenneT NL Imbalance Price Delta NL Introduction Average long and short system prices increased in 2020

Main Average Imbalance Price Delta in the Netherlands findings €/MWh 45

Wholesale 40 market prices 35

30 Fuel prices & generators 25

20

Capacity & generation 15

10

RES support 5 schemes

0 J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J J A S O N D Wholesale 2018 2019 2020 market integration Short system state Long system state Yearly average short system state Yearly average long system state In the AMU 2018 ISPs with dual pricing were not included. In the AMU 2019 and 2020 these are included using the weighted average ISP price.

Balancing ■ The imbalance price delta is the difference between the imbalance price and the day-ahead price and can be considered as the penalty for being in imbalance. ■ The average imbalance price delta of short system state (imbalance shortage) and of long system state (imbalance Congestion management surplus) were higher in 2020 than in 2019.

41 7 April 2021 Source: TenneT NL, MRC Market Coupling Imbalance price delta spreads NL Introduction Higher prices at higher imbalance volume clusters

Main Spread of Dutch Imbalance Price Delta 2020 findings

€/MWh

Wholesale 450 95% percentile market prices 400 350 75% percentile

Fuel prices & 300 median generators 250 25% percentile 200 150 5% percentile Capacity & generation 100 50 0 RES support schemes -50 >150 <-150 0 to 25

Wholesale -25 0 to 25 to 50 50 to 75

market 75 to 100 -75 to -75 -50 to -50 -25 to 100 to 125 125 to 150 integration -100 -75 to < short long> -150 to -150 -125 to -125 -100 to Imbalance Cluster (MWh) ■ The figure shows the spread or variability in imbalance price delta, the difference between the day-ahead price and the imbalance price, for certain imbalance clusters. Balancing ■ The spread is higher at larger imbalance volume clusters, which corresponds to the principle that the incentive to stay balanced or to help restore the system is larger with larger system imbalance volumes. ■ As was the case last years as well (see AMU 2018 and 2019), the imbalance price spread includes negative values in Congestion management most imbalance clusters. This can be attributed to the depressing price effect of IGCC (cooperation between TSOs to exchange imbalance volumes in opposite directions).

42 7 April 2021 Source: TenneT NL, MRC Market Coupling Net Imbalance Volumes DE Introduction Increased number of ISP’s in long system Imbalance Cluster

Main Imbalance Volume Distribution in Germany findings Number of ISPs 4. 500

Wholesale 4. 000 market prices 3. 500

3. 000 Fuel prices & generators 2. 500

2. 000

1. 500 Capacity & generation 1. 000

500

RES support schemes 0 >390 <-390 0 to 30 -30 to 0 to -30 30 to 60 60 to 90 90 to 120 -90 to -60 to -90 -30 to -60

Wholesale 120 to 150 150 to 180 180 to 210 210 to 240 240 to 270 270 to 300 300 to 330 330 to 360 360 to 390 -120 to -90 to -120

market -360 to -390 -330 to -360 -300 to -330 -270 to -300 -240 to -270 -210 to -240 -180 to -210 -150 to -180 -120 to -150 integration < short long>

2018 2019 2020 Imbalance Cluster (MWh)

Balancing ■ This figure shows the total number of Imbalance Settlement Periods(ISPs) per year in which the net system imbalance volume fell within a certain cluster of net imbalance volumes. ■ The imbalance Volume distribution in 2020 shows some more skewedness towards the right side indicating an increase of Congestion management the number of ISP’s in a long system Imbalance Cluster compared to the previous year.

43 7 April 2021 Source: ENTSO-E Transparency Platform Imbalance Price Delta DE Introduction Average long and short system prices increased in 2020, but Q4 prices became very negative

Main Average Imbalance Price Delta in Germany findings €/MWh 80

Wholesale 60 market prices

40

Fuel prices & 20 generators

0

Capacity & -20 generation

-40

RES support -60 schemes

-80 J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J J A S O N D Wholesale 2018 2019 2020 market integration Long system state Short system state Yearly average short system state Yearly average long system state

Balancing ■ The imbalance price delta is the difference between the imbalance price and the day-ahead price and can be considered as the penalty for being in imbalance. ■ The average imbalance price delta of short system state (imbalance shortage) and of long system state (imbalance Congestion management surplus) were higher in 2020 than in 2019, although became significantly negative since October 2020.

44 7 April 2021 Source: ENTSO-E Transparency Platform, MRC Market Coupling Imbalance price delta spreads DE Introduction Higher prices at higher imbalance volume clusters

Main Spread of German Imbalance Price Delta 2020 findings €/MWh

900 95% percentile

Wholesale market prices 750 75% percentile 600 median

Fuel prices & 450 generators 25% percentile 300 5% percentile 150 Capacity & generation 0

-150

RES support -300 schemes >360 <-360 0 to 60 -60 to -60 0 to

Wholesale 60 to 120 120 to 180 180 to 240 240 to 300 300 to 360 market -120 -60 to -360 to -360 -300 to -300 -240 to -240 -180 to -180 -120 to < short long> integration Imbalance Cluster (MWh)

■ The figure shows the spread or variability in imbalance price delta, the difference between the day-ahead price and the imbalance price, for certain imbalance clusters. Balancing ■ A defining aspect of the current average pricing model is the local price peak around zero imbalance which is reflected in the graph in the -60 to 0 and 0 to 60 cluster. This is a difference with the imbalance price delta of approximately zero for small imbalance volumes in the Dutch system. Congestion management ■ The spread is higher at larger imbalance volume clusters, which corresponds to the principle that the incentive to stay balanced or to help restore the system is larger with larger system imbalance volumes.

45 7 April 2021 Source: ENTSO-E Transparency Platform, MRC Market Coupling FCR common & Dutch auction Introduction 4-hour products were auctioned instead of daily products since July 2020 Common annual average prices decreased, Dutch increased

Main Frequency Containment Reserve (FCR) Capacity Prices in the Common and Dutch Auctions findings €/MW/h 140 Pay as bid Marginal pricing Marginal pricing < weekly auction daily auction, daily product > daily auction, 4-hour product > Wholesale market prices 120

100

Fuel prices & generators 80

60 Capacity & generation 40

20 RES support schemes

0

Wholesale Jul-18 Jul-19 Jul-20 market Jan-18Feb-18Mar-18Apr-18May-18Jun-18 Aug-18Sep-18Oct-18Nov-18Dec-18Jan-19Feb-19Mar-19Apr-19May-19Jun-19 Aug-19Sep-19Oct-19Nov-19Dec-19Jan-20Feb-20Mar-20Apr-20May-20Jun-20 Aug-20Sep-20Oct-20Nov-20Dec-20 integration Dutch Dutch Average Weekly Dutch - Annual Average Common Common Average Weekly Common - Annual Average Note that since 01-07-2019 there is no separate auction for NL, the minimum capacity that needs to be active in the NL control area (34MW) is a boundary condition in the common auction algorithm.

Balancing ■ From July 2020 the auction systematics changed for both the Common and Dutch Auction. The D-1 daily auctions for a daily product were replaced with daily auctions for six 4-hour products. ■ FCR prices became more volatile due after the introduction of daily auctions in 2019. After the introduction of 4-hour

Congestion products as of July 2020, volatility increased further. management ■ The prices for the common auction reached a record low price of 2,50 €/MW/h at 15-12-2020 for the 17h-20h product. Also the Dutch auction reached a record low price of 2,75 €/MW/h at 23-12-2020 for the 9h-12h.

46 7 April 2021 Source: regelleistung.net FCR common & Dutch auction Introduction Hr. 1-4 and hr. 5-8 products have the highest prices in the Common auction High variability in prices in the Dutch Auction

Main Frequency Containment Reserve (FCR) Capacity Prices in the Common and Dutch Auctions findings

€/MWh Common Dutch

60 60 95% percentile Wholesale market prices 75% percentile 50 50 median Fuel prices & generators 25% percentile 40 40

5% percentile Capacity & generation 30 30

RES support 20 20 schemes

10 10 Wholesale market integration 0 0 Hr. 1-4 5-8 9-12 13-16 17-20 21-24 1-4 5-8 9-12 13-16 17-20 21-24

Balancing ■ From July 2020 the auction systematics changed for both the Common and Dutch Auction. The D-1 daily auctions for a daily product were replaced with daily auctions for six 4-hour products. ■ The Dutch market has most often the highest prices for the 9-12 and 17-20 hour blocks. For the same 4-hour products the Congestion management common auction has most often the lowest prices.

47 7 April 2021 Source: regelleistung.net aFRR in the Netherlands Introduction Prices for aFRR increased during 2020 Introduction of daily contracts in September

Main Contracted automatic Frequency Restoration Reserve (aFRR) Capacity Volumes and Prices in the Netherlands findings MW Weekly €/MW/h 600 contracts 12 Month and weekly contracts Daily contracts

Wholesale market prices 500 10

400 8 Fuel prices & generators 300 6

Capacity & 200 4 generation

100 2

RES support schemes 0 0 J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J J A S O N D

Wholesale 2018 2019 2020 market integration Volume aFRR symmetrical Volume aFRR upward Volume aFRR downward Price

■ After a small decrease in prices from January to April, prices for aFRR overall slightly increased. ■ Balancing Since September aFRR is contracted on a daily basis for a 1 day period instead of Monthly and Weekly contracts. This was preceded by a period of two months, July and August, with only weekly contracts. ■ Since 2018, a fixed amount of capacity for aFRR and mFRRda (see next slide) combined is contracted, contracting the least costly combination, instead of fixed amounts for aFRR and mFRRda products separately. Therefore there is a Congestion management variation in monthly average volumes contracted.

48 7 April 2021 Source: TenneT NL mFRRda in the Netherlands Introduction mFRRda upwards prices increased during 2020 mFRRda downwards prices remained relatively stable during 2020

Main Manual Frequency Restoration Reserve directly activated (mFRRda) Capacity Volumes and findings Prices in the Netherlands

MW Quarterly and Monthly Weekly Daily €/MW/h Monthly contracts contracts contracts contracts ■ Wholesale 1. 200 12 Prices for upwards mFRRda market prices reserves increased during 1. 000 10 2020. This effect can partly be 800 8 contributed to the increase in

Fuel prices & 600 6 contracted capacity. The generators increased demand for upwards 400 4 capacity is the result of the 200 2 dimensioning of mFRR+aFRR Capacity & that increased due to the generation 0 0 operational return of Claus C 1. 200 12 1.340 MW in 2020. 1. 000 10 ■ Prices for downwards mFRRda RES support schemes slightly increased compared to 800 8 the second half of 2019 and 600 6 remained relatively table during Wholesale market the year. integration 400 4

200 2

0 0 Balancing J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J J A S O N D 2018 2019 2020

Volume mFRRda upward Volume mFRRda downward Price Congestion management

49 7 April 2021 Source: TenneT NL aFRR in Germany Introduction Introduction of balancing energy market in November 2020 aFRR prices on average lower compared to 2019

Main Automatic Frequency Restoration Reserve (aFRR) Capacity Volumes and Prices in Germany* findings

MW €/MW/h Mixed-pricing scheme ■ Rather stable aFRR prices throughout 2. 500 25 2020 with slightly increased volumes Wholesale market prices compared to 2019 as an outcome of new 2. 000 20 dynamic dimensioning approach for both aFRR and mFRR volumes (determined 1. 500 15 for each 4-h-product timeframe Fuel prices & individually) generators ■ 1. 000 10 Current balancing market design which was re-introduced in July 2019 (following a court ruling to abolish the mixed-price Capacity & 500 5 mechanism) proved again in 2020 to be generation efficient regarding a reliable balance 0 0 service procurement. E.g., price spikes 2. 500 25 like in July 2019 have not occurred ever RES support since the mixed price system was schemes replaced. Extreme aFRR and mFRR 2. 000 20 prices in July 2019 can partly be attributed to the mixed-price system: low Wholesale 1. 500 15 market balancing energy prices encouraged integration some BRPs to deliberately deviate from 1. 000 10 schedule, in particular during periods with high intraday prices. This has been 500 5 observed during 3 days in June 2019 Balancing leading to significant system imbalances. In response to these system imbalances, 0 0 TSOs increased capacity volumes to be J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J J A S O N D procured which resulted in these Congestion 2018 2019 2020 management significant price spikes. Volume aFRR upward Volume aFRR downward Price * Figures for 2020 include Austria (common tender to procure aFRR capacity jointly for both countries) 50 7 April 2021 Source: TenneT DE mFRR in Germany Introduction mFRR volumes decreased in 2020 Higher prices volatility for upward mFRR during in second half of 2020

Main Manual Frequency Restoration Reserve (mFRR) Capacity Volumes and Prices in Germany findings

MW €/MW/h 2. 500 Mixed-pricing scheme 25 ■ Wholesale In July 2019, mFRR upward market prices volume was raised to 2.000 MW 2. 000 20 in response to significant system imbalances occurring in the 1. 500 15 Fuel prices & German power system on generators multiple days in June 2019. 1. 000 10 ■ Dynamic dimensioning of procured capacity for both Capacity & generation 500 5 upward and downward mFRR since 2020 volume decreased in 0 0 2020 to previous levels of around 1.000 MW for upward RES support 2. 500 25 schemes mFRR and 600 MW for downward mFRR indicating that 2. 000 20 effect of new dimensioning Wholesale market 1. 500 15 approach (volume determined integration for each 4-h-product timeframe 1. 000 10 individually). ■ In line with EB GL, a balancing 500 5 energy market was introduced in Balancing November 2020. 0 0 J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J J A S O N D Congestion 2018 2019 2020 management Volume mFRR upward Volume mFRR downward Price

51 7 April 2021 Source: TenneT DE Congestion & management

52 7 April 2021 Redispatch Volumes NL Introduction Redispatch volumes remained roughly similar in 2020 compared to 2019 Most redispatch required on critical branches

Main Redispatch upwards and downwards volumes in the Netherlands findings

GWh +4% 180 Wholesale market prices 160

140

Fuel prices & generators 120 -15% 100

80 Capacity & generation 60

40

RES support schemes 20

0

Wholesale J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J J A S O N D market integration 2018 2019 2020 Critical branches Other network elements Yearly average

■ Balancing Critical branches are lines that are included in CWE flow-based market coupling, as they significantly impact and are impacted by CWE cross-border exchanges. Redispatch takes place to ensure that grid operation remains within operational security limits. ■ Average redispatch volumes remained roughly stable in the Netherlands with 49 GWh/month in 2019 and 51 GWh/month Congestion management in 2020.

53 7 April 2021 Source: TenneT NL Congestion Management Costs NL Introduction Costs for Congestion Management increased by 27% in 2020

Main Redispatch and Restriction Costs in the Netherlands findings

mln€ 35 Wholesale market prices 30

25 +27% Fuel prices & generators +14% 20

15 Capacity & generation 10

5 RES support schemes 0 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Wholesale market 2018 2019 2020 integration Total costs Yearly average

■ Balancing This figure shows redispatch and restriction costs in the Netherlands. Restriction concerns contracts with market parties to withhold a share of production for a certain period. Total costs increased from €61,0 million in 2019 to € 77,6 million in 2020 with a slight increase of redispatch volume activated. A significant part of the cost increase is related to restriction contracts. Congestion management

54 7 April 2021 Source: TenneT NL GOPACS Introduction 83 GWh of redispatch volume contracted through GOPACS Highest average IDCONS prices in January 2020 of 162 €/MWh

Main Number of congestion management request, cleared volume of IDCONS, and weighted average prices of cleared IDCONS findings Number of requests GWh €/MWh 80 40 200 74

Wholesale 70 market prices 30 150

60 20 100 Fuel prices & 50 generators

40 36 10 50

30 27 Capacity & 0 0 generation 21 S O N D J F M A M J J A S O N D 20 13 2019 2020 11 9 -10 -50 10 8 6 6 5 RES support 4 4 schemes 0 0 0 0 -20 -100 S O N D J F M A M J J A S O N D 2019 2020 Cleared volume Spread price Sell price Buy price Wholesale market integration ■ In September 2019 the first Intraday Congestion Spreads (IDCONS) were activated via the Grid Operators Platform for Congestion Solutions (GOPACS). GOPACS is a Dutch TSO-DSO coordinated market-based congestion management platform that enables intraday bids with a geo-tag to be used for congestion management as well. An IDCONS is the spread the Grid Operator pays in order for a buy and sell bid to be cleared. For a more detailed explanation visit: Balancing www.GOPACS.eu. ■ In total 83 GWh of redispatch volume was contracted through the GOPACS platform in 2020. ■ Congestion Spreads were highest in January 2020 with 198 €/MWh. The average buy prices are typically around zero or negative. management ■ Most activated redispatch volume via GOPACS in October 2020.

55 7 April 2021 Source: TenneT NL Redispatch Volumes DE Introduction Increased redispatch and countertrade Slightly decreased EinsMan related redispatch

Main Redispatch Volumes in Germany findings TWh 10 -4%

Wholesale 9 market prices 8 7

Fuel prices & generators 6 5 4 Capacity & generation 3 2

RES support 1 schemes 0 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Wholesale market 2018 2019 2020* integration Redispatch + countertrade Netzreserve EinsMan** Yearly average * For 2020 only costs for the first three quarters were available. ** EinsMan volumes exist only of downward adjustments.

Balancing ■ RES curtailment (EinsMan) related redispatch slightly decreased in the first three quarters of 2020, especially in Q1. Conventional redispatch (conventional power plants > 10 MW) in combination with countertrade remained the most common process used for solving congestion in the German grid.

Congestion ■ The contracted Netzreserve plants are called upon when redispatch availability is insufficient. For the first three quarters management of the 2020, the use of Netzreserve increased slightly, mostly in Q2.

56 7 April 2021 Source: Bundesnetzagentur Congestion Management Costs DE Introduction Increased redispatch costs, mainly in Q2

Main Redispatch Costs in Germany findings mln€ 600 -7%

Wholesale market prices 500

400

Fuel prices & generators 300

200

Capacity & generation 100

0 RES support Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 schemes 2018 2019 2020* Redispatch Countertrade Netzreserve** EinsMan Yearly average Wholesale market * For 2020 only costs for the first three quarters were available. ** Netzreserve costs for all years were given as yearly aggregated integration values. Therefore, costs were equally divided over the four quarters.

■ Costs for congestion management slightly increased the first three quarters of 2020 compared to 2018, mainly due to Q2. Biggest contribution to increasing costs due to EinsMan (high wind energy production). Netzreserve and countertrade Balancing costs also increased, redispatch cost decreased. ■ Congestion management costs are generally higher in winter months, due to more stressed grid conditions. Due to different weather conditions in Q4, the overall costs in 2020 might have reached the level of 2019. Congestion management ■ When compared to the previous slide, redispatch measures show the lowest costs per GWh, and EinsMan the highest.

57 7 April 2021 Source: Bundesnetzagentur Annex

58 7 April 2021 Annex (1/2) Day-ahead avg. price Day-ahead avg. Physical import Physical import Physical export Physical export Net export Net export position 2019 price 2020 2019 2020 2019 2020 position 2018 2019 €/MWh €/MWh TWh/year TWh/year TWh/year TWh/year TWh/year TWh/year AT 40,1 33,1 21,1 19,5 18,0 18,1 -3,1 -1,4 BE 39,8 31,9 11,7 12,6 13,4 12,1 1,6 -0,5 CH 40,9 33,9 25,1 22,7 27,4 26,4 2,3 3,7 CZ 40,2 33,6 8,6 10,4 21,3 20,2 12,7 9,8 DE 37,9 30,5 27,5 33,3 61,3 53,1 33,8 19,8 DK1 38,6 25,0 15,0 13,5 9,3 9,0 -5,7 -4,4 DK2 39,9 28,4 EE 45,9 33,7 3,9 6,8 3,2 3,4 -0,7 -3,4 ES 47,7 33,9 15,8 10,9 9,7 16,7 -6,1 5,8 FI 44,1 28,0 16,0 8,9 3,9 6,7 -12,1 -2,2 FR 39,5 32,2 10,5 15,6 67,9 59,7 57,4 44,1 GB 48,9 39,6 24,9 23,0 2,2 4,3 -22,6 -18,8 HR 49,3 38,0 6,4 6,8 2,3 3,0 -4,1 -3,8 HU 50,4 39,0 15,0 16,9 6,8 6,5 -8,2 -10,5 IE 50,3 35,8 1,0 1,7 1,2 2,3 0,2 0,6 IT-CNOR 52,2 38,7 IT-CSUD 52,3 39,7 IT-NOR 51,3 37,8 42,7 36,3 4,1 2,4 -38,6 -33,9 IT-SARD 51,8 39,1 IT-SICI 62,7 46,1 IT-SUD 50,9 38,9 LT 46,3 34,0 6,8 6,6 2,9 2,8 -3,9 -3,8 LV 46,2 34,4 2,8 2,5 2,8 1,6 -0,02 -0,8 NL 41,2 32,2 16,9 15,6 16,7 18,2 -0,3 2,6 NO1 39,4 9,3 NO2 39,3 9,3 NO3 38,6 9,5 11,3 2,4 11,1 14,9 -0,2 12,5 NO4 38,4 8,9 NO5 39,3 11,5 PL 53,2 45,4 15,7 17,8 6,8 6,4 -8,9 -11,4 PT 47,9 34,6 6,9 11,0 3,5 0 -3,4 -11,0 SE1 38,0 14,4 SE2 38,0 14,7 9,0 3,7 35,0 23,1 26,0 19,4 SE3 38,4 21,6 SE4 39,8 26,7 SI 48,8 36,7 7,0 5,5 7,5 7,5 0,4 2,0 SK 41,5 34,0 13,4 12,9 11,7 11,8 -1,6 -1,1 59 7 April 2021 Annex (1/2)

Unit 2018 2019 2020 Source NL DE NL DE NL DE Yearly average hard coal price (API#2 OTC) €/MWh.th 11,2 8,0 6,3 [1] Yearly average natural gas price (TTF OTC monthly) €/MWh.th 22,0 14,1 9,1 [1] Yearly average carbon price (EEX futures) €/tCO2 15,4 24,9 24,7 [1] Yearly average Clean Dark Spread base €/MWh 13,4 6,8 2,8 0,9 -4,5 -5,1 [1,2] Yeary average Clean Dark Spread new €/MWh 17,9 11,3 7,2 5,4 -0,5 -1,1 [1,2] Yearly average Clean Spark Spread base €/MWh 8,6 2,0 8,7 6,8 6,1 5,5 [1,2] Yearly average Clean Spark Spread peak €/MWh 14,3 6,7 12,4 10,6 11,5 11,8 [1,2] Average imbalance price delta long system €/MWh 21,0 13,4 16,4 -4,3 25,4 13,8 [2,3] Average imbalance price delta short system €/MWh 22,9 18,9 16,4 5,5 27,0 18,7 [2,3] Yearly average FCR price Dutch auction (symmetrical) €/MW/h 21,2 15,5 20,4 [3,4] Yearly average FCR price common auction (symmetrical) €/MW/h 13,8 9,4 7,3 [5] Yearly average aFRR upward price €/MW/h 2,3 3,8 2,5 [3,4] 8,8 6,5 5,7 Yearly average aFRR downward price €/MW/h 0,8 3,6 2,2 [3,4] Yearly average mFRRda upward price €/MW/h 4,8 0,5 4,1 6,1 4,0 2,7 [3,4] Yearly avergae mFRRda downward price €/MW/h 7,1 0,1 2,5 2,3 2,1 1,3 [3,4] Redispatch volumes GWh/year 696,3 21.181 589,5 20.235,0 610,2 [3,4,6] Redispatch costs mln.€/year 53,9 1.304 61,0 1.206,6 77,5 [3,4,6]

Sources 1) 1) energate 2) MRC Market Coupling 3) TenneT NL 4) TenneT DE 5) regelleistung.net 6) Bundesnetzagentur

60 7 April 2021 For questions and comments please contact: TenneT Customer Care Centre [email protected]

Project team: Anton Tijdink, MSc. Dr. Mathias Hoffmann Alexandra Giasimaki, BSc. Rosalie Brinkman, MSc.

61 7 April 2021 Disclaimer

This PowerPoint presentation is offered to you by TenneT TSO B.V. (‘TenneT’). The content of the presentation – including all texts, images and audio fragments – is protected by copyright laws. No part of the content of the PowerPoint presentation may be copied, unless TenneT has expressly offered possibilities to do so, and no changes whatsoever may be made to the content. TenneT endeavours to ensure the provision of correct and up-to-date information, but makes no representations regarding correctness, accuracy or completeness. TenneT declines any and all liability for any (alleged) damage arising from this PowerPoint presentation and for any consequences of activities undertaken on the strength of data or information contained therein.

62 7 April 2021 TenneT is a leading European grid operator (Transmission System Operator (TSO). We design, build, maintain and operate the high-voltage electricity grid in the Netherlands and large parts of Germany and facilitate the European energy market. We are committed to providing a secure and reliable supply of electricity, today and in the future, 24 hours a day, 365 days a year and to playing our role in driving the energy transition. We transport electricity over a network of approximately 23,500 kilometres of high-voltage connections, from wherever and however it's generated, to over 42 million end-users while keeping electricity supply and demand balanced at all times. With close to 5,000 employees, we achieve a turnover of 4.1 billion euros and a total asset value of EUR 23 billion. TenneT is one of the largest investors in national and international onshore and offshore electricity grids. TenneT makes every effort to meet the needs of society. This will require us all to take ownership, show courage and connect with each other. www.tennet.eu

63 7 April 2021 Confidentiality