The Dutch electricity sector - part 1: Who are the players and what is their role?

In the Netherlands, different players are active in the electricity sector, each with their distinct own roles and responsibilities. These roles and responsibilities are defined by legal frameworks, including the Dutch Electricity Act (in Dutch) which, if all goes well, will transition into the new Energy Act (in Dutch). Table 1 shows the key roles relevant to this article. We will explain them in greater detail below. Although the Dutch power market is fully integrated into the northwest-European electricity market, the Dutch electricity sector has its own specific characteristics.

Power generator

Power generators are responsible for generating electricity. Most of the electricity is produced by commercial players such as Eneco, RWE and Vattenfall. Some large industrial companies and horticulturalists also generate their own electricity, both for internal use and for the market. Households and small and medium-sized enterprises (SMEs) increasingly produce their own electricity, mainly using solar panels installed on rooftops. The Netherlands has seen a rise in energy cooperatives that generate electricity. Most of the electricity produced is fed into the electricity grid, while a small amount is consumed directly.

End user/consumer

End users consume electricity. End users can refer to households, retail companies, large industrial companies and everything in between.

Supplier

Electricity suppliers such as ANWB Energie, Greenchoice and Tibber purchase electricity from the wholesale market through a balancing service provider (see table 1 for a brief role description) and sell it to end users. To supply electricity to retail consumers, a party must hold a license from the Authority for Consumers and Markets (ACM).[1] In early 2024, the ACM granted licenses to nearly 60 parties (in Dutch). The majority of these are commercial entities, some are cooperatives. In addition to buying and selling electricity, suppliers forecast their customers' expected offtake and feed-in, communicating this information to their Balancing Responsible Party.

Transmission system operator (TSO)

To physically deliver the electricity that suppliers sell to end users on paper, electricity infrastructure is needed. In the Netherlands, the national transmission system operator (TSO) is TenneT. They are responsible for constructing, maintaining and expanding the high-voltage electricity grid in the Netherlands. Additionally, TenneT manages the interconnectors – electricity connections between the Netherlands and other countries. TenneT also monitors the balance between electricity supply and demand. After all, supply and demand must be in balance at all hours of the day. If that is not the case, the frequency of the electricity grid deviates from 50 Hertz, potentially leading to a nationwide blackout. When the system becomes unbalanced, TenneT coordinates with market parties to adjust electricity offtake or feed-in, restoring the balance. TenneT is a state-owned company. Its sole shareholder is the Dutch State.

Distribution system operator (DSO)

Distribution system operators (DSOs) are responsible for building, maintaining, and expanding regional distribution systems, and medium- and low-voltage grids. The most prominent DSOs include Enexis, Liander and Stedin. These entities operate as public companies, with ownership shares held by municipalities, provinces, and/or the Dutch state. System operators are often referred to as "grid operators”.

Balance responsible party (BRP)

To ensure that electricity supply and demand are in balance, every party connected to the electricity grid must anticipate their expected consumption, feed-in and transmission needs one day in advance for each quarter-hour. Small-scale consumers are an exception; their electricity supplier forecasts their expected consumption and feed-in. These forecasts are then relayed to a balance responsible party (BRP)[2], which in turn informs TenneT about planned consumption and feed-in for all customers in its portfolio. This process, known as the "E-Program”, involves all BRPs collaborating to ensure balanced offtake and feed-in within their portfolios per quarter-hour. TenneT subsequently determines whether the measured feed-in and/or offtake corresponds to the forecast submitted by a BRP. Any quarter-hourly deviations have financial implications. To operate as a BRP, registration with TenneT and a pre-qualification process are mandatory. Examples of BRPs include Eneco, RWE and Vattenfall.

Balancing services provider (BSP)

As previously mentioned, one day in advance, BRPs ensure that the expected supply of electricity is balanced with the expected offtake on a quarter-hour basis. However, in practice, some imbalance always occurs due to the inherent difficulty in precisely forecasting both feed-in and offtake. To prevent the imbalance from becoming too large and thus endangering the electricity system, TenneT purchases balancing capacity and balancing energy from balancing service providers (BSPs). These BSPs must pre-qualify to be allowed to offer balancing capacity or balancing energy to TenneT. Examples of BSPs include Recoy, Scholt Energy and SemperPower.

Provider of congestion management services (CSPs)

Even when the electricity system is in balance, it may be necessary to adjust the demand or supply of electricity locally to avoid exceeding the maximum capacity of the local electricity infrastructure and causing congestion. Congestion management services providers (CSPs) deviate from their planned electricity feed-in or offtake at the request of a grid operator in exchange for payment. Unlike balancing services, congestion management services are site-specific. A party can offer congestion management services only after pre-qualification. Some examples of CSPs include GigaStorage, Northpool and Powerhouse.

[1] Supply to wholesale customers is allowed without an ACM license.

[2] Balancing service parties were formerly referred to as program responsible parties.

Many of the market roles described above can be fulfilled by the same party. For instance, large players such as Eneco and Vattenfall serve as power generators, balance responsible parties, suppliers, and providers of congestion management and balancing services. However, this is by no means true for all electricity suppliers; smaller ones often function solely as suppliers. Another example of a combination of roles involves end users who generate their own electricity. They are also referred to a ‘prosumers’. Network operators (both TSOs and DSOs) are legally prohibited from assuming additional roles such as electricity production or supply under normal circumstances.

The ongoing energy transition, propels the need for greater flexibility. This presents an opportunity for financial gain through adjustments in electricity consumption and/or electricity production. Individuals and companies that are able to manage their electricity offtake or feed-in in a partially flexible way, stand to benefit. If they can manage their own electricity consumption smartly, this opens up opportunities. Conversely, the energy transition poses a risk for parties that fail to strategically address (in Dutch) energy-related matters. Therefore, a solid understanding of the electricity sector and the evolving changes is important. Subsequent articles in this series elaborate on this.

The electricity sector is evolving rapidly. By 2023, half of the electricity produced was renewable. An increasing number of consumers are generating their own electricity, and electrification of transport and heating is also on the rise. All this has an impact on the load on power grids, the supply and demand balance, security of supply, and electricity prices. These developments present both risks and opportunities for electricity users. To better understand these risks and opportunities, RaboResearch is publishing a series of articles on the Dutch electricity sector. In this part, we explore the roles different actors play in the electricity market. In the future parts, we’ll explore the different electricity markets, analyze the key developments impacting electricity markets and qualitatively describe how these markets will develop towards 2030.