Evaluating congestion management in the Dutch electricity transmission grid

Due to the increase in electricity generation capacity in the Netherlands and a new connection policy, transmission system operator (TSO) TenneT expects a significant increase in congestion in the Dutch transmission grid. To manage this, the Dutch government implemented redispatching, a method which is argued in the literature to potentially impose large congestion costs upon the TSO. A quantitative model of the Dutch electricity system was developed in order to evaluate this method. The outcomes were compared to the performance of three alternative congestion management methods. Regardless of the method, congestion costs were found to be substantially lower than in previous studies. Because combined-cycle gas turbines are the marginal generation technology in almost all cases, the costs of up and down regulation do not differ much. Consequently, the redispatching costs for the TSO are expected to be relatively low, and the opportunities for abuse of market power appear to be limited. While all the evaluated methods are effective and economically efficient, they have significantly different welfare effects. Market splitting creates significantly larger welfare effects than the different varieties of redispatching.