Energy mismatch is closer than you think (I)

By mid-2040, we are generating a lot more sustainable electricity in the Netherlands than we need in total. However, the moment of generation and offtake will no longer be simultaneous, because all that supply of electricity generated by wind, sun et cetera will fluctuate enormously. On a limited scale, we already see this in summer. However, the fluctuations will become so large that we will not be able to balance them with the energy storage options now in sight. This upheaval will accelerate around 2030. In this piece, we offer a 2040 vista to give you an idea of where things are going.

The mismatch between generation and offtake already exists today and will become much larger in the coming years. Our analyses show that in 2040, balanced over the annual total, there will be a surplus of 5500 hours on one side. Converted, this means there will be an annual surplus of electricity for a period of as many as 230 days. On the other hand, the shortfall will then be about 3250 hours, or 135 days per year.

This 'E mismatch' is going to have a big impact on prices

During moments of surplus, prices will be very low. This is because the variable cost of generation from renewable sources is virtually zero. This can already be clearly seen in the fluctuation of hourly prices. See the example below of the residual load in Germany in relation to the hourly electricity price. (Residual load = demand -/- renewable generation; dates January and February 2023).

During moments of shortage, prices will be particularly high. The only option we are likely to have then is to use gas power plants to make up the shortfall. However, that will become increasingly expensive over the next 20-30 years because of the associated CO2 allowances. Flexibility also requires investment in new gas plants to replace decommissioned coal plants.

These new gas-fired plants have to be recovered over fewer hours of operation per year. That means there will be a higher investment surcharge on the kilowatt-hour price. Electricity from gas plants will therefore become much more expensive on balance. It will be interesting what the role of green hydrogen will become in this.

Future picture 2040 and beyond

How will we generate and deploy our renewable electricity to make our society more sustainable 18 years from now, beyond 2040? We made a calculation based on future scenarios as outlined in the Climate and Energy Outlook and by Energiebeheer Nederland in combination with the Dutch government's plans for offshore wind power generation. See reference list at the bottom of this post.

Our analyses show the following:

1. From 2040 onwards, the Netherlands has sufficient supply of sustainably generated electricity to be climate-neutral in this respect - even if we electrify much of our gas and oil consumption. However, fluctuations will be huge.
2. On the one hand, there are then so many renewable generation resources that a huge surplus is generated, without us using it at the time - unless we change our behaviour. Of the 323 TWh generated annually, we will not use as much as 49% (157 TWh) at the time it is generated. This huge surplus of cheap and renewable electricity creates opportunities that we can capitalise on.
3. On the other hand, there will be an extensive shortage. This is formed by the need for electricity that is not directly generated at the same time. According to our calculations, there will be a shortfall of 38 TWh. In other words, for about 19% of the total annual demand, we will not have electricity available at the time of need.
4. It is often thought that electricity storage (batteries, EVs, etc) is going to bring salvation to deal with such fluctuations in the system and keep the balance - and hence costs - in check. Our analyses show that the size and duration of the mismatch is so large that electric storage methods will not be able to cover more than 1/3 of the instantaneous shortfall.
5. It will not be possible in our lifetime to store most of the gigantic surplus. The techniques and technologies are too expensive for at least the next few decades. To make storage economically viable, a large number of times a year (rough average: 150 times) must be loaded and unloaded. No solution is yet in sight that is the egg of Columbus for storage in technical, financial and scale terms.

The reality is that within a foreseeable number of years, the energy mismatch will be so great that in terms of volume, we will not only face a huge surplus of nearly 50% of cheap renewable electricity, but also an annual deficit of around 12% that cannot be covered by storage methods.

For customers, this offers opportunities for demand shifting to smartly avoid costs. After all, if batteries and gas plants have to step in to provide electricity according to your demand profile, the costs will be unpredictable and high. Energy consumers will make conscious choices not to use electricity at such times and to buy it when there is a surplus.

Those who only start thinking about the impact of these changes a decade from now will miss out on investment opportunities and face ever-increasing costs.

• Where are the opportunities for your organisation in terms of demand shifting?
• What is the impact on how you invest, produce and run your business?
• What will be important for this in the new energy landscape? And what will actually be the role of hydrogen in all this?

The following future scenarios and planning were used for the presented year 2040 calculations:

• OTB Delft Energy Label and Gas Consumption - TVVL Magazine 01 2023
• National Heat Pump Trend Report - DNE Research
• Lazard's Levelized Cost of Energy Analysis - Version 14.0
• Lazard's Levelised Cost of Storage Analysis - Version 6.0
• System Integration Wind at Sea 2030-2040 - RFO
• Parliamentary letter on offshore wind power 2030-2050
• Climate and Energy Outlook 2021
• The Energy System of the Future 2030-2050 - Netbeheer Nederland
• Energy-Charts.info - Fraunhofer ISE
• Germany to use tenders to build 25 gigawatts of new gas power plants by 2030 - econ min | Clean Energy Wire

We look forward to the first reactions

So let's hear from you, with your thoughts, questions and insights. And look out for our next post on this topic.