Monitoring Report. Security of Supply Introduction. 2. Results

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1 1. Introduction This monitoring exercise will be performed annually, for the first time this year, at the request of the Minister of Economic Affairs. The members of the EnergieNed Production Section assisted in the monitoring process on a voluntary basis, by providing the information that TenneT specifically requested in this respect. The purpose of monitoring is to provide an insight into expected movements in domestic supply in relation to domestic demand. The monitoring report covers the imports required to meet domestic demand and the demands that these imports place on the available import. The reserve factor and its relationship with the imports requirement are also discussed. 2. Results The assessment method used here includes two conditions for the adequacy of the supply side (domestic and foreign) in relation to domestic demand: one necessary condition that will (just) provide for permanent coverage of market demand at gate closure, and one sufficient condition, that will (just) provide for permanent coverage of market demand after gate closure. The sufficient condition will enable compliance with the E-programmes, or the ability to maintain the balance, on a permanent basis. If domestic supply from commodity (CV) falls short in these conditions, this leads to modelled imports in the assessment method. Figure 1 shows the monitoring results for the years 2003, 2004, 2007 and Figure 1: monitoring results

2 Pagina 2 van 8 Legend to figure 1: resulting use factor of commodity (CV) if this provides full cover for the market ditto, after reducing the market with the contribution of generation from flowing sources ditto, after reducing the market with the contribution of generation from flowing sources and reserve commitment on CV from no-load commitment on CV from non-availability commitment on CV from UCTE requirements The resulting CV use factor is moving increasingly into an infeasible area: the commodity falls increasingly short to meet domestic demand. If the shortfall in supply from commodity in order to meet the necessary condition or the sufficient condition is made up through imports, this leads to Table 1. Table 1: monitoring results market commodity reserve nonoperational flow sources modelled imports use factor CV at 675 MW free room install ed NA install ed full load contri bution installed install ed contri bution necess ary sufficient year [TWh] [GW] [%] [GW] [h] [TWh] [GW] [GW] {TWh] [TWh] [TWh] [%] ,2 18,6 12,5 0, ,3 0,8 0,6 1,0 1,5 7,5 61, ,7 18,1 9,9 1, ,6 0,8 0,8 1,1 3,5 9,5 62, ,6 18,9 10,9 1, ,6 0,8 0,9 1,3 2,5 8,5 62, ,7 18,3 7,8 1, ,0 0,8 1,2 1,8 12,5 18,5 63, ,5 18,2 8,3 1, ,9 0,9 1,4 2,1 26,0 32,0 61,1

3 Pagina 3 van 8 Figure 2 illustrates the development of shortfall in domestic supply from commodity in relation to the sufficient condition: 60,0 50,0 40,0 TWh/a 30,0 20,0 10,0 0, maximum possible import modelled required import (sufficient condition) Figure 2 : modelled required imports (sufficient condition) and maximum possible imports Table 2 and Figure 3 display what this means in terms of demand on available import. Table 2: demand on available import available 1) necessary sufficient year [GW] [TWh] [%] [%] ,6 30, ,6 38, ,6 38, ,9 49, ,9 49, ) according to TenneT plan

4 Pagina 4 van 8 demand on import % monitoring result all commodity, NA 12.5% import in GW GW Figure 3: minimum required demand on import (sufficient condition, red dotted line with triangles shows result if all the reported reserve and the nonoperational becomes commodity and non-availability is equal to that in 2002) From 2004 onwards, the minimum required demand on import (by the market) increases. The necessary import is available for the entire period under review. Table 3 shows reserve factors that can be deduced from the data used. Table 3: reserve factors commodity reserve flow sources Sep import contracts (OEPS) import peak demand reserve factor year [GW] [GW] [GW] [GW] [GW] [GW] 1) 2) 3) 4) 5) ,6 0,4 0,6 0,9 3,6 16,1 1,22 1,19 1,28 1,25 1, ,1 1,1 0,8 0,9 4,6 16,4 1,22 1,18 1,27 1,23 1, ,9 1,1 0,9 0,9 4,6 17,0 1,22 1,18 1,28 1,24 1, ,3 1,7 1,2 0,8 5,9 18,2 1,16 1,11 1,20 1,15 1, ,2 1,6 1,4 0 5,9 19,5 1,09 1,03 1,09 1,03 1,33 1) No import, flow sources included in full, non-operational not included 2) No import, inclusion of 20% flow sources and no non-operational 3) Incl. SEP import contracts, flow sources included in full, non-operational not included 4) Incl. SEP import contracts, inclusion of 20% flow sources and no non-operational 5) Incl. 100% import, inclusion of 20% flow sources and no non-operational

5 Pagina 5 van 8 Figure 4 shows the relationship between the second column reserve factor from Table 3 and the shortfall in domestic supply from commodity with the sufficient condition (second to last column from Table 1). Figure 4 illustrates the correlation between reserve factor (second value from Table 3) and the required import from the assessment method.. 1,25 reserve factor 2) 1,2 1,15 1, , modelled required import (sufficient condition) Figure 4: correlation between reserve factor (2 nd value from Table 3) and required import (sufficient condition) Table 3 shows that the reserve factor remains roughly the same until the end of 2004 and then gradually decreases 1. Figure 4 shows that the import requirement, as follows from the assessment method as a measure for the adequacy of domestic supply, has a higher resolution than the reserve factor. 3. Notes to the data used The data requested from the members of the EnergieNed Production Section are supply-side data only. These data form the basis for this monitoring process. At the installation level 2, the data received from the members of the EnergieNed Production Section represent some 75% of the total in the Netherlands assumed for 2002 in the reference scenario of the TenneT Capacity Plan In the Electricity Plan , the saving on production as a function of installed wind is valued at between 13% (at 1500 MW wind ) and 20% (at 500 MW wind ). For the sake of simplicity, 20% is used here, as an illustration. In UCTE (UCTE adequacy forecast ), a value of 25% is used at present 2 Data per production asset

6 Pagina 6 van 8 Data from the reference scenario in the above Capacity Plan are used for the remainder of the supply side. The supply side data provided for the Capacity Plan are of a different nature, origin and purpose and therefore are for this monitoring process not of the same quality as the data provided specifically for this purpose by the producers. TenneT considers it desirable that all the information on the domestic supply side required in this respect should be based on data supplied specifically for the purpose of the monitoring process. The following comments can be made on the data supplied by the members of the EnergieNed Production Section: For the years under review after 2002, the producers did not provide sufficient statements of the expected production of reserve to deduce representative values. For these years, therefore, the equivalent full load hours of reserve are frozen at the level deduced for For production of less than 5 MW a statement at the aggregated level was requested. The total of this reported is far less than the total assumed of <5 MW in the reference scenario of the above Capacity Plan, and is consequently not representative of the total installed <5 MW in the Netherlands. The value from the reference scenario of the above Capacity Plan was therefore used for of <5 MW. At the unit level, a total of eight movements are reported in the years under review after New is reported in 2003 and 2004 and no replacements or removals are reported. The other movements involve changes in the classification of the production (commodity, reserve, non-operational ). The stated non-availability of the commodity in 2002 is low in comparison with e.g. the assumptions made for SEP units in the Electricity Plan According to the statements, this non-availability will diminish further in the subsequent years under review. The data for the demand side and import in this monitoring process were all taken from the reference scenario of the above Capacity Plan. The following comments can be made regarding these: Although the realisation and growth of consumption was considerably lower in 2002 than was expected in the Capacity Plan , partly on the basis of estimates for 2002 provided by the Netherlands Bureau for Economic Policy Analysis (CPB), no scenarios differing from the Capacity Plan were used for the purpose of this monitoring process. However, the lower growth in consumption observed in 2002 will affect the results in subsequent years. If the expansions in interconnector anticipated in this plan do not become available to the market, in due course, insufficient production could flow to the Netherlands. These expansions concern the commissioning of the phase shifters in Meeden, improvement of the interconnector between France and Belgium by 1000 MW and the realisation of a 1320 MW cable connection with the UK.

7 Pagina 7 van 8 4. Recommendations On the basis of the monitoring results and the data currently available, we see no grounds at present for the government to take measures to protect future security of supply in the electricity production sector. The results show that in principle, potential supply in the years to 2010 will be sufficient to meet domestic demand for electricity. However, the Netherlands is dependent on foreign supply for adequate coverage. So far, this has not led to situations in which security of supply was in jeopardy. On the basis of the data available at present, this dependence on foreign supply will increase substantially in the longer term. In order to assess in the next monitoring exercise whether measures are necessary in this regard, we consider it desirable for the government to form a picture of the level of dependence that it considers acceptable, now and in the future, in view of competition in the European market, which is still in development.

8 Glossary for Monitoring Report Date 3 september 2003 Ref: BS-NES Page 8 of 8 Contribution Contribution to market demand from production CV Commodity, i.e. domestic installed and controllable production stated to have 2,000 or more (expected) operating hours. Controllable means that this can be utilised as required. Operating hours The number of hours per year that a unit is operational CV use factor Expected CV production, based on the results of the assessment method, as a proportion of production at 8760 full load hours Market Scale of domestic electricity consumption, including network losses Modelled imports - Necessary Shortfall of CV supply for permanent coverage of market demand before gate closure (leads to a balanced set of E-programmes) - Sufficient Shortfall of CV supply for permanent coverage of market demand after gate closure (leads to the ability to comply with E-Programmes or maintain the balance) NA Non-availability: total anticipated and unanticipated non-availability in percentage terms Non-operational Domestic installed and controllable production that is defective and/or reserved No-load Complement of demand relating to the 95 percentile value of year-on-year demand Reserve Domestic installed and controllable production stated to have fewer than 2000 (expected) operating hours Flow sources Domestic installed production on flow sources basis (wind, solar energy) UCTE requirements Required permanent operating reserve to be maintained by the Netherlands pursuant to UCTE agreements (required primary and secondary reserve) Full load hours The ratio of production on an annual basis to the of a unit Free room Potential average annual production of the commodity on which no demands are made as a result of non-availability, no-load, market and UCTE commitments.