In a market increasingly affected by negative prices, the business case for renewables energy is under growing pressure in the Netherlands. Participating in the aFFR market offers a promising supplementary strategy for independent power producers and energy traders– but one that can only succeed with smart, integrated automation.
In recent years, solar and wind capacity in the Netherlands has expanded significantly, as shown in a recent KPMG study. This growth is crucial to meet the country’s climate targets, but it also creates structural changes in the power market. During periods of abundant sun or wind, electricity oversupply drives market prices down to zero or even negative levels. Both the frequency and duration of negative price periods have increased sharply.
For independent power producers and energy traders, this results in direct financial risk: when negative prices persist for six consecutive hours on the day-ahead market, the SDE++ subsidy is suspended. Solar and wind farms are then forced not only to sell electricity at negative prices but also to forfeit their subsidy – forcing independent power producers to curtail production during these periods to limit losses.
Imbalance curtailment is the predominant way producers generate substantial revenue through the Dutch passive imbalance ‘market’. But, as shared by Spectral’s founder Philip Gladek in this article, this strategy is rapidly becoming less lucrative, due to market changes.
Due to the strong growth of solar and wind, the frequency of Regulation State 2 has increased sharply in recent years, by approximately 50%. Regulation State 2 is triggered due to market parties reacting fast on imbalances, turning the imbalance in the other direction. In that situation, dual pricing occurs, which is two different imbalance prices within the same 15-minute period. Dual pricing leads to increased unpredictability and pronounced price swings on the imbalance market – and thus more financial risk for independent power producers and energy traders employing only imbalance curtailment strategies.
Meanwhile, more market participants are applying imbalance curtailment, which is impacting margins. Moreover, margins are impacted by TenneT joining PICASSO, which increased competition. In 2024, revenue from imbalance curtailment has declined by 44–63% for wind farms and by 53–71% for solar farms. In some cases, the strategy has even resulted in losses.
Alongside these market developments, a growing opportunity emerges: participation in the Automatic Frequency Restoration Reserve (aFRR). This is the automatically controlled balancing capacity that TenneT uses to correct frequency deviations in the Dutch high-voltage grid.
For solar and wind parks, there is a strategic advantage: periods with negative day-ahead prices often coincide with premium aFRR pricing. By offering aFRR with curtailed assets, independent power producers and/or energy traders can generate revenue during these periods.
Additionally, the aFRR market structure is evolving, increasing business opportunities for independent power producers and energy traders. TenneT moved from 24-hour bid blocks to four-hour blocks. For solar and wind farms with their variable production profiles, this makes participation far more flexible and plausible: bids can be focused on hours when renewable assets are generating and prices are attractive for asset owners.
While the aFRR market offers attractive revenue potential, participating is anything but simple. Energy Traders must align their bids with expected production, TenneT’s activation behavior, and the technical limitations of their assets.
Participating requires:
While these actions can be managed manually for one or two installations, larger portfolios with dozens of solar parks and wind turbines across multiple locations are too complex and error-prone to operate without automated systems.
Automation with intelligent Energy Management Systems like STELLAR is therefore a prerequisite for a successful aFRR strategy with renewable energy portfolios. Optimization is essential, but so are automation safeguards, reliability and uptime. For independent power producers and energy traders, having a system that can respond instantly and autonomously is crucial to be compliant with TenneT-regulation, minimize operational risk, and optimize financial revenue.
STELLAR automates the full aFRR value chain by enabling:
In the end, supplementing imbalance curtailment with aFRR is a strategic step for renewable energy portfolios to keep their business case sustainable. The stacking of multiple market services is something we likely will see more and more. To make this step, firm control of renewable energy assets is a must, and only achieved through fully integrated automation.
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