The Legal Implications of Grid Congestion Management

In many places in the Netherlands, the demand for electricity exceeds the transmission capacity on the electricity grid. The overflowing grid in the Netherlands holds back expansion plans of many companies in need of more capacity to realize their electrification and sustainability ambitions.

Grid congestion management is used to reduce the effects of grid congestion, including by creating alliances between companies – such as energy hubs – and grid operators. What are the legal problems involved in all this? The main subareas are represented in the overview below.

In the Netherlands, this legislation regulates the production, supply and transmission of electricity, and is naturally an important piece of legislation in the debate about grid congestion. The current Electricity Act 1998 will be replaced by the new Energy Act that is in preparation. The proposal for the Energy Act contains specific provisions about the energy transition and is expected to offer a future-proof legislative framework for the changing electricity and gas market, and for the energy system.

In the past two years, the ACM (Authority for Consumers and Markets) has also published several specific regulations for grid congestion, including flexible ‘capacity limitation contracts’ and the ‘non-firm connection and transmission agreement’. Besides, several codes are being prepared that should enable ‘group transmission agreements’ and other ‘alternative transmission rights’, and soon the option of ‘prioritizing public-interest projects’ in the allocation of transmission capacity will also be enshrined in regulations.

Grid congestion has the alarming side effect that it obstructs the energy transition, and consequently also the targets set in the Paris Climate Agreement. In spite of the abundance of solar panels and wind parks in the Netherlands, the harsh reality is that connecting all of them to the high-voltage net is impossible, and that even some parts of the mid-voltage grid are ‘full’. Net congestion thus prevents many enterprises from achieving their ESG targets and/or their ESG arrangements with customers and purchasers, including about the reduction of carbon emissions from business operations.

To resolve grid congestion, efforts must be made to develop local (alternative) sources of energy, such as wind and solar energy. Permits and subsidies will inevitably come up in this process, while the parameters of environmental law – including the Spatial Planning Act and the Environmental Management Act – must also be observed.

Grid operators and other actors in the energy market increasingly resort to smart solutions – using IT applications – in their provision of services and development of new (and improvement of existing) solutions. This means that classic IT topics, like cybersecurity and data sharing, will need to be addressed, with due observance of (imminent) regulations in this field, such as the NIS1 and NIS2 Directives, the Cybersecurity Act, the Cyber Resilience Act and the Data Act. New technologies like Artificial Intelligence are also applied increasingly, for example to predict user behaviour and related congestion. AI applications will soon become subject to the AI Regulation.

The resolution of grid congestion calls for (close) cooperation between enterprises. Alliances or collectives have to agree internally on their decision-making structure, internal supervision, directors’ responsibility, but also on the relationship of the collective with third parties, such as grid operators and clients. Many alliances in the energy transition are given the form of cooperatives.

Where assets for the generation or storage of energy are installed, such as solar panels, wind turbines, generators and batteries, rights of use in rem – such as easements – will often need to be established to ensure the property status of such assets.

The funding of sustainable energy projects is another focus point. The significant investments that must be made, for example in assets, will often require the borrowing of capital. This could be achieved through a combination of public incentives (including subsidies and funds), financial participation by the private sector, loans from banks, and innovative funding mechanisms.