Alliander works continuously to secure a reliable, affordable and accessible energy supply that everyone can use on equal terms. We recognise that our activities have multiple social impacts, such as on the economy, nature, knowledge development and the safety and stability of the energy system. In short, on our prosperity (wealth and economy) and well-being (health and happiness).
To measure our impact on society, we have analysed the value chain and aim to quantify the consequences of our operations in a single unit (euros) wherever possible. Alliander is currently gaining experience with this practice. In the coming years, the impact calculations will be taken on board in our decision-making. The three stakeholder chapters in this report take a closer look at our value calculations. Our value creation process can be viewed interactively in our online report.
Why quantify impact?
Alliander wants to make a contribution to society that goes beyond its traditional responsibility for a reliable, affordable and accessible energy supply. We can offer many benefits to society in diverse roles, including as a network operator in the changing (renewable) energy market, as an employer, and as a responsible corporate citizen for local communities. In assessing the social contribution of our activities, our main focus is currently on the inputs (costs) and outputs (direct consequences). By quantifying and monetising our social impacts on prosperity and well-being, we gain better insight into specific factors and their interactions. We are thus developing a new language that will ultimately help us to make better decisions.
Our journey in impact measurement
In 2015, we started to analyse, quantify and report on our social impact, based on selected projects. We looked at the social impact of the construction of heating networks, the placement of smart meters and our investments in Step2Work for people at a distance from the labour market. In 2016, we continued to assess and quantify the impact of projects. This report outlines the impacts we have identified in respect of the accelerated digitisation of our networks in the province of Noord-Holland and the sustainable renovation of our two largest office buildings. In 2016, we also sought to track down the most important impacts of all of Alliander's activities, either as an individual company or based on our position in the energy value chain. Some of these impacts were quantified.
In making these impact calculations, we are aware that the identification, quantification and monetisation of ecological and social impacts are still in progress. Further standardisation of calculation methods and assumptions is required at international, national and sector level. With our impact report, we want to contribute to this process, and we will continue to do so. We therefore intend to further improve and expand our impact model in 2017. Working with other network companies, we want to lay the foundations for a broad-based sector model. Going forward, we will also use the model to make better choices.
Impact at a glance
To properly understand the ways in which we make a positive or negative contribution to society, we have identified our relevant impacts, based on the six capitals model of the International Integrated Reporting Council (IIRC) http://integratedreporting.org/. We first made a long list of potential impacts. Qualitative analyses based on input from professional journals and newspapers, academic literature, annual reports, studies and internal consultations were then performed to draw up the final short list. The figure below indicates the relative size of Alliander's social impacts as currently identified, quantified and monetised.
To visualize the magnitude of the impacts (both positive and negative), we have chosen to translate non-financial securities into euros (monetization). In this first year that we conduct the impact measurement in this way, we are able to quantify only a portion of the identified impacts. Our measurements contain uncertainties because assumptions have to be made in the calculation. An explanation, see "Other information". A further detailed explanation where also full details of the criteria, principles and assumptions as well as the calculation methods used, online insight.
Important impacts of Alliander
Financial capital and manufactured capital
The continuous availability of energy has a high prosperity value for customers. Without energy, almost everything grinds to a halt. Due to the dependence on energy, transmission and connection services as well as measurement services for small users have been designated as exclusive statutory tasks of network operators. The tariffs are regulated to ensure our energy remains affordable and reliable.
In financial terms we have estimated the prosperity value of electricity and gas transmission at about € 4 billion, which is significantly higher than the tariffs that customers pay for energy. We plan to assess the monetised prosperity and well-being impacts of gas and power outages in more detail. Through our role and position in the value chain, we feed a lot of money back into society. Every year, we pay suppliers for goods, services and costs of operating assets used for the construction and maintenance of our networks. In doing so, we generate a lot of work and income for other parties. This stimulates the economy, creates jobs and promotes prosperity. At the same time, we withdraw capital from society for the financing of our activities.
We realise that the energy system is undergoing radical change. Climate agreements and advancing technology will influence the value of gas and electricity connections to our central network. By determining both the economic and social impact of the availability of energy, at both a national and local level, we can make better decisions in the future.
The welfare value of the energy transport is calculated on the basis of the consumer surplus. This is the added value that customers, in theory, would be willing to pay above the regulated price for a service or product. The consumer surplus is currently the most common method for determining economic value, both for liberalised and regulated markets. The consumer surplus covers all price elements in the energy chain, thus includes taxes and prices for supply and transport of energy. The calculated amount indicates the economic part of the energy value chain that is attributable to Alliander.
Alliander invests time and money in the network management of the future. This annual report looks extensively at the digitisation of our networks and the key role of data as well as at new business and market models to meet the challenges of the energy transition. This creates intellectual capital for Alliander and its stakeholders. New open infrastructures for e-charging posts and heating networks, for instance, not only enhance our own knowledge and expertise but also unlock new market opportunities for businesses. The monetisation of intellectual capital calls for reliable historical data. We intend to make a further step forwards in this area next year.
Network operators make heavy inroads into our planet's scarce resources. We use large quantities of materials and have a (regulated) environmental impact on the soil and water in our regions. The biggest negative impact comes from the CO2 emissions through our grid losses and our position in the - still largely fossil - energy chain. These CO2 emissions give rise to additional costs of € 281 million in terms of natural capital or climate effects.
On the other hand, we also have a positive ecological impact. Think of the construction of sustainable heating networks and e-charging posts, wind turbine connections, solar feed-in and the integration of renewables into the energy network. Our 'circular economy' projects also reduce the use of scarce natural resources. We have not yet been able to put an exact figure on our positive impact. Finding the right coefficients for this purpose is a challenge that we want to take up with our colleagues in the sector.
Social and relationship capital and human capital
As a transparent and reliable employer, we contribute to social stability and cohesion and ensure that everyone experiences personal advantages of being in work. Safety incidents relating to the energy infrastructure have a negative well-being effect on the individuals involved and their family and friends. The safety of people is our top operational priority. Needless to say, further digitisation and automation will also be a game changer in the energy sector. The further quantification of our social and relationship capital and our human capital in 2017 will help us to more accurately determine the implications of the energy transition for our role as employer.
Impact of our projects
The future holds many changes for network operators. Due to the steady growth of local renewable generation and the rapidly evolving customer demands, it is important that alternatives and innovations are rigorously tested and, if successful, scaled up. In 2016, we calculated the impacts of two of our projects. The first concerned the roll-out of a far-reaching form of digital network management in the northern part of the province of Noord-Holland. The second was the construction of our premises in Arnhem and Duiven. For our own energy-neutral buildings, we calculated the positive impact that sustainable buildings have for society. The impacts of these projects are explained further in the 'Customers' and 'Employees' stakeholder chapters.
What we learn from our impact analyses
Together with our knowledge partners, we have gained many new insights into the consequences of our activities. Reliable network management clearly has extremely great financial and economic value for Alliander. We can now better identify our intellectual, social and relationship, and human capitals and have obtained insight into the negative impacts of the distribution of energy which is still largely fossil-based. In terms of climate effects, this is many times greater than our own CO2 emissions.
The impact measurements for our projects compelled us to make carefully-considered assumptions about the expected CO2 effects, avoided investments and costs.
The various impacts were calculated with a critical and conservative mindset, and we realise that some assumptions and criteria are still subject to debate, both within Alliander and among stakeholders outside our organisation. We note that our projects will produce the expected benefits, but only in the longer term and sometimes in relation to other themes than expected. Clearly, the true value of digitisation will only come to the fore once the transformation to local renewable generation has taken place. One unexpected, but important, benefit of our sustainable office renovations lies in the creation of a healthier indoor climate. The impact calculations thus offer valuable insights into the effects of the choices we make.
In 2017, Alliander will seek to further improve and expand the impact model, devoting more attention to the social and human impacts. Working with other network companies, we want to lay the foundations for a broad-based sector model. The model will also be used to enhance decision-making on new developments and investments. As before, we will engage in a dialogue with all our stakeholders in order to maximise the social returns of our operations. Our assumptions and criteria can be viewed online. In providing this transparency, we invite all our stakeholders to help us keep improving our methodology.