Trends and developments
In implementing our task, it is important that we know which factors can influence our activities. In this chapter, we describe key trends and developments taking place around us and what we must do in response.
What we see around us
The energy transition is gathering pace: by 2030, the Netherlands aims to reduce national carbon emissions by 49% compared to 1990 levels. The European Union is currently considering the possibility of increasing this target even further to 55%. In order to realise the target set in the Netherlands, the 2019 Dutch Climate Agreement includes provisions such as:
the integration of 35 TWh of onshore renewable energy generation;
using forms of renewable energy to heat millions of homes;
accelerating the installation of additional charging points for electric vehicles;
making industry more energy-conscious and using land more sustainably.
The Dutch Climate Act came into effect on 1 January 2020. This legislation enshrines the targets of a 49% reduction in 2030 and a 95% reduction in 2050 in law. Our greatest challenge is to ensure that the necessary power infrastructure is ready on time. The more work we have to do, the harder it will be to meet the targets. The Regional Energy Strategies, as at year-end 2020, include plans for achieving the 35 TWh of onshore renewable energy generation. However, the high emphasis on solar generation in these plans will lead to a major peak load within our infrastructure. Furthermore a solar farm produces less energy than a wind farm with the same peak capacity. So the ratio that is finally chosen in these plans has a major impact on our grids.
National and international climate goals
Due to the COVID-19 crisis, our society is feeling the effects of an economic downturn. Although we do not yet know its duration and impact, this economic dip is expected to be temporary. We expect the demand for electricity to rise further after the COVID-19 crisis as the economy recovers. The 2030 targets in the Dutch Climate Act will therefore remain unchanged for the time being. More new houses, businesses, and buildings will need to be connected to the grid. Moreover, greater power capacity is required to facilitate the significant expected level of growth in the private sector. We are likely to see a sharp increase in the number of data centres, growing demand for larger connections, and a surge in the demand for additional capacity among our current customers.
We know from practical experience that the energy transition leads to more local generation and more local energy usage. Solar energy is becoming more and more affordable. Also, thanks in part to SDE grants designed to stimulate renewable energy production, several large-scale solar farms have been built in the regions where Alliander operates. Furthermore, we have connected various wind farms to the grid and electric vehicles and the associated charging infrastructure are now a familiar sight: in 2020 we connected 2,400 public charging points.
Fulfilling the agreements in the Dutch Climate Act will involve a huge amount of work for us in the years to come. System studies show that the electricity demand will have at least doubled by 2050. Our social mission is to complete that work on time. We want the Netherlands to achieve the climate goals, and for customers to get the capacity and energy they need.
The reduction in carbon emissions is not the only factor driving the energy transition: the nitrogen and PFAS issues that were very much in the news during 2020 also play a role. At the end of 2019, the government introduced measures to help get stalled construction projects up and running again in 2020. Examples include the lower maximum speed limit on motorways and relaxation of the limits set for PFAS. In the period up to 2023, fewer homes than planned will be completed in Liander’s service area due to (temporarily) suspended construction projects. The expectation is that new construction activity will only reach its former levels from 2024.
Rising costs of the energy supply
As a result of the major investments that will be made in the energy networks, the costs for network management will increase, both for Alliander and others. The entire energy infrastructure in the Netherlands will be upgraded in the coming years, which will, in turn, make it increasingly difficult for more and more households to pay their energy bill. From Alliander’s perspective, it is important to ensure that all investments are justified and that we can arrange the necessary funding. Action must be taken to ensure financing capacity for the required investments.
Shortage of technical staff
The energy transition will involve significant electrical engineering work. Tens of thousands of extra technical specialists are needed in the Netherlands. Even though supply and demand in the labour market are currently more evenly matched, for the first time in years, filling these vacancies remains a major challenge for the construction industry, the installation sector, and network operators.
Farewell to natural gas and coal
The Netherlands wants to stop using natural gas from the Groningen gas field by 2022. All coal-fired power plants need to be shut down by then too. Initiatives to substantially reduce, and ultimately phase out, the use of fossil fuels like natural gas are springing up around the country. For example, the obligation to connect new buildings to the gas grid has already been repealed, and 90% of new construction is now ‘natural gas-free’. All municipalities are working on their own transition vision statement for heating, in which they describe how they intend to wean each district off natural gas and which alternative will take its place. Liander is assisting the municipalities and provinces by giving them access to its knowledge and experience. The transition vision statements will be ready in 2021. We consider the gas grid’s service life, the social investments in it and the application possibilities to find the best balance.
Digitalisation opens up new opportunities for consumers and businesses to manage their utility bills and conserve energy. Network operators can benefit from digitalisation by gaining a better understanding of the consequences of the energy transition, the condition of the grids, and the investment opportunities. In addition, digitalisation offers the market new opportunities for the procurement, trade, and exchange of energy.
Impact on Alliander
We expect the demand for transmission capacity to increase enormously as a result of the developments outlined above. The final result will be a greatly expanded power grid in 2030, compared to 2020. All our focus will be required to ensure proper timing and coordination of this mammoth task. We are working hard on solving the bottlenecks in the power grid by upgrading networks and applying innovative solutions. This takes time however. Until these issues have been resolved, there is a chance that we will not yet be able to supply the capacity required by customers in several areas.
For network operators to make the right investment decisions in good time, it is essential that they know well in advance what needs to be done to the infrastructure and where this needs to happen. It is with this in mind that the network operators want the transition to sustainable energy to be brought about in a well-considered, manageable way. The arrangements in the Dutch Climate Agreement and the development of the Regional Energy Strategies are crucial in this respect. Alliander (and network operator Liander in particular) are assisting municipalities and provinces with knowledge and expertise.
Our mandate for society
The trends, developments and issues in the world around us constitute the basis for the formulation of our strategy, which describes how we as a company deal with the challenges of the changing energy system. Our strategy outlines how we respond to these new demands, while our SWOT analysis sets out where the opportunities and threats lie for our organisation.