Our story in 2018
2018 was a year of operational challenges and solid financials for Alliander. The economy grew strongly and the energy transition gathered further pace. This resulted in a huge workload that proved difficult to handle at times. That is why we focused mainly on getting as much work done as possible, but also on innovations and smart solutions to prevent unnecessary work and costs.
The energy transition has a major impact on our energy networks. Looking to the future, it is vital that we educate ourselves about developments so that we can capitalise on them. That calls for in-depth and early cooperation with municipal and provincial authorities, and other partners within and outside the energy sector.
Everyone safely home
Safety comes first when working on energy networks, for our colleagues, customers and contractors alike. We deeply regret the injuries that two subcontractor engineers sustained while working for us in September in Amsterdam, as well as the injury that a bystander suffered during an interruption near Frederiksplein, also in Amsterdam. ‘Everyone safely home’ is and remains our ambition. In 2018, we commissioned investigations into the possible occurrence of benzene pollution due to small prolonged gas leaks and into the use of Chrome-6 paint on our installations. In both situations, we took measures to ensure our employees continue to be safe at work. Fortunately, the number of work accidents leading to absenteeism (relative to the number of hours worked) at Alliander was just as low in 2018 as in 2017.
Surging demand for connections and power
Thanks to the growing economy, demand for energy is rising rapidly. Our customers are requesting new connections and more electric power. In addition, the energy transition is gathering pace, with renewable energy being generated at more and more locations. The electricity grid was constructed 100 years ago for transporting power from coal-fired energy plants to consumers, but was not made to meet the huge demand for capacity from data centres, all-electric new-build areas and suchlike, nor was the grid designed to cope with large-scale feed-in from solar farms, particularly in rural areas. As a consequence, apart from connecting customers, we also need to upgrade or expand the network at multiple locations. Unfortunately, due to the huge workload coming our way, we were not always able to meet our customers’ requests. That said, customer convenience as per the Net Effort Score remained stable in 2018: 38% for large corporate customers and 50% for small users (39% and 47% in 2017) by contacting customers early and completing more projects on time.
Getting the job done
There is an urgent shortage of technicians in the Netherlands. As in previous years, we put a lot of energy into recruiting technical staff in 2018. We hired 294 engineers last year, which is something we are proud of. Many of them will be trained to become specialists. To make sure they can handle any possible situations, they will be offered one-on-one mentorships by our engineers. To speed up the training process, we opened a practice facility in Leeuwarden where multiple technicians can be trained simultaneously. At this facility, realistic work situations can be simulated and trainees can gain experience dealing with all manner of contingencies. We plan to open more of these practice facilities.
Clearly, we can do more work with more employees, but it is even better to avoid the need for large expenditures and the associated work in the first place. That is why we also worked on smart and innovative solutions last year. One such solution was the transmission of wind and solar energy through a single cable, instead of two; a technique called ‘cable pooling’. Another initiative last year involved the organisation of a flexibility market in Nijmegen-Noord, ahead of the completion of a new distribution station. The flexibility market matches supply and demand in order to prevent peak loads: this saves work on and investments in the network.
In 2018, we worked on several large projects in our service area. Some examples will serve to illustrate this. In Friesland, we carried out extensive works to reinforce the network for the connection of solar farms. And in the Haarlemmermeer area, where demand for extra capacity is growing explosively for greenhouse farming and data centres, we teamed up with TenneT, the local authority and residents to find a suitable location for creating extra capacity. TenneT was also our partner in Middenmeer, where we are building a new switching station with new cable connections for the Wieringermeer wind farm. Zaanstad saw the start of the development of a heating network that is going to utilise residual heating from various sources. Its stand-out feature is the open structure: all businesses with residual heating, suppliers and customers can make use of the network and the same rules apply to everyone.
Higher outage duration
The outage duration of our networks came to 30.6 minutes in 2018, significantly higher than in recent years. Apart from the exceptionally hot summer weather – the dry ground caused more defects to coupling sleeves, transformers and other network components – four major power interruptions accounted for the increased outage duration in particular. Great consternation was caused by an interruption in March 2018 when the Frederiksplein distribution station in Amsterdam was ravaged by fire and a flash flame shot from the pavement in the city centre. One person, unfortunately, was injured. Restoring the energy supply was a mammoth job and the task will not be entirely completed until well into 2019.
The draft Climate Agreement was presented in 2018. Alliander put a lot of effort into this agreement together with our colleagues of Stedin and Enexis and the Association of Energy Network Operators in the Netherlands. Nearly every aspect of the energy transition has an impact on the energy networks. Network operators have pressed for a systematic approach to prevent suboptimal solutions – and unnecessary costs that must be borne by everyone in the Netherlands. A systematic approach is vital so that everyone, including citizens, knows what will happen when and where. This is necessary to build society-wide support, without which the energy transition can never be achieved on time. Moreover, smart use of the existing electricity grid can help to keep costs within bounds. Over the coming months, the Dutch Cabinet will decide on the climate measures that are to be taken in the Netherlands. The real challenge lies in their actual implementation going forward.
Corporate Social Responsibility
Alliander has actively pursued sustainable business practices for years. Our ambition is to be climate-neutral by 2023. Our carbon emissions declined further in 2018, falling to 288 kilotonnes, partly by greening our grid losses. Last year, we signed a deal with Shell for the sustainable offset of more carbon emissions (about 11% to 14% more) from 2021 onwards. In addition, we are looking for ways to promote circularity. In 2018, for instance, we gave old transformers and returned materials a second lease of life. We also signed an eight-year contract for the delivery of more sustainable power transformers.
Diversity was another area of focus: our Step2Work programme offered jobs and apprenticeships to migrants with residency status, secondary school leavers and employees. The percentage of women in leadership roles continued to increase. Nearly 900 volunteers took part in the activities of the Alliander Foundation.
Alliander launched its subsidiary Allego in 2013 with the aim of creating a big enough EV-charging network to allow people to drive their electric cars with freedom and confidence, and to develop solutions to ensure that e-charging does not overload the electricity grid. Alliander found a buyer for Allego that endorses this vision. On 1 June 2018, Alliander sold Allego to Meridiam, a French investment company specialising in developing, funding and managing long-term and sustainable infrastructure projects. As a long-term international investor in infrastructure, Meridiam makes a good fit with Allego’s activities and is perfectly positioned to support the company through its next phase of rapid international growth.
Our financial position remained solid in 2018. Alliander’s profit after tax came to € 334 million (2017: € 203 million). Profit excluding incidental items for 2018 worked out at € 261 million, € 55 million higher than in 2017. Total expenses showed a limited increase to € 1,572 million (2017: € 1,535 million) and Alliander’s total investments ran to € 731 million in 2018 (2017: € 666 million). Alliander’s good creditworthiness was reaffirmed by S&P and Moody’s rating agencies.
Economic growth is set to continue in 2019, albeit at a tempered pace compared to 2018. The energy transition will accelerate further this year. Crucially, 2019 will be the year in which we will prepare for the implementation of the upcoming Climate Agreement: all provinces and municipalities must have a Regional Energy Strategy (RES) in place in 2020, subsequently leading to the definition of a heating transition vision for each municipality. This calls for in-depth cooperation between municipal and provincial authorities, Alliander and other stakeholders. We share a responsibility for devising the best possible sustainable energy supply for each district in order to prevent unnecessary costs to society. In addition, the Regional Energy Strategies should form the basis for a plan-based approach, so that everyone knows what needs to be done when and where, preferably as far in advance as possible, so that licence application procedures can be completed on time and our scarce technicians as well as those of our contractors and construction and engineering firms can be put to work where they are needed most. As in 2018, Alliander will be happy to sit down with you to determine the best route forward. Together, we can devise smart solutions to keep the energy supply reliable, affordable and accessible for everyone.
Our employees drive our efforts to achieve these objectives. We are happy to see that they are working passionately every day to keep the lights burning and our homes warm, both today and in the sustainable future. We are extremely grateful to them for their commitment.
Ingrid Thijssen, Mark van Lieshout
Management Board of Alliander
Mr. I.D. (Ingrid) Thijssen Member and Chief Executive Officer (CEO)
Drs. M.R. (Mark) van Lieshout Member and Chief Financial Officer (CFO)