We look back on 2020 as an extraordinary year that demanded a great deal of our employees and customers, primarily because of the COVID-19 crisis, but also due to the unabated speed at which the energy transition continued. Our employees worked hard under all circumstances to make the energy network ready for the future. We connected many customers, laid more cables and invested more in the power grid compared to last year. These activities reflect our efforts to continue to provide a reliable and affordable energy supply for our society. We are proud of our performance.
The impact COVID-19 has had on our work
The approach to and fight against COVID-19 may lead to a temporary delay in implementation of the Dutch Climate Agreement. At the same time, we see that the goals and intentions remain unchanged. The impact of COVID-19 on our society was - and continues to be - very significant. That also applies to the impact on our activities. For example, all work inside the homes of our customers had to be paused briefly after COVID-19 broke out. For colleagues in the offices, the crisis meant a rapid switch to working from home. During the crisis, we took every possible action to ensure that our employees could work safely and without endangering their health. This included following the guidelines and industry-wide protocols, and implementing additional measures such as rapid testing and the social distancing rule (currently one and half metres). We have adapted to the situation and shown flexibility to help our customers as well as possible. This is essential, because without energy everything would come to a standstill. Unfortunately, when carrying out scheduled maintenance work during the lockdown this spring, some of our technicians were the target of aggressive behaviour on the part of local residents. In our view, behaviour that puts the health of our technicians at risk while they are working to ensure the continuity of the energy supply is completely unacceptable.
The COVID-19 crisis also affected our financial position. Some of our large business customers, for example, have reduced their power consumption since the start of the outbreak. This led to a drop in our income from grid usage in that segment. The level of investment increased however; we continue to spend substantial amounts on expanding and upgrading our power grid.
Safety is the first priority when working on energy networks. Our goal is ‘Everybody safely home’. This applies to our employees, the customers on whose behalf we do our work, and the contractors who collaborate with us. Safety is an overriding priority at Alliander. There were no major accidents or incidents in 2020. The number of sickness absence cases reduced last year, and the Lost Time Injury Frequency (LTIF) also dropped to 1.8 (2019: 2.1), mainly due to a decrease in short-term sickness absence.
In 2020, we did our best to ensure our work could go ahead as much as possible and even to accelerate it. For example, we connected more large business customers to the energy network and work on power stations and cable connections also continued uninterrupted. In 2020, we laid over 1,200 kilometres of medium-voltage cable (400km more than 2019). In addition, we built 960 medium-voltage substations. The total investments increased by €56 million to €890 million.
These extensions and capacity upgrades are necessary because customers have an increasing need for electricity and facilities for feeding power back into the grid. As expected, the number of bottlenecks in the power grid grew in 2020. That has significant repercussions for customers. We are not always able to satisfy the demand for power. In fact, the grid is so congested in many places that business customers are facing transmission restrictions. Consumers are increasingly unable to feed in electricity from solar energy, or obtain a new connection or extra capacity within the specified delivery time. Upping the capacity at existing power stations and building new ones takes time, due to lengthy permit procedures and the acute shortage of technicians in the Netherlands. We feel it is important to clearly explain the local situation to customers and the effect their choices have on their energy supply. We devoted a great deal of time and attention to these issues last year.
In spite of all our investments, we do not expect the capacity problem to be resolved in the near future. We must continue to innovate, together with market parties and other stakeholders, in order to use the power grid more efficiently. We are working on a broad spectrum of technical solutions. For example, following on from the flex-markets in Nijmegen-Noord and Zuidplaspolder, businesses in the Neerijnen region were also offered the opportunity of participating in congestion management schemes.
Contribution to the Dutch Climate Agreement
The approach to and fight against COVID-19 may lead to a short-term delay in implementation of the Dutch Climate Agreement. In the long term, the goals and intentions appear to remain unchanged. Collaboration is required between all the parties involved in order to create a smart, affordable and efficient energy system. The Regional Energy Strategies (RES) are crucial to achieving this. Last year, municipalities and provincial authorities published draft versions of their Regional Energy Strategy on the websites of the RES regions. Looking closely at these plans, we see a general preference for solutions that aim to maximise local support, but that are not necessarily efficient for the energy system, or that require more work and higher investments than strictly necessary. An alternative design can save up to almost 60% of the costs to society, 60% of the space required and 50% of the work. We were happy to contribute and proactively share our knowledge and expertise with the regions. The joint network operators, including Alliander, have drawn up a set of guidelines to support the regional discussions. We also engage in constant dialogue with the regions to ensure that all interests are clearly understood and achieve a good balance between support and efficiency.
Expanding the power grid requires high availability of good technicians. Engineers, foremen and fitters who are looking for a job can more or less start with us tomorrow. So in 2020, as in previous years, we continued to invest a great deal of time and energy in recruiting technical colleagues. No easy task, because an electrician looking for a new job can currently find work with roughly 40 companies. Together with more than twenty other national parties - private sector businesses, public sector organisations, educational institutions and the trade unions - we have jointly agreed a learning and innovation programme (‘Mensen maken de transitie’) to ensure an adequate supply of skilled workers. This collaboration is intended to lead to technical innovation, an increasingly smarter approach and permanent employment.
In addition, we continuously look for new and innovative ways of recruiting staff. For example, we use live chat to give job applicants the opportunity of talking to potential colleagues before attending a job interview. We are also involved in the ‘Sterk Techniek Onderwijs’ initiative and the ‘Opleidings- en Ontwikkelingsfondsen’ funding programme, which target further improvements to technical education in collaboration with educational institutions and the sector in general. Our efforts have paid off, we were privileged to welcome 316 technicians into our ranks last year.
The Netherlands boasts one of the most reliable power grids in the world, with a 99.99% availability rate. In 2020, customers were, on average, without electricity for 23.2 minutes (2019: 21.9 minutes) and without gas for 83 seconds (2019: 40 seconds). Customers can count on high-quality maintenance and fast service in the event of outages or problems, and appreciate this. In addition, we continue our efforts to further improve the electricity and gas grid for customers. Digitalisation of our network helps us achieve this. For example, we used the Smart Cable Guard – a monitoring tool that anticipates disruptions – in our electricity grid on a larger scale. We are also focusing on maintenance, reliability and development of the gas grid with a view to the future.
Agile, effective and cost-efficient
The energy transition has a major impact on Alliander. An agile, effective and cost-efficient organisation is a crucial precondition in view of the very significant amount of work that lies ahead of us. With this in mind, we developed plans for a new, flatter organisational structure last year, which will allow us to focus in a more targeted way on our strategy and speed up decision-making. By coordinating activities better and executing them in the same way, we can work faster and more effectively and develop and implement more innovations. In December, the Works Council issued positive advice on the plans for the new organisation. More than 200 jobs are scheduled to disappear due to the reorganisation. The new organisation came into effect on 1 January 2021.
Our social contribution to a sustainable energy supply also requires an organisation that has corporate social responsibility in its genes. The global Sustainable Development Goals are our compass in this respect. In 2020, our negative impact on the climate has decreased substantially as we further reduced our CO2 footprint in line with our target. Being forced to work from home also led to a particularly sharp reduction in our energy usage for buildings and (public) transport. Our policy of achieving climate-neutral business operations in 2023 is completely in line with the science-based Paris climate targets. In 2020, we presented our climate risks more accurately in accordance with the international standard (developed by the Taskforce on Climate-related and Financial Disclosures). We purchased a large proportion of the main components through circular procurement. We also launched the first initiatives for improving biodiversity by adapting our site management policies. Together with other infrastructure companies, we prepared an impact-measurement handbook to allow more effective benchmarking in respect of our social performance in future years. In our social domain, we succeeded in consolidating the number of women in managerial positions through targeted recruitment and selection, and took action to improve cultural diversity. Despite the COVID-19 crisis, a large number of colleagues were still able to provide support as volunteers through the Alliander Foundation, with a particular focus on preventing social isolation among the elderly.
Alliander’s profit after tax came to €224 million in 2020 (2019: €253 million). Profit excluding incidental items for 2020 worked out at €221 million, a reduction of €46 million compared to 2019. COVID-19 had a negative impact of €12 million on our operating profit. In addition, our costs increased because TenneT imposed higher tariffs. We must continue to critically review our spending and financing in the long term. In 2020, we once again successfully issued a green bond loan at favourable interest rates. Furthermore, we are also discussing ways of creating additional financing capacity with our shareholders. The first discussions on this topic took place in October last year.
Changes to the Management Board
As the energy transition, new technologies, and digitalisation are accelerating and having an ever greater impact, we need additional focus in how we run Alliander. With this in mind, Marlies Visser joined Alliander’s Management Board on 1 May 2020 in the position of Chief Operational Officer. On 20 May, Maarten Otto joined the Management Board as the new Chief Executive Officer. He succeeds Ingrid Thijssen, who left after three years as Alliander’s CEO to take up a new position as Chair of the VNO-NCW employers’ association. We would like to thank her for her tremendous efforts on behalf of our organisation.
In 2021, COVID-19 will probably continue to affect our daily lives for quite some time. We do not yet know how significant those effects will be. One thing is certain though: the energy transition will continue at the same rapid pace. This means that the issues we face today will continue to present challenges in the coming period. If we are to achieve the goals of the energy transition, we must ensure that we have access to adequate long-term financing capacity, that we double our production in the coming years and collaborate more intensively with partners such as other network companies, contractors, installers, municipalities and provincial authorities. Because energy will continue to be a hot topic. As the designer of today and tomorrow’s energy network, our goal is to achieve maximum energy supply coherence for both electricity and gas. We continue to provide information and data to help customers develop their energy supply facilities. We realise that limited transmission capacity and long waiting periods for connection are inconvenient for our customers. The moment when Regional Energy Strategies are approved and adopted in their final form will be an important landmark in 2021. We continue to support our partners in the RES regions by making our knowledge and expertise available to them and keeping the energy supply system affordable and reliable. In stark contrast to the increasing pace of the energy transition, new and appropriately modified legislation is emerging at a snail’s pace. We are working with sector partners and government organisations to eliminate bottlenecks and further accelerate our activities in the near future. This is how we are working together on an energy network that is right for everyone.
A word of thanks
Every day, thousands of employees, both at Alliander and our contractors, work hard to get the job done. They are in contact with our customers each day and make sure that the lights are on, homes are heated and businesses can keep operating, even in these complex times with a worldwide pandemic unfolding in the foreground and the transition to a new and sustainable energy system continuing to gather pace in the background. We are proud of all these colleagues and thank them for their flexibility, commitment and effort. Together with our stakeholders, in 2021 we will continue to work on our mission: ensuring an energy supply that gives everyone access to reliable, affordable and renewable energy on equal terms.
Alliander Management Board, 15 February 2021
From left to right: Maarten Otto, Marlies Visser, Walter Bien, Daan Schut