Our impact on society
Alliander’s activities have a major impact on society. For example, the distribution of energy affects the economic development of regions and stakeholders. The network operations also have an impact on greenhouse gas emissions, knowledge development and employee well-being.
We want to increase positive effects, such as the impact on customer well-being and increasing the percentage of renewables in the energy supply. In addition, we want to minimise negative effects, such as our CO2 emissions and the carbon footprint associated with the goods we procure like cables, pipes and transformers. By measuring our impact, we can quantitatively assess the significance of our activities.
When assessing the social contribution of our activities, our main focus has traditionally been on costs and the direct consequences. Now we also use impact measurements to calculate to what extent these activities affect society (our ‘social impact’). Stakeholders can use this information to assess our contribution to social developments more accurately. Impact measurement is also good for our own organisation: it shows whether we are achieving our goals and helps us make better decisions about projects and activities. Impact measurements also give us greater insight into our contribution to the global Sustainable Development Goals.
Impact at a glance
Alliander follows the ‘six capitals model’ of the International Integrated Reporting Council (IIRC). To be able to explain and compare the composition and extent of our impacts, we express them in euros. In the model, we mainly quantify and monetise the impacts where we can make the largest contribution to society, both directly and in the supply chain. For the other indicators, we made a qualitative description and an estimate based on external sources. Direct impacts result from Alliander’s activities, for example, the impact of network losses, our own emissions and the well-being of our employees. Supply chain impacts are effects for which parties in the chain are jointly responsible. One example would be the impact of energy distribution on the well-being of consumers, or emissions from the consumption of electricity, gas and heating. We would like to point out that, in all cases, size is relative, i.e. the impact may be small at group level but significant at an individual level, like the impact of an accident on a person’s life. For basic assumptions, calculations and comparative figures, we refer you to the Comparative figures for impacts section in the Other information chapter.
Our steps in quantifying impact
We are constantly working on improving the impact model and our social impact. Impact measurement gives us information on the value we create across a broad cross-section in the long term. In 2020, we made no changes to our impact model.
We used the model to calculate the impact of two proposed projects in 2020. Both situations related to the optimum use of grid capacity in areas affected by a lack of capacity in the power grid.
Our impact model
Since 2018, we have been working in a coalition of network and infrastructure companies on the development of a sector model for impact measurements. In 2020, we jointly worked on the Handbook on impact measurement in network organisations. This handbook describes the key areas of shared impact for the national infrastructure sector as a whole. Alliander uses different values for a number of aspects, such as attribution factors. We will implement changes as required, in combination with a number of other calibrations, in the years to come. Making changes all at the same time favours stability and makes it easier to explain the underlying rationale. Thanks to the work put into this by the coalition, we now have a well-founded basis for joint impact measurements.
The financial capital reflects the impact of incoming and outgoing cash flows in relation to our stakeholders. For example, we use the money we receive from income and payments to make investments and carry out maintenance work. Put another way, we withdraw capital from society to finance our activities. Last year, we withdrew and paid back €49 million less to the capital market compared to 2019. In addition, the repayments and the successful issue of a green bond led to a substantial reduction in the impact of dividends paid out, repayments and interest paid, totalling €283 million. In addition to withdrawing capital, we also transfer value back to society through our role and position in the energy supply chain. For example, our employees are paid a salary. Suppliers receive payments for goods, services and assets. So we generate work and income for other parties in the supply chain. In 2020, our impact increased by €202 million due to the rise in payments to our suppliers and supply chain partners. On balance, our work stimulates the economy and generates long-term employment, income and prosperity.
The availability of energy and heat largely determines the degree of prosperity and well-being in society. Energy distribution and transmission are our manufactured capital and reflect the value that energy has for our customers. We calculate the value of this capital based on the regulated tariffs and the extra amount that customers would theoretically be prepared to pay on top of the actual price of a service or product (‘consumer surplus’).
Alliander’s share in the value for consumers amounted to €4.4 billion in 2020. This value is lower than in 2019. The mild winter led to a reduction in the number of degree days and gas demand. Those factors resulted in a lower distributed volume. To some extent, this reflects a direct effect of the energy transition: more and more customers generate their own renewable energy. Energy that is consumed immediately locally does not appear in our transmission figures. The amount of distributed electricity also decreased. This is reflected in a lower consumer surplus for our operations.
For some years now, we have seen an increase in the number of households with solar panels (2020: from 9% to 12%). Energy fed back into the power grid by consumers has a positive effect of €14.7 million on well-being. We expect that, on balance, an increase in the electricity generated locally on/in customers’ buildings, some of which is fed into the grid, will result in less electricity being transported through our networks. This shift clearly illustrates the change in supply and demand patterns in our networks caused by the energy transition.
Due to the expansion of the district heating networks in Hengelo and Zaanstad, the number of heating connections for small consumers increased by 28%. This represents an added value for consumers of €0.3 million. Due to the mild winter and the relatively low price for natural gas, the impact value of our heating networks for customers has reduced.
The total value of electricity and gas transmission for business customers was down on 2019, dropping to €512 million. Less electricity was used for commercial activities due to COVID-19 (down by 6%). This effect can already be seen in the telemetry values recorded for business customers. The impact value of the business gas volume is less clear because the information is partly based on estimates, leading to uncertainty in the data. The gas consumed by businesses is used mostly for production applications and to a lesser extent for heating buildings. We therefore believe that the COVID-19 measures have not affected gas consumption as much as electricity. The calculated impact value for gas shows a slight increase for business customers.
The impact of failures and outages has been benchmarked against other network operators. Last year, Alliander performed relatively less well in this respect compared to the sector as a whole. This results in a slight decrease in the reliability of our networks, which can be expressed as a value of negative €1.3 million compared to 2019.
- 1 The distinction between distributed and transmitted energy has led to an adjustment of the calculation method. for which reason it is no longer possible to compare our figures for this reporting year with those of 2019.
Alliander invests time, attention and money in the network management of the future, Digitalisation of the energy networks, the use of data in applications, new business and market models, and the development of alternatives to natural gas are boosting knowledge development and data density and therefore creating intellectual value for Alliander and its stakeholders. We started measuring the benefits of the use and availability of data for stakeholders in 2019. Alliander makes data available through multiple channels. We share public data directly on Liander’s website and other data can be requested on a case-by-case basis. This data has qualitative and operational value for society if it facilitates applications for users. Making data available also offers market opportunities for other companies. In 2020, this market-facilitating data represented a value of €4 million (2019: €6 million). Compared to last year, this impact has reduced due to a decrease in the number of times the data was referenced. One obvious explanation is that fewer websites contained links to our files and data in 2020, resulting in lower findability compared to the previous year. This can be generally explained by the fact that rules on nitrogen emissions and the COVID-19 measures resulted in a lower level of the types of (construction) activity for which this information is referenced. We also publish public data and refer more often to related sources when data is required. Both of these practices can lead to a decrease in the use of Alliander data.
The effect that we have as a society on natural capital (raw materials, biodiversity, air, water and soil quality and climate) is considerable. Alliander is working hard to limit the negative impact in this area. The total negative impact on the climate due to CO2 emissions from our activities in 2020 increased by €24 million compared to 2019, to €261 million. This includes pro-rated emissions from the Dutch energy supply chain for Alliander. This negative effect arises because the social price of CO2 damage is now valued considerably higher (by almost 22%). This effect is mitigated by the decrease in the volume of distributed energy. In the case of gas, this decrease can be attributed to a relatively warm year. Further details of this decrease are provided in Manufactured Capital. Our own direct emissions related to network losses, buildings and mobility also decreased. The monetary impact of our CO2 footprint resulting from our own emissions amounted in 2020 to €28 million, largely due to the network losses and leakage in our networks.
In 2020, we procured more materials (20% more by weight than in 2019) and the cost of the ecological damage associated with specific raw materials, such as steel and copper, also increased. The materials that account for the largest procurement volume, i.e. the total of recycled and primary, are aluminium (6.7 million kilos), copper (5.4 million kilos), PE (3.8 million kilos) and PVC (3.7 million kilos), mainly in the form of electricity cables. As a result, the negative impact of materials procurement rose from €16 to €26 million in 2020. However, by using recycled materials, we avoided a negative impact of €9.7 million. As a result, we succeeded in reducing the total costs of the ecological damage that would have been done if we had exclusively used new primary raw materials by 27%. The fact that a very large percentage by weight of our waste materials are recycled or reused means that we have a limited negative impact in this area: €0.2 million.
How stakeholders perceive and value our performance is part of our social capital. The value for reputational change indicates how we compare to similar companies in terms of reputation. A good reputation is beneficial for collaboration, employee recruitment and customer satisfaction. We are constantly aware that bottlenecks when connecting customers and the inability to facilitate feed-in into the grid due to local capacity constraints have an impact on customer perceptions and ratings. In 2020, we used a projection of the results from previous years that was adjusted for current developments in the sector. The outcome of this measurement shows a value of €14 million, compared to €28 million in 2019. We measure reputational value by relating the increase in the brand value of other energy companies in Europe to the increase in revenue. In 2020, the brand value did not increase as strongly as in 2019.
The contribution we make to national and local social cohesion and to improved institutions and regulations is based on a qualitative estimate. This contribution is not quantified.
Limiting the uncontrolled exchange of privacy-sensitive information has our constant attention. The violation of protocols can have an adverse effect on our social capital. We largely prevent the unwanted exchange of data through our systems. Even so, a data incident can sometimes still occur. We have not yet calculated the associated impact.
Long-term work-related sickness absence or safety incidents have a dampening effect on the positive value of having a job. The negative impact value is relatively small compared to the positive impact. As in previous years, this impact is around €1 million. In addition to a slight increase in the impact of work-related sickness absence, we see a decrease in the negative impact of safety incidents.
Due to the lack of source data, we are unable to quantify the positive impact on human capital for Alliander in 2020. However, we can make qualitative statements based on the working-from-home scans that were carried out twice last year as a result of the COVID-19 crisis. In the spring, we saw negative effects due to the COVID-19 crisis. For example, it delayed the reintegration of employees who had been off sick for some time: reintegrating in a working-from-home situation is extremely difficult in the case of some employees. In the autumn, we saw no visible effects of the COVID-19 crisis on work-related sickness absence. Furthermore, it is difficult to say at this stage whether the organisational changes will have a positive or negative impact. Although some employees may experience stress and tension due to the reorganisation, others may see it as an exciting new development.
The impact of grid-efficiency measures
The power grid in the Netherlands was originally built to transmit and distribute electricity generated on a large scale. The grid is now evolving into a multifunctional connector between electricity supply, demand and storage. The goals defined for the energy transition require careful consideration of the physical infrastructure and approach for regional energy networks. Coordinated integration and, where necessary, restriction of the feed-in capability of individual customers leads to system efficiency. It can also contribute greatly to controlling social costs and using existing and new network structures efficiently. There are a number of smart technical solutions for this:
Feeding in power generated by wind and solar farms at a single location – cable pooling – avoids extra connections.
Capping feed-in at peak times ensures that the grid offers greater and more consistent capacity for a longer period.
Abandoning the principle of maintaining a standard outage reserve, known as redundancy, can free up capacity in areas where there are capacity constraints.
A limit on individual capacity agreed with the customer leads to greater grid efficiency, greater use of renewable energy and, on balance, lower social costs. The following two cases studies illustrate the social value of capping and using the operating reserve.
Impact case study 1: Using the operating reserve differently to relieve grid congestion
In an increasing number of regions, there is insufficient network capacity for connecting businesses and renewable energy generating facilities in a timely manner. One promising solution is to temporarily abandon the principle of maximum grid reliability based on a fully redundant grid structure. Redundant grid construction means that there is ‘emergency capacity’, which allows power to be restored quickly in the event of an outage. Using this emergency capacity in a different way speeds up connection in areas where there is a capacity shortage and makes the power grid more efficient.
We performed an impact analysis for a case study in Leeuwarden. Under the current regulations, a non-redundant connection is possible after obtaining a dispensation. The hypothetical scenario of combining non-redundant connection with priority treatment for connecting renewable electricity generation leads to a significant increase in the social return. The case study focuses on a business park with a shopping centre around a planned football stadium. Setting up a redundant connection is not yet possible as this would require an upgrade to a substation. The network operator has two options: to either not make transmission capacity available at the preferred location until the upgrade has been implemented, or to offer a non-redundant connection with a restriction, possibly with a back-up set up by the customer for use in the event of a power outage. The question is whether the non-redundant connection (possibly with an emergency back-up) has value in terms of its social benefits. Various scenarios were explored in this connection:
A preferred scenario that involved subsequent construction work to create the operating reserve in the area after a period of five years.
A scenario without any operating reserve where the money saved would be used for
connecting other business parks
connecting sustainable energy production
Results of the impact calculation
The case study shows that transmission capacity can be provided faster in an area with capacity restrictions by using the option of a temporary or permanent non-redundant connection. The hypothetical scenario in which all the available installation time is invested in connecting renewable electricity generation locations has a much higher social return than the scenario where that freed-up installation time is invested in other business parks. Scenario 2 has a much higher social return than scenario 1, largely driven by freeing up capacity for the connection of renewable energy generation.
The impact differs depending on the stakeholder perspective. For companies, the positive impact of faster availability of transmission capacity outweighs the negative impact of lost value due to a greater risk of power failure. In the scenario that focuses on renewable electricity generation sites, this advantage is less significant. For the government, the scenario that focuses on renewable electricity generation sites results, on balance, in considerably higher costs due to the requirement for more SDE+ subsidies. In the companies scenario, the government receives more income in the form of tax payments and the bottom-line impact is €61,000 positive. Other stakeholders benefit from a limited positive financial impact in the case of the business park connections. In the scenario that focuses on renewable electricity generation locations, the impact for them has a higher positive value of €2 million.
The results of the climate impact comparison differed significantly. The scenario where investments are made in renewable electricity generation sites shows a more favourable impact, to the tune of €2.3 million, in comparison to the scenario involving business parks. The impact in terms of the use of scarce materials and the knock-on effect on natural capital is slightly negative in all scenarios. From the network operator’s perspective, the impacts are equivalent in all scenarios.
The total value creation for society is greatest if the money saved by not upgrading the outage reserve in the grid is used to connect renewable electricity generation sites. This has the greatest overall positive impact across the different stakeholder groups and limits the climate costs. Some of the effects concern shifts: the use of SDE+ subsidies has a positive effect on the production of sustainable energy. Conversely, accelerated connection of business parks leads to a financially positive impact for the government and higher profits and revenue for companies, but comes at a cost in terms of the negative impact on the reduction of climate-related emissions.
Impact case study 2: Capping peaks in individual production capacity
Customers with renewable electricity generation systems require a relatively high transmission capacity in order to cope with the peaks in their supply to the grid. The question here is whether an incidental cap on production from the generating systems, applied by the network operator, is more effective in terms of the social benefits. This would mean individual producers having to sacrifice a small percentage of their annual production. This cap would ‘shave away’ the most extreme feed-in peaks. As a result, more customers could be allowed access to the electricity grid and the grid would be used more efficiently.
This case study examines whether capping the feed-in capacity of producers of solar and wind power can free up grid capacity for new access requests from producers. We compare the effects of capping with a baseline scenario in which producers are subjected to a transmission restriction.
To obtain a realistic picture of the impact, this analysis was performed for two specific network sections. Actual data was used for this, supplemented by assumptions relating to the rate at which new producers of renewable energy will emerge, and other factors. The actual data comes from a solar farm in Oosterwolde and a wind farm in Dronten. The calculation in the case study is based on compensation for producers who suffer a loss of feed-in income due to capping.
The analysis shows that the social impact of capping within a specific bandwidth is positive on balance.
In this scenario, the customer limits peak production up to a maximum of 10% of the installed capacity by installing a smaller inverter (a device for converting direct current into alternating current).
In both cases, the optimum situation is achieved by capping the feed-in peak at roughly 85% of the installed capacity. This is where the highest social return on investment is realised. The added value of capping gradually diminishes as this value decreases and reaches a negative tipping point in terms of social impact at a percentage of roughly 35% of the installed capacity. This relates to the capacity: the volume of renewably generated electricity that is sacrificed, i.e. the lost income, is approximately 5 - 6% per year.
The financial impact for various stakeholders increases the more we cap. The financial impact is always negative for Liander due to the costs of compensation for capping. The government invests in the construction of the wind and solar farms through the SDE subsidy scheme. The initiators, i.e. the producers, benefit as they receive compensation for the costs of capping and generate revenue by feeding renewable electricity into the grid.
The results are broadly similar for both wind and solar. Interestingly enough, the contribution to climate change limitation is greatest at a capping percentage of roughly 15%, i.e. at 8% of the maximum capacity. In the case of wind in particular, this drops off rapidly at higher capping percentages due to the longer operating time required for wind in comparison to solar.
The result of capping is that new solar farms or wind farms can be built in the area and connected to the grid. The production of sustainable energy therefore increases and CO2 emissions are avoided.