Developments in 2022

External developments

In 2022, geopolitical developments resulted in extraordinary external circumstances and increased risks with an impact this year. One important external development is the energy crisis, which has caused various different risks to increase. We will discuss a number of these risks and the associated developments for Stedin below.

• One of our tasks as a regional grid manager is to transmission losses. The costs of this sharply increased in 2022 due to the rise in gas prices. On top of that, these costs also fluctuated considerably. For these reasons, this was added as a strategic risk in 2022.

• Another effect of the energy crisis is that it accelerated the energy transition and the associated electrification effort in 2022. At the same time, future customer demand is accompanied by huge uncertainties, for example as a result of national and international economic developments and issues surrounding the availability of energy sources. In anticipation of this, Stedin endeavours to make potential customer demand for connections and reinforcements more predictable.

• In the Porthos case determined at the end of 2022, it was ruled by the Council of State that the construction exemption is at odds with European nature conservation laws and cannot be applied to construction projects. But even without the construction exemption, this does not mean that all construction activity will come to a standstill. The ruling does not affect projects for which irrevocable planning permission had already been granted. As regards projects without such irrevocable permission, their nitrogen deposition effects in the environment must be studied and measures must be taken to reduce nitrogen emissions.

Feasibility of the energy transition

The feasibility of the energy transition is limited by such factors as materials, labour, space and funding. The central government may assist Stedin in strengthening its financial position. On Budget Day, the government announced its intention to set aside €500 million in the national budget for strengthening Stedin’s capital position. Read more about this in the ‘Financial and economic performance’ section.

Geopolitical tensions are having an impact on the supply and commodities markets. As a result, Stedin is experiencing an overall lack of certainty as regards the availability of materials. We have taken additional measures to secure the supply of strategic materials in particular.

The Netherlands is struggling with severe shortages on the labour market, and many organisations are understaffed. Stedin is taking targeted measures to reduce these exceptional shortages of labour. The company is fairly successful in attracting and binding employees. At the same time, the government is developing measures to address the problem. For more details about this, see the ‘Good employment practice’ section.

Internal developments

With the integration of DNWG in 2022, Stedin entered a new phase. The risk registers have since been extended and control measures have been fleshed out. The key uncertainties for Stedin and DNWG are now part of the Stedin-wide risk and control framework. Challenges such as shortages of labour and developments within the organisation can have a temporary impact on the implementation of risk control measures. We are monitoring this 24/7 and take action where necessary.

Since 2019, within the Control Framework Stedin Group has had a specific control framework for its financial reporting, with a focus on the company’s internal control structure. Keeping this framework up to date, effective and efficient is a continuous process. In 2022 we devoted a great deal of attention to integrating the DNWG processes. This work will continue in 2023. In addition, we have implemented a number of operational improvements, in collaboration with various different departments within our organisation. In 2023 we will continue our efforts to ensure the effectiveness and efficiency of the framework, with a special focus on developments in connection with the Corporate Sustainability Reporting Directive (CSRD).

Corporate Risk Management is experiencing an increase in the demand for guidance and support. In addressing risks and the development of those risks, the Board of Management and directors increasingly rely on the expertise of our Corporate Risk Management department.

Climate adaptation

The extent to which climate change affects our work remains uncertain. In view of our activities and our social responsibility, this is an area of focus for us and we adapt to the situation. We do so, for example, by exchanging knowledge and experiences within the sector and by conducting geographic analyses of our assets in combination with climate risk scenarios. See the ‘Impact on people and planet’ section for a number of examples of our organisation’s priority areas in this context. The ‘Climate scenarios’ section contains a table with further details on the physical risks and opportunities associated with climate change.

Safety

At a company like Stedin, safety always comes first. This is reflected, for example, in our risk appetite in this regard, which is minimal. We simply do not accept any risks when it comes to safety. For a description of accidents in 2022, see ‘Safety, security and cybersecurity’.

Other topics

For an overview of the average downtime in electricity and gas supply, see ‘Supply security’. For uncertainties concerning the smart meter, see ‘Smart grids, data technology and innovation’. For insights into our financial risks, see ‘Financial risk management’.

Outlook for 2023

Stedin’s new strategic objectives also come with recalibrated strategic risks. We determined those risks in late 2022 and we will further align the processes in 2023 so as to monitor the impact of those risks on our objectives. In this connection, risk management also supports the recalibration of risks in the amended departmental annual plans. In 2023, where necessary we will continue this support to ensure effective management of the risks associated with complex processes or projects. The new energy crisis is confronting us with a variety of new challenges both within and outside our organisation. For this reason we will also review our risk appetite in 2023 (along with the recalibration of our strategy), so that we can confront those challenges with confidence. Within the sector, Stedin collaborates with the other grid managers via Energie Data Services Nederland and the underlying Programme Organisation.