Consequences for energy market and Stedin

Scarcity of space, materials and technicians

The National Implementation Agenda published in November shows that all regional grid managers have much work to do. Where the energy transition is concerned, we expect that between now and 2050 we will together build around 50,000 medium-voltage stations and lay enough cables to go 2.5 times around the earth.

Space is limited

Grid expansions require space. However, the amount of land and space available is scarce and it is difficult to obtain planning permission in time. Local authorities play an important role in freeing up space for essential infrastructure. The space we need in our service area for Stedin’s high-voltage and medium-voltage stations alone is equivalent to more than 50 football pitches. And that does not even include all the space needed underground. Work is required on grids everywhere: off shore, on the coast, along every motorway, in every district and every neighbourhood. This may take the form of electricity grid reinforcement and expansion, the construction of a heat grid or the conversion or removal of gas connections. Stedin endeavours to achieve this, among other things, by strategically acquiring land. We are also in discussions with all municipalities about how to fit stations into districts. You can read more about this topic in the ‘Construction ’ section.

Scarcity of materials

A global surge in demand for raw materials, with a growing need for materials such as cobalt, copper and aluminium, has led to greater risks of supply problems. A preliminary agreement was recently reached at European level on a regulation aimed at increasing the supply of critical raw materials to the EU. This agreement, aimed at strengthening Europe's strategic autonomy, shows the necessity of a coordinated approach at both national and international level to meet the challenges presented by the energy transition. Until now, Stedin has managed to buy enough materials and build up inventories. These inventories in turn entail logistical challenges. This year, Stedin therefore worked on a more efficient distribution process that makes it easier to get the materials to the fitters in the field in time.

Shortage of staff

A shortage of technical staff is another challenge in the energy transition. The accelerated expansion of the electricity grid requires a greater number of specialised and qualified technical staff members. In order to address this shortage, the focus is on three pillars: stimulating interest in technical occupations, increasing productivity and recruiting talent. An example of a productivity innovation is the development of more compact and efficient connection modules for charging points. As this requires less specialist knowledge, charging points can be connected more quickly. Another focus area is to train more people, not just school leavers but also people coming in from other professions (lateral entrants). In this context, we refer to our COO’s interview with Vinnie Veth , a former cook who now works at Stedin as a low-voltage operations manager.

Affordability of energy transition

In order to facilitate the energy transition, build the homes required and support the growing economy, grid managers are expanding the electricity grid on a massive scale. With the power grid filling up, the challenge of maintaining a balanced grid distribution is placing a big burden on the grid managers. All this costs a lot of money. The joint grid managers estimate that from 2024 through to 2030, the cost of future-proofing the gas and electricity grids will rise to € 60 billion. The initial effects of this are already reflected in energy bills. In the past year, the grid management costs on energy bills rose by € 7.40 a month for households in Stedin’s service area, to a total of € 650 on an annual basis. This will not be the last price increase, as is also apparent from a study by PWC commissioned by the grid managers (Stedin, Enexis, Alliander, TenneT and GTS).

Because the costs of the electricity grid are rising faster than the number of connections, the grid management costs per connection are expected to go up by an average of about 70% (excluding inflation) through to 2030. Where gas connections are concerned, falling gas consumption does lead to falling costs, due to increasing removal costs and a slower decline in peak capacities. As a result, grid management costs will rise in the coming years for both electricity and gas connections, although for the latter to a limited extent. That the new energy system costs money is obvious, but we are doing everything in our power to keep the societal costs as low as possible. First of all, considerable savings can be made if we make better use of the existing grid. We therefore call on both businesses and households to put less strain on the grid during peak hours. We also advocate the abolition of the netting scheme. This scheme causes ever-increasing peaks on our grid. We also urge the government to accelerate the roll-out of large-scale heat grids and the use of hydrogen. By aiming to optimise the entire energy system, we will prevent a situation in which all electricity generation and consumption peaks have to be absorbed by the grid. In addition, we ourselves are operating as efficiently as possible, among other things through effectiveness programmes and intensive sector cooperation.

Construction takes time

We are faced with a huge task, and if we continue at the current pace, we will run into the limits of what is achievable. Demand is rising faster than we can currently build, and we are all feeling the consequences. Stedin devotes all its efforts to building and expanding grid capacity. We focus on structurally speeding up the process of changing zoning plans and obtaining land positions and planning permission for the necessary infrastructure expansions. You can read more about this topic in the section entitled ‘The steps we have taken’. We are also working with our colleagues in the sector to jointly accelerate this infrastructure overhaul. Despite all these efforts, construction projects and processes take a long time and we cannot keep up with the increase in demand for transmission capacity.

Overloaded power grid

At certain times, the demand for transmission capacity exceeds what the existing capacity and infrastructure can handle and than we can add through construction. This means that electricity generation and consumption are no longer always in balance, which may lead to capacity and voltage problems.

Capacity problems

When there is an (expected) shortage of transmission capacity, the grid is ‘saturated’. We call this congestion. In large parts of the Netherlands, the TenneT high-voltage grid is either close to or has already reached this limit. In addition to congestion on the TenneT high-voltage grid, we are increasingly coming up against the limits of our own regional grid. You can read more about our congestion areas in the ‘Queues on the electricity grid: congestion ’ section. How we deal with congestion is described in the ‘Utilisation’ section .

Voltage problems

An overloaded power grid can also cause excessive highs and lows in the voltage on our grid. For example, when it is both windy and sunny, the voltage increase excessively. At such times, solar panel transformers, for example, may off automatically for safety reasons. Conversely, the voltage on our grid may become too low. This happens, for example, when total demand for electricity is high at a particular time, such as when everyone is simultaneously charging their electric cars in the evening. Excessively low voltage becomes noticeable when lamps suddenly start flickering, for instance. How we deal with this is described in the ‘Utilisation’ section.

Energy transition going faster than expected

For the Netherlands, the main effect of the geopolitical developments mentioned earlier was a sharp increase in the use of solar and wind energy. This increase also entailed challenges, however, such as saturation of the electricity grid (congestion) and a growing need for flexibility. In 2023, we not only saw an increase in renewable generation, but also significant developments on the energy supply side (consumption side). The Netherlands has truly switched gears in its sustainability drive. This is reflected in the rising demand for electrification of industrial business processes and heating. We also see that gas consumers – both households and businesses – are now consuming less gas and switching to electricity as their main energy source. The projected growth of electricity use in the Rotterdam port area is a good illustration of the acceleration of the energy transition. In this area, the growth originally projected for the period 2020-2030 has already been attained through requests made between 2020 and 2022.

How do we know if the grid is becoming saturated?

In determining whether the grid will become saturated at a particular location, we look at the expected future load on our grid and the transmission capacity available there. We determine the future load by looking at the expected consumption of all customers who already have a contract with us, as well as new requests. In doing so, we look at past grid load, the currently contracted capacity of existing customers and any concrete requests. We also look at expectations about the extent to which users will use the grid simultaneously, known as the peak hours. Where possible, we make agreements with customers about off-peak energy consumption.

Congestion management

At the moment when congestion occurs, we check whether congestion management is possible. This means that we will initially look for flexible capacity in the congestion area. We ask parties to avoid the queues on the grid, as it were, by avoiding the rush hour. In this way, by changing the timing of electricity supply and demand, we can ease the pressure on the grid at busy times. To this end, we make agreements with connected grid users to use more or less power at certain times. For example, by temporarily reducing or even switching off the feed-in from solar farms or wind turbines to the grid. These agreements help us create new space on the grid for connecting additional customer capacity. These parties are paid a fee in return.

Measures to reduce congestion

In order to prevent or optimally manage congestion, we are trying to better predict customer demand and are making more targeted agreements with customers to relieve the grid. We are also pursuing technical solutions to maximise existing capacity and flexible solutions to make better use of the grid. Furthermore, we are facilitating a better understanding and control of the grid and are seeking cooperation with politicians and market parties. You can read more about the results in the ‘Utilisation’ section.

Together we can achieve the energy transition

Whether it is grid expansion, technical solutions or congestion management: a successful energy transition requires cooperation between the business sector, the regional authorities and central government. Accordingly, many partnerships were initiated in 2023, while politicians looked at ways to adjust regulations and take measures to speed up construction and make better use of the grid.

National Grid Capacity Action Team (LAN)

The various measures are largely coordinated by the National Grid Capacity Action Team (Landelijk Actieteam Netcapaciteit, LAN). In the LAN, the Ministry of Economic Affairs, the ACM and grid managers work together with stakeholders on accelerated expansion and better utilisation of the electricity grid. In the past year, we developed proposals for alternative transmission contracts and group contracts (energy hubs). What is more, in the ‘LAN low-voltage grids’, we not only design technical solutions, but also cooperate in order to improve the grid managers’ communication with customers.

Energy storage

In the spring of 2023, the Energy Storage Roadmap was presented. This report states what actions need to be taken to facilitate energy storage, in accordance with its expected role in the future energy system. Energy storage is not an end in itself, but can serve multiple purposes, such as balancing supply and demand on different time scales, mitigating peaks, easing grid congestion and providing strategic stocks. You can read more about our cooperation with battery operators in the ‘Utilisation’ section.

Prioritisation

Prioritising customer connections

In 2023, the Netherlands Authority for Consumers and Markets (ACM) put forward a proposal that would allow grid managers in the Netherlands to prioritise certain requests for connections to the electricity grid in a congestion area. This priority applies to projects that help resolve grid congestion or have an important social function, such as healthcare or house building projects. This proposal will enable grid managers to deviate from the usual ‘first come, first served’ principle when providing access to the electricity grid in a congestion area. Although the prioritisation framework has not yet been formally adopted, the ACM has called on grid managers to already put it into practice, in any case by making the necessary preparations. If grid managers can justify in a specific case why priority is already required, the ACM will not take enforcement action based on the ‘first-come, first-served’ principle currently applied. The consultation period regarding the proposal has ended and the ACM will now process the responses.

Prioritising investments

Another development relating to prioritisation concerns grid investments. As the current energy infrastructure cannot be simultaneously expanded and adjusted everywhere, public authorities and grid managers are making joint decisions in provincial multi-year energy and climate infrastructure programmes (known as ‘pMIEKs’) on what the energy system should look like and in what order the adjustments will be realised. In 2023, such a pMIEK was drawn up for each province. The regional grid managers have prioritised the projects under the pMIEKs in their investment plans for 2024-2034. Stedin’s final 2024 investment plan will be published in April 2024, after its review by the ACM. In addition, public authorities and grid managers will work together on accelerating the implementation of pMIEK projects.

Customer forecasts

To minimise congestion, we need to be able to forecast customer requests as accurately as possible. If we recognise in time that a lot of capacity is being demanded in areas where little capacity is available, we can manage congestion earlier and better. This was a major challenge in 2023 and will remain so in the coming years. The ’Utilisation’ section describes what we are doing to forecast customer requests as accurately as possible in terms of technology and processes. However, while discussions with large businesses and municipalities enable us to make a fairly accurate assessment of sustainability plans and their impact on the electricity grid, this is very difficult in respect of consumers and small businesses.

Measures by public authorities and grid managers

Demand for electricity transmission capacity has risen sharply with the arrival of solar panels and electric cars, electric hobs and heat pumps. This was not foreseen when our current infrastructure was designed decades ago, and our construction projects cannot keep up with the pace of these developments. This creates voltage and capacity problems.

The low-voltage grids are not a closed system, but are connected to medium-voltage and high-voltage grids. This means that they also affect each other. A feed-in peak on a sunny afternoon or a high demand peak around dinner time can cause the low-voltage grid to overload, which in turn triggers overloads on the medium-voltage and high-voltage grids.

A unique feature of the problems in low-voltage grids particularly special is the fact that they are not always visible to us as a grid manager. Households make their sustainability plans in private. We call this natural growth: the changing use of an existing connection. As a grid manager, we do not become fully aware that residents in a neighbourhood have collectively bought solar panels until the summer. The same applies, conversely, to new heat pumps, which only appear on our radar when the temperature drops.

On top of that, more than 800,000 homes will need to be built in the Netherlands before 2030, of which more than 200,000 in our service area . These extra connections will also be added to the low-voltage grid. This means that the magnitude of our task is becoming ever greater. Grid managers, public authorities, market parties, customers: each has a role to play in the new energy system. If we want to make one of the largest ever overhauls of the Dutch infrastructure a success, we will need to switch to top gear.

To this end, outgoing Minister Rob Jetten on 18 October submitted a letter to the House of Representatives presenting a robust package of measures to minimise grid congestion on the low-voltage grid. Among other things, these measures will enable grid managers to make agreements with businesses to consume or produce less electricity at peak times in return for a fee. These measures focus on four tracks: faster construction, better utilisation of existing grids, stronger focus on flexible use and smart charging, and smart sustainability enhancement in the built environment. Stedin was actively involved in formulating these measures, which fit in well with our strategy. The energy transition in the Netherlands has thus entered a new phase. A phase in which faster construction and better utilisation of the electricity grid have become even more important for sustainability enhancement and economic growth in the Netherlands. In the words of the outgoing Minister for Climate and Energy Policy, the electricity grid is ‘the cork that keeps the energy transition afloat, as well as its bottleneck’.

Stedin – together with all the grid managers – is making every effort to widen that bottleneck as soon as possible, but we cannot do this on our own. We can only accomplish the energy transition together.