Trends and developments
In implementing our task, it is important that we know which factors can influence our activities. In this chapter, we describe the key trends and developments taking place around us and how we are responding.
Trend 1: Climate targets have been tightened
The targets for CO2 reduction have been tightened further in the government's new coalition agreement. The Dutch government has followed the European Commission’s guidance by aiming for a 55% reduction in CO2 emissions by 2030, with a package of measures that actually adds up to 60%. This package demonstrates the government’s intention of complying with, and preferably surpassing, the European 'Fit For 55' ambition. In addition, in November 2021 agreements were made at the Glasgow Climate Summit to limit global warming.
The national Climate Agreement states that additional demand for electricity will be met by phasing in extra generation capacity. This means that additional onshore generation may be needed compared with the 35 TWh identified in the Regional Energy Strategies. On the other hand, the government is releasing €35 billion for a fund for new energy infrastructures (CCS, hydrogen, district heating and electricity networks that, based on current expectations, will be mainly high-voltage).
Trend 2: The demand for electricity is soaring
The energy transition has gained pace in recent years. This applies not only to sustainable energy generation, but also to the level of dependence on electricity. The demand for electricity is soaring. This trend is visible in Amsterdam, for example. At our Hemweg power station, which supplies electricity to much of the city, large-scale consumers requested four times more power last year than in the previous ten years. A number of underlying developments explain the growing demand for electricity.
The economy has recovered
After several quarters of economic contraction due to the COVID-19 pandemic, the economy recovered strongly in 2021. That has led to growing demand for new connections and power for businesses and new-built homes.
Decentralised generation continues to grow
The growth of decentralised generation from solar energy will continue in the coming years. At present, roughly 4.4 GW of solar energy is installed in our grids. By 2030, we expect generation from solar energy to increase by a factor of two to four. We also see a trend towards more solar panels on rooftops instead of large-scale solar farms in fields. This trend may accelerate further due to more ambitious sustainability targets.
Many new sustainable homes
Looking at developments since 2019, it is obvious that we face a huge housing challenge in the Netherlands. More than one million homes must be added to our national housing stock between 2021 and 2030 to resolve the housing shortage. The demand for power in sustainable homes also shows a break in the previous trend line, fuelled by the decision to no longer heat new homes with natural gas. Sustainable homes require more electricity than homes with a natural gas supply. The need to build more homes plus the increased electricity requirement per home have accelerated this trend by eight years relative to the general picture in 2019.
Strong growth in hybrid heat pumps
The heating transition in the built environment is proceeding more slowly than initially thought. However, we do expect strong growth in the use of hybrid heat pumps in the period up to 2030. After that, we foresee strong growth in all-electric solutions and low-temperature and medium-temperature district heating networks. Up to 2030, we expect capacity in the power grids to grow by an additional 500 to 700 MW.
More electric cars
The number of electric cars will increase to about 1.6 million by 2030. Several tens of thousands of additional connections for the public charging infrastructure must be provided in the coming years for these cars. We also expect the number of grid connections for high-power fast chargers to increase by several hundred in the period up to 2030. Based on scenario analyses, we expect an additional demand for electricity of approximately 600 MW at our stations by 2030. In view of the growing popularity of electric urban freight transport and electric vans, we see this trend accelerating by about three years relative to the general picture in 2019.
More new data centres, at new locations
The demand for data centres in Europe remains as high as ever due to the continuing digitalisation of society. The total demand for electricity associated with this sector has developed about six years faster than initially thought. We are also seeing a more pronounced spread of data centre locations across the country. The Amsterdam and Haarlemmermeer regions have traditionally been the hotspots for new data centres. However, an increasing number of new data centres are now being built in surrounding areas, such as the Flevopolder. In the period up to 2030, we anticipate an increase of roughly 2 GW in the power required due to data centre growth in our service area.
Industry is becoming more sustainable
Industrial companies’ approach to energy management is changing significantly. During the past two years, this customer group's power demand has already shown a clear break with the previous trend. We now expect industry's demand for power to grow very strongly over the next nine years. The companies supplied by Alliander are considering electrification, process modification and/or the use of sustainable gases as an alternative to fossil fuels. In particular, we see growing interest in hybrid electrification and e-boilers. We expect these developments to have an impact of approximately 400 MW on our grids through to 2030.
Trend 3: Shortage of technical staff and materials
The labour market is tighter than it has ever been during the past ten years. This is particularly noticeable in the job categories that are critical to Alliander: i.e., engineering and ICT. The energy transition calls for massive expansion and strengthening of the power grid, and that requires technicians.
In 2021, the number of job vacancies for technical professions rose above 100,000. Historically low unemployment has resulted in a job vacancy ratio of 1:32 for electrical engineers. In other words, an electrical engineer looking for a position can choose from 32 job vacancies on average. In the western part of the Netherlands, the ratio is even higher at 1:55. This labour shortage limits the ability of network operators and other companies to scale up their operations. It also threatens implementation of the energy transition, against a background of declining numbers of students taking technical courses. As a result, during the next four years network operators and supply chain partners will have 13,000 fewer technicians than they need to meet the climate goals. If we are still to achieve those goals, we must not only step up our efforts to recruit existing engineers but also, and above all, act to increase the number of technicians. Fortunately, in the coalition agreement the government has recognised the need to tackle the shortage of technicians and sees this as a prerequisite for the energy transition.
Shortage of materials
In addition to scarcity in the labour market, there is also a shortage of the products and raw materials needed for the energy transition. In the short term, we will be confronted by higher prices and longer delivery times for cables and transformers, for example. Shipping in raw materials from sources around the world has become more challenging. In addition, many production lines are currently running at their maximum capacity. In the long term, the world's limited reserves of iridium and cobalt, for example, could make it harder to achieve the global climate objectives.
Impact on Alliander
When considering all these trends, we realise that the energy transition in the Netherlands is a bottom-up process. Government incentives and changing market prices will have a major impact on the direction and pace of the transition. Those factors make the transition more difficult to predict. The impact of these trends on Alliander is huge. In Amsterdam alone, the current power supply capacity will need to double in seven years in order to meet future demand. In our service area as a whole, dozens of new large power stations, thousands of transformer substations and many thousands of kilometres of cable will be required in order to meet the growing demand.
How is Alliander responding to these trends and developments?
The trends, developments and issues in the world around us are the basis on which we formulate our strategy, which describes how we as a company deal with the challenges of the changing energy system. Our SWOT analysis identifies where the opportunities and threats lie for our organisation.