Our impact on society
Alliander’s activities have an impact on society. The distribution of energy and its feed-in to our networks make a positive contribution to the economic development of regions and stakeholders. Employees and suppliers are rewarded for their performance. On the other hand, we know that we are also removing value from society, for example through the emission of greenhouse gases, the use of raw materials and the effects of interruptions to the power supply. Our aim is to contribute to broad prosperity in society by reducing the negative impact on stakeholders and increasing the positive impact.
Impact measurements are used to calculate the extent to which our activities affect society. We can see whether we have achieved our goals and what our contribution to the global SDGs is. This enables us to take better decisions on projects and activities. By being transparent about how these calculations are made and reporting on the results, we want to actively involve our stakeholders in our development, the choices we make and our broad value creation.
Our steps in quantifying impact
Impact measurement is undergoing significant development worldwide. Alliander actively participates in alliances and continually works on improving our impact model. In 2021, we reached new agreements in the sector about various basic principles, which have been recorded in the Impact Measurement for Network Organisations handbook. A new version will be published in 2022. The new agreements provide a firm foundation for joint impact measurements and make it possible to compare participants’ performance.
Alliander participates in the board of the Impact Economy Foundation on a pro bono basis. The aim of this foundation is to invest in further standardisation of impact measurements in a wider impact community. Our impact in 2021 was substantially affected by the following developments:
In consultation with the sector, changes have been made in the attribution of costs to society to various parties involved in the valuation process. This attribution is a significant basis for the measurement of impacts. The starting point remains that the attribution is assigned according to the added value in the supply chain but this added value is divided up more accurately across the supply chain, leading to a reduction in our share in a number of impact indicators. The results of our model and the comparison of quantitative indicators with previous years have been adjusted to reflect this change.
We are seeing the effect of a rise in the CO2 price. This price tracks the damage to society due to climate change, and it increases every year. It has a negative effect on our impact on natural capital. At the same time, we are seeing that the energy produced in the Netherlands is becoming increasingly cleaner. This dampens the effect of the higher CO2 price.
The greater number of cold days in 2021 led to more transmission of gas. We did not notice any effect of the price rise on the total volume in 2021. The result is an increase in manufactured capital. In addition, we see that the value of district heating networks is increasing as an alternative.
Our impact model
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. We have described the other indicators qualitatively and made an estimation on the basis of external sources. 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 Accountability document.
Financial capital: investing in networks and energy transition
Alliander invests abundantly in expanding the energy networks and in the energy transition. Our need for financing increased in 2021. Capital requirements were €308 million more than in 2020.
Because our employees are paid a salary and suppliers receive payments for goods, services and assets, this generates work and income for other parties. In 2021, our impact increased by €276 million due to the rise in payments to our suppliers and in dividends, repayments and interest. On balance, our work stimulates the economy and contributes to employment, income and prosperity.
Manufactured capital: the impact of a warm home
Energy distribution and transmission are our manufactured capital and reflect the value that energy has for our customers. The availability of energy and heat determines prosperity and well-being.
Consumers and low-volume consumption
Alliander’s share in the value for consumers amounted to €5.3 billion in 2021, an increase of €0.6 billion compared to 2020. The colder winter and more degree days resulted in greater distributed volumes of gas and heat. There was no increase in the number of gas connections. The number of heating connections for low-volume consumption rose by 10% and the well-being value of the heating connections also rose correspondingly. The added value for consumers rose from €0.6 million to €0.7 million. The total amount of electricity distributed rose slightly. This was due to a further increase in the amount of energy that consumers fed into the grid in 2021. We are seeing an increase of some 25% in the number of connections with solar panels. Feed-in of solar power resulted in a positive contribution to perceived well-being of €20 million.
The total value of electricity and gas transmission for business customers rose from €409 million to €453 million. Despite the fall in electricity and gas transmission to business customers compared to 2020, the value of energy transmission increased due to rising energy prices.
Increase in value to society of reliable energy
The impact of failures and outages has been benchmarked against other network operators in the Netherlands. The length of gas outages in our service area almost halved last year, whereas the average length of gas outages in the sector increased considerably. As a result, Alliander performed better than average, with a positive impact of €0.025 million. The value of the reliability of a gas connection consequently rose by one eurocent.
Both the length of electricity outages and their frequency fell at Alliander. The average length of outages in the Netherlands actually increased slightly. We performed better than in 2020, but still below average, resulting in a negative impact of -€0.036 million. The value of the reliability of an electricity connection therefore improved. The net result for gas and electricity connections was an improved value for the reliability of our networks. This value was -€0.011 million compared with -€2.3 million in 2020.
Intellectual capital: added value of market-facilitating data
The digitisation of power grids is essential for the energy transition. New models for business and markets and the use of renewable energy lead to knowledge and data on these developments. This knowledge and data is intellectual capital that can make a positive contribution to issues around the energy transition, raw materials and implementation. Transparency, innovation and collaboration are key concepts for denoting intellectual capital.
We share public data directly on Liander’s website and other data can be requested on a case-by-case basis. The quality and value in use of the data provide value for society if they facilitate applications by users. Making data available also offers market opportunities for other companies. In 2021, the ‘market-facilitation data’ represented a value of €2.5 million. Its impact increased slightly by €0.2 million due to a rise in the number of times the data was referenced.
Short-Term Forecasts project
A practical example of intellectual capital is the Short-Term Forecasts project. The software for this project has been developed in-house and will be used for congestion management, supporting innovations and a national analysis of the safety of the grid in conjunction with TenneT. Predicting the future load on the grid is complex, but relevant to many parties. This is why Liander has made the Short-Term Forecasts project available as open source and added it to the Linux Foundation Energy platform, enabling developers from other parties to assist the project further. As an example, the French high voltage network operator RTE and RWTH Aachen University are actively contributing to the project.
The improved tooling enables network operators such as Liander to make better predictions for up to two days ahead. This leads to better utilisation of the grid’s capacity, fewer failures, fewer network losses and cost-efficiency. More capacity is created on the grid to connect customers, and savings can be made on purchases of flexible capacity and on the cost of limiting renewable energy generation. Participants in an open-source environment can work on innovation and knowledge development at a lower cost and with less deployment of human capital.
Alliander is working hard to limit its negative impact on natural capital (raw materials, biodiversity, the quality of the air, water and soil, and the climate).
The impact of our CO2 emissions increased from €218 million in 2020 to €223 million in 2021. This can largely be explained by the increase in the number of degree days and the higher CO2 price. The fall in carbon intensity per kWh due to a cleaner energy mix reduced the effect of this increase somewhat.
The negative impact of our use of materials increased from €34 million in 2020 to €45 million in 2021, despite the fact that the amount of purchased material remained the same at 28 million kilos in 2021.
Validation of used recycled/recyclable material requires more consultations with suppliers. However, by using recycled materials, we avoided a negative impact of €3 million (2020: €13 million). As a result, we succeeded in reducing the total costs of the ecological damage that would have occurred if we had exclusively used new raw materials by 7%.
The negative impact of our waste remained stable at €0.11 million.
Social capital: broader measurement recommended
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. The reputation survey revealed a reduction in our reputational value from €14 million in 2020 to €4 million in 2021. Because of the reduced weight given to reputation as an indicator of social capital, we also see a reduction in the value of Alliander’s reputation. Compared to the previous survey in 2017, Alliander’s reputational value has improved.
Human capital: increased well-being through work
The impact on well-being through being in work has risen by 10% to €60 million euros. Alliander’s employees reported that they are relatively satisfied with their work. The same applies to external employees. People in subsidised employment have also been included in the impact analysis since 2021. No negative effect was observed of the measures brought in to combat COVID-19, such as working from home. There are differences at a personal level however.
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 €0.61 million. Accidents and sickness absence due to mental health issues increased by 21%. The impact comprised a negative effect of €0.46 million due to work-related absence and a negative effect of €0.15 million due to safety incidents.
Measuring impact: lessons learned
As every year, manufactured capital (reliable energy transport) has a high social value. We calculate this value 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’). From this year, to make the method more understandable and applicable sector-wide, we started calculating the consumer surplus for the entire Dutch sector on the basis of a customer’s consistent willingness to pay. We are aware that, by doing so, we are excluding the effect on society of the rise in energy prices. We will therefore take a broader approach to measuring the effects of our activities on social capital in 2022.
We also see the effect of circular procurement on natural capital. We expect that further examination of the data on our circular procurement percentages will improve our impact again in 2022. And finally, as recommended by the stakeholder panel, we will invest more in a vision for the desired long-term impacts of Alliander in 2022. In doing so, we are moving from ‘measuring and reporting’ to ‘working proactively towards social impact’.
Cable pooling: connecting a combination of wind and solar energy
Scarcity and capacity limitations on the electricity grid are currently an obstacle to creating new connections for feeding in renewable energy from the sun and wind. Often modifications to the networks are needed first. Because of the long wait for a connection, initiators are postponing investments, which in turn leads to delays in the feed-in from renewable sources of energy. One promising solution is to make use of one existing network connection for two sources of energy at a single location. Linking the two in a single cable, called ‘cable pooling’, makes the usual practice of using two separate network connections for solar and wind energy unnecessary and increases the chances of achieving feed-in in areas with many bottlenecks. To obtain a better understanding of the effects of cable pooling, we conducted an impact analysis at a solar and wind energy production site in the Dutch province of Gelderland.
Situation and study question
The impact calculation is based on a combined network connection of 5 MW of solar power and 10 MW of wind power. Traditionally, 5 MW of solar energy generation would only be possible on a separate new connection after extending the network. We looked at a five-year period. The stakeholders in this case study are the customer, Liander, the national government, society at large and the climate. The question is: what is the social impact of the combined connection of solar and wind energy using cable pooling compared to two individual network connections created after extending the network?
Results of the impact calculation
A combined connection would mean that the initiator of the project would save on the cost of making the additional connection for solar energy generation. The solar energy connection can be achieved more quickly than in the traditional manner. There would however be additional costs for the operating system that enables cable pooling and the necessary peak shaving. The project would be eligible for a government SDE subsidy (Stimulation of Sustainable Energy Production programme). Because the initiator would generate solar energy sooner, the total financial impact for the initiator would be €1.2 million positive. There would also be a positive impact on manufactured capital. Energy could be fed in sooner through the connection. This represents a value of €0.1 million over five years.
Cable pooling would have no direct impact on Liander’s financial capital compared to the reference. If a traditional connection was used, the connection would be achieved after five years of transmission restrictions. The cost of this connection would be charged in full to the initiator. Cable pooling brings no additional costs or income for Liander. Savings would be made in investments at a higher network level since peak shaving would occur to feed in both wind energy generation with a capacity of 10 MW and solar energy generation with a capacity of 5 MW to a single network connection of 10 MW. This peak shaving would enable savings of around €1.2 million on the necessary network extension of the transmission service. These savings can be broken down into around 33% for Liander and 67% for TenneT.
There would be a negative impact for the government of €0.2 million due to the SDE subsidy. Cable pooling would lead to an acceleration of five years in the connection, implying that the subsidy costs would be incurred earlier and would represent a higher net present value. Cable pooling would enable the network operator to free up working hours, it would contribute to task feasibility and allow connections to be created elsewhere. This value creation is represented by the financial value of the connection, resulting in social value creation for Liander of the value of the connection, i.e. €0.4 million.
There is a positive impact for natural capital in terms of the climate: solar energy generation would be brought forward by five years, which equates to an impact of €1.4 million due to the avoidance of long-term CO2 emissions from non-renewable energy generation. Eliminating the second connection leads to less use of materials and land and less earth moving. The eco-costs of this are not significant. Cable pooling produces new knowledge for those involved in the project and generates intellectual capital which can be used for projects elsewhere. This impact has not been quantified.
The total social value creation of cable pooling is positive. The True ROI – the ratio of social costs to revenue – amounts to 18.8 for this project. This is a very favourable ratio. The accelerated connection for solar energy generation will lead to higher revenue for the initiator in the initial years and to a reduction in climate-related emissions. Cable pooling will make more efficient use of the grid and the social costs of a combined connection are lower. Alliander is already facilitating this technique at several locations in the area it supplies. As such, together we are increasing the social creation of value in terms of financial, manufactured and natural capital. More renewable energy production can be connected to the existing network. Our service area has 36 comparable connections for 5 and 10 MW wind power installations on land. This offers potential for a comparable combination of network connections with solar power installations by means of cable pooling.